What is Embedded Finance, how does it work, why is it important, who benefits, what do brands and companies in all sectors need to consider if they want to take advantage of it?

1. Embedded Finance
The $7.2 Trillion market opportunity
(and how to realise it)
Simon Torrance
FTT Embedded Finance, August 2021
Simon@Simon-Torrance.com
www.linkedin/in/simontorrance
www.embedded-finance.io

2. Introduction
Board and Leadership Advisor
• New Growth Strategy
• Platform & Ecosystem Strategy
• Venture Building
www.embedded-finance.io

3. 3
Problem #1 – our financial system is not fit for purpose
Source: Mercer for World Economic Forum 2018 Source: Simon Torrance, based on FICO Bank Study 2020
E.g. Retirement savings gap ($ Trillions) E.g. Banks don’t address full needs

4. 4
Problem #2 – our business models are out of date
Source: McKinsey Global Institute, July 2020; Simon Torrance analysis
• Low interest rates
• Increased competition
• High costs
• Obsolete infrastructure
• Non-digital leadership
“Scared
sh**less”

5. 5
Problem #3 – New Consumers, new Behaviours
Sources: AppAnnie; FT; NGA

6. 6
Digitising existing business (most focus today)
Intelligent digital solutions
Developer Platforms
Online Marketplaces
Ecosystem Orchestration
(inc. ‘Super Apps’)
Impact potential
Complexity
1
2
3
4
5
Digital Business Model Archetypes – which win?
Source: Simon Torrance for the World Economic Forum 2020

7. What is Embedded Finance? Where does it fit in?
Abstracting financial services functionality
into technology to enable any product or
service provider, retailer or developer to
seamlessly integrate innovative financial
services into their customer propositions
and experiences:
• Visible complementary add-ons, or
• Invisible native components
Personalised and relevant to context
Payments & Lending
Payments, Banking,
Insurance
Payments, Lending &
Insurance
Lending & Insurance Lending & Insurance
Examples
Payments, Lending &
Insurance
Source: Simon Torrance
10x better customer experiences,
faster/cheaper/simpler/fairer,
leveraging new data sources (Open
Banking/Open Data), financial inclusion

8. Very tangible commercial benefits…
+ Payments + Loans + Insurance
5x SaaS TAM/ARPU
+ Insurance
100m new customers
Source: Simon Torrance analysis, industry interviews
B2B Software
Businesses
Digital Service Providers
& Platforms
+ Credit + Insurance
+20% to order value
+50% conversion
Retailers &
Manufacturers

9. Started with payments…
*Market value
Embedded
Payments
Embedded
Lending
Embedded
Insurance
$7.2 Trillion*
Global 2030
Other
Source: Simon Torrance analysis

10. FinTech: becoming the world’s new innovation platform
*Market value
Embedded
Payments
Embedded
Lending
Embedded
Insurance
Top 30 Global
Software
Companies
Top 30 Global
Financial
Institutions
$3.6 Trillion*
$5.1 Trillion*
$7.2 Trillion*
Today Today 2030
Licenses & Deposits
Internet + Cloud +
Mobile Tech
+ Financial
Technology
Other
Source: Simon Torrance analysis; Bain Capital Ventures; Morningstar data

11. Existing Customer base
(Products)
Agents,
Brokers
Fintechs/BigTechs
Developer Platforms & Neo Aggregators
Direct Partners
New Customers
(More personalised, affordable and compelling solutions
integrated into daily life)
Your FS Products
Your Underwriting
APIs
New FS distribution
Traditional FS distribution
Your Capabilities
APIs
Compliance & Capital Compliance & Capital
Today Tomorrow
Any Products
Any Underwriters
Any Capabilities
Digital Wallets
Any Company
Copyright: Simon Torrance 2021
The evolution of FS distribution: new control points

12. Growth and market power concentrating at top of the
stack. Control Points are key.
General Brands
Fintech brands
Dev Platforms
Sponsor FIs
Increasing choice of
suppliers
Robust APIs not enough
Commoditising
Strong customer affinity
Source: Simon Torrance analysis

13. Leading bank strategies (insurers starting to follow…)
Full Service
Retail Bank
BaaS Platform
New Customers
Sell BaaS
Sell FS
New
Accounts
New Customers
Attractive FS
$$
Data & $
Embedders
Capabilities
Transaction
Services
Capabilities
New
Accounts
New Customers
$$
$$ Sell FS
Source: Simon Torrance analysis

14. 9. Make it tangible
(Optimise Core + Create Future)
BOLD AMBITION
1. Clear, shared vision and strategy
2. Rich Portfolio
COMPELLING VALUE PROPS
3. Based on new insights
4. New commercial models
ENERGISED ORGANISATION
5. Dual innovation for execution speed
6. Ring fenced investment
EFFECTIVE SCALE-UP
7. New methods and tools
8. Core enablers
9 Success Factors (brands, retailers, FIs, techcos, et al)
Source: Simon Torrance analysis

15. #1 Foundational Requirement: Ambidextrous Org
New Innovation Governance
Optimise
the Core
Fast track
the Future
• Internal Ventures
• Fintech Collaboration
• External Ventures
• M&A
• API-ise
• Data-fy
• Automate
Where to play/
How to win?
Source: Simon Torrance analysis

16. Thank you
Simon Torrance
Simon@Simon-Torrance.com
www.linkedin/in/simontorrance