Embedded Finance is a new way for companies across all sectors to create and capture more value. It allows any brand to create and sell attractive financial services (payments, credit, insurance, investments, savings) either as invisible native components of, or add-ons to, their customer experiences. This helps them to increase loyalty and/or generate new high margin revenue in new ways. For the (software) companies who enable Embedded Finance, this offers a very exciting new market.

1. Embedded Finance
The $7 Trillion market opportunity
(and how to realise it)
Simon Torrance
API Days Live, 28 July 2021
Simon@Simon-Torrance.com
www.linkedin/in/simontorrance

2. Introduction
Board and Leadership Advisor
• New Growth Strategy
• Platform & Ecosystem Strategy
• Venture Building
Bit.ly/SimonTorrance-EmbeddedFinanceAnalysis
Bit.ly/EmbeddedInsuranceSimonTorrance

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
Retirement savings gap ($ Trillions) Banks don’t address real 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Problem #2 – our business models are out of date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
Digitising existing business
Intelligent digital solutions
Developer Platforms
Online Marketplaces
Ecosystem Orchestration
Impact potential
Complexity
1
2
3
4
5
Digital Business Model Archetypes
Source: Simon Torrance for the World Economic Forum 2020

6. What is Embedded Finance?
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

7. 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

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

9. 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

10. Existing Customer base
(Products)
Agents,
Brokers
Digital Companies
Developer Platforms & Neo Aggregators
Direct Partners
New Customers
(More personalised, affordable and compelling solutions
integrated into daily life)
Your 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

11. Eg. BaaS: growth and market power concentrating at
top of the value chain. Control Points are key.
General Brands
Fintech brands
Dev Platforms
Sponsor banks
Increasing choice of
suppliers
Robust APIs not enough
Commoditising
Strong customer loyalty
Source: Simon Torrance analysis

12. Some leading bank BaaS strategies (Asia, LATAM)
Local
Indonesian Bank
Full Stack
BaaS Platform
(venture)
Large E-Commerce Player
Sell BaaS
Sell traditional
Corporate
Services
New
deposits
100m Consumers
& 14m Merchants
Attractive FS
$$
Local bank
Full Stack
BaaS Platform
(separate BU)
Large Embedders
Sell BaaS
Sell traditional
Corporate
Services?
New
Accounts
Millions of new
Customers
Attractive FS
$$
Data & $ Data & $
License &
Capabilities
Source: Simon Torrance analysis

13. Some leading bank BaaS strategies (USA)
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 + Fast Track Future)
BOLD AMBITION
1. Clear, shared vision
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
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