Aputure, a Geneva-based strategic advisory firm focused on financial services, has released a report on embedded finance that includes market maps of 45 vendors.
Embedded financing, unlike Banking as a Service (BaaS), is offered by consumer companies that provide access to financial services at key companies, the consultancy said in a statement.
For example, Assure Hedge offers currency hedging (FX) for small businesses.
“Many companies offer forex trading as a service,” says Ben Robinson, co-founder of Aperture. “This is nothing new, but hedging as a service has not been explored by others.”
Barry McCarthy, Founder and CEO of AssureHedge, said he has begun to address the challenges small and medium-sized enterprises (SMEs) face in hedging currency risk. Banks are reluctant to offer prices below $1 million and the process is too complicated for most small businesses to be interested in, he said.
Yet many of them need it. Cruise ship builders usually estimate in dollars. Buyers can use Assure Hedge to make payments in their local currency. Cruise ship brokers are advised to hedge their fees as payments can take anywhere from 6 months to 1 year. A B2C business selling on Amazon may want to hedge the currency risk of a payment they don’t receive for two weeks.
“We’re already considering transfer companies looking to get this onto their own platform,” McCarthy added. He said the agency could start service in two hours. “It took a long time to establish a seamless connection, but now there are 26 microservices on the platform.”
Make sure a hedge is a hedge in plain language rather than offering customers a fixed term supply contract. This is a banking term that has no meaning to traders.
“Products are digitized and presented to customers in the form of works they need when they need it. I think sometimes people miss that with banking products – like packaged banking products. Let’s make something out of it that is closer to the customer’s work. ”
When he asked about forex hedging, the bank didn’t give him a 50-page document.
Another marketplace card company, HUBUC, specializes in providing embedded financing for companies offering Software as a Service (SaaS). According to Hassan Nawaz, the compliance issue has been resolved.
“HUBUC includes compliance with just one contract, giving brands access to fintech and banking services, creating new revenue sources, increasing customer loyalty and user experience. It gets better,” says the company’s website. need any rules.”
All they want is a good debit or credit card and a known exchange fee. You can also get transactional data for better retention.
Wix.com, an online website building company, has 2.5 million merchants. With HUBUC, in addition to personal and corporate credit cards Visa or Mastercard, you can also offer debit and prepaid cards in 19 European countries.
“Wix makes 1% of transactions, while customers make revenue, want to keep it and just install it.”
Some of the companies on the market map are still in their early stages. For example, make sure Hedge and HUBUC buy Series A. In a fast-growing market like embedded finance, Aperture believes it can create value by finding innovators before other fintech analysts. That means asking questions, checking websites, and talking to customers.
“They were inherited by the time the company reached the Magic Quadrant,” says Robinson. He sees embedded finance as an important market opportunity.
“Embedded or contextual banking seeks to provide banking services when and where consumers need them, increasing conversions and overall market size. An estimated $3.7 trillion in embedded banking functionality in the market value of companies with access to US dollars could increase.” According to the report. aperture.
“Market maps should not distinguish between good and bad, but rather help those responsible for system selection to understand which platforms will help them achieve their strategic goals. Lead to. ”
Embedded finance companies raised $22 billion in 2020, according to Pitchbook.
“These are small businesses that cannot afford to be included in most industry analyst reviews or that do not meet the criteria,” Robinson said. “But it is transformers that, despite their small size, can radically change a company’s business model and the technological capabilities associated with it.”
Aperture scores support a modular model for greater specialization and flexibility. The report describes the company as a destroyer/transformer, amplifier and accelerator. “The upgrade has helped accelerate the rollout of Challenger Bank without radically innovating the end-user experience or changing their business model to other than third-party vendors.”
Stripe is categorized as an accelerator rather than an enhancer because it “offers strong intelligence, low code integration, and a microservices architecture”. Accelerators are “usually new with the latest architecture and pure UX”.
Using APIs and microservices, modern embedded finance companies offer a degree of portability.
“If we started developing the BaaS platform and using it to incorporate other services, we would have a lot of conclusions,” said Robinson. “But the blockage rate is much lower than in the past when the option to offer banking services as non-banking was white-labeled a monolithic technology stack, or buying a bank.”
The far right quadrant of the opening is for solutions that “offer a robust business model and best-in-class technology solutions”. Some of them provide strong contextual information and share data between tenants so you can see cases of fraud happening in multiple companies.
“Market maps assess suppliers based on their ability to enable business models and technology innovation,” Aperture said in a statement.