DECEMBER, 20229 in software business models that enabled Fintech to multiply its reach today:1. Pre-2000s: On-premise + licensing softwares (Oracle, SAP) unlocks access for large enterprises2. 2000s: Subscription-based SaaS platforms (Box, Workday, Salesforce) reduced/eliminated operational expenditure requirements, unlocking access for small to medium sized businesses and enabling APIs and embedding applications from strategic partners3. 2010s: The rise of bottom-up i.e. freemium / trials models (Zoom, Dropbox, Airtable,) that unlocked access for individual consumers and ability to pay at point of engagement4. Post-2020s: Embedded Fintech for new verticals (PAKT, Episode SIX, WalletEngine) unlocks new potential financial services revenue streams for digital businesses. Revenue is a combination of SaaS and consumption-based models Game-changing Innovations Drive Growth MultiplesMarket penetration will continue to deepen given that embedded finance can help Saas businesses to increase revenue per customer by as much as five times. The opportunities it promises are spawning three interesting investment themes:1) Finding the next payment service disrupter;2) Banking-as-a-service or technologies that allow non-bank brands to offer financial services; 3) Vertical Market Additions, such as fitness, construction, property or other sectors that can offer insurance or other financial products.At Vectr Fintech, we continue to see game-changing companies that can both solve challenges and grow a brand's revenue and market share through embedded finance. Two examples include:· Gigacover: provides insurance and financial services to gig workers that man the many on-demand services platforms across Southeast Asia (Gojek, Lalamove, FoodPanda, AXA Insurance). Through the Gigacover app, these platforms can offer contract workers a variety of insurance products, access to healthcare and even loans. The platforms benefit by becoming more attractive to their workers, as well as ensuring that their workforce remains healthy, secure and has access to the right financial products.· PAKT: still in stealth mode, has APIs that allow any qualified brand to offer auto or homeowners insurance. The user experience is seamless and can be embedded as part of an existing subscription service or as an add-on using a brand's loyalty points. Everything is FintechThe myriads of companies in various verticals going into Fintech is the necessary infrastructure needed for the massive transfer of wealth going to Gen-Y and Gen-Z where the future is primarily driven by convenience first. This makes delivering these services via brands where consumers already have built relationships and trust even more important to drive adoption. Every brand must look at how they can embed financial and insurance services into their customer relationship as a customer retention and loyalty strategy. Making transactions both easy and high value is paramount. Big tech realised this in 2007 when Amazon launched Amazon Pay and soon others followed. The new normal now is to ensure every business can offer a suite of financial services that are aligned with its brand as well as customer relationships. With such a big market opportunity, there can be (and we believe will be) several winners. But winning will require all stakeholders to be open to new models and processes and for regulation to keep up with the demand for access. There is undoubtedly a long way to go and the innovation wave powered by embedded finance is just getting started. EMBEDDED FINANCE, WHICH IS ESSENTIALLY A MERGER BETWEEN BANKING-LIKE SERVICES WITH NON-BANKS OR THROUGH A DIGITAL ENABLER (THINK API), HAS BECOME A GROWING TREND
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