4 x 4 Virtual Salon – Crypto in the post-FTX era

with Seamus Donoghue, Julian Sawyer, Mike Higgins, and Simon Taylor.

This edition of the  4 x 4 Virtual Salon is focused on the future of crypto custody post-FTX.  Ben Robinson [aperture] hosted a lively panel discussion featuring 4 speakers: 


Main topics discussed:

1. Decentralization or Better Centralization?
2. Crypto failures and regulatory initiatives
3. Digital Assets: Coins, Regulated Securities or Non-regulated tokens?
4. The building opportunities that crypto winters bring

We ran 4 polls and we take questions from the audience. Watch the recording below:


4 X4 Virtual Salon – Crypto In The Post-FTX Era

Full transcript:


[00:00:11] Ben: Hi everybody, and welcome to our latest 4×4 virtual salon, where we’re going to be discussing crypto in the post-FTX era. For those of you who are new to the virtual salon format, or as a reminder, let me explain what we try to do in one hour, which is that we try to explore four different topics. We attempt to take four audience questions, we hold four polls, and we do that together with our four speakers who I’m going to introduce right now.

First of all, we have Seamus Donoghue, who is Chief Growth Officer at METACO. METACO provides core infrastructure for banks and other institutions to thrive in the digital asset economy. Seamus has over three decades of banking capital markets experience, and in his role at METACO he’s responsible for driving non-linear growth.

Next, we have Julian Sawyer, who is CEO of Zodia custody, an institutional cryptocurrency custodian backed by Standard Chartered and Northern Trust. Julian was previously CEO of Global Cryptocurrency Exchange BitStamp, and was also co-founder of  Sterling Bank.

Next, we have Mike Higgins. Mike is partner and Global Head of Business Development at Hidden Road. Hidden Road is a technology driven prime brokerage clearing and financing across traditional and digital assets. Mike has 20 years of experience in electronic trading, multi-asset class, and a bulk of that was in FX.

Last, but definitely not least, we have Simon Taylor, who is Head of Content and Strategy at Sardine, an API platform providing compliance and instant settlement to the crypto and DeFi wallet industry. Co-founder of 11Fs, an author of the excellent weekly Fintech Brain Food newsletter, Simon will be well known to many of you and is a very influential person in the world of FinTech.

We’re going to move us on now to the first of our four topics, which is around decentralization or better centralization. Seamus, I’m going to come to you first please. Seamus, where are institutions headed towards when it comes to deciding their custody strategy? Is it self-study, or is it using custodians?

[00:02:41] Seamus: It’s an interesting question and I think there’s a couple ways to answer. I think historically there’s been a lot of themes in the market. Obviously not your keys, not your coins, is a common theme in the market at individual level. I think for the past few years, even at the institutional level, we’ve seen everybody really focus on self custody.

Maybe they start with sub-custody as a easy go to market, but typically the plan has been eventually all want to do self custody. Now I think that that’s evolving now. The whole digital asset space is maturing. It’s no longer an experiment about, hey, we need to do cryptocurrency on-ramps, off-ramps. This is the end game. Our clients are asking for it, we want to do that. I think what we’ve seen the last couple years is, at an institutional level, there’s an acknowledgement that blockchain’s here to stay and that technology’s potentially transformational. Looking at things like DeFi, you can really think longer term how they can reinvent their intermediation they do.

I’ll quote Simon, DeFi protocols operate 24/7, 365 at zero marginal cost. I think that’s pretty profound when the banks look at their own technology stack, which is not that. I think the technology itself is becoming transformational as far as the banks are thinking.

What we’re seeing now is basically the market is becoming a bit more nuanced, particularly last year we had a lot of events whether there was 3AC, Celsius, FTX, and it’s clear that not everybody should be doing self custody, particularly the buy side. I think the buy side’s done it for a lack of choice. There hasn’t really been the large traditional custodians in this market. Those traditional custodians are now building I think LPs to all the asset managements side of the business, they will not tolerate their investment managers also doing self custody. We see what went wrong with Ameta, for example. You need segregation there.

What you’re going to see basically is you’re going to segregate the market about self custody and those that view custody as strategic to their business. Others, they’ll be more focused on the use case and custody as a way to get there.

What we’re seeing now is the, particularly we work primarily with like the large tier one banks, those that are traditional custodians are building foundational infrastructure on this. That is really them building direct custody infrastructure, self custody infrastructure. But even there the space is becoming increasingly regulated. It’s a nuanced answer from that perspective, because dealing with the Tradify space, they do both. Where they have a license, they’ll do self custodying; where they don’t have a license, they do sub custody. Even those that are strategic custodians will have some notion of working with both self custodys and sub custody to leverage licenses that they don’t have themselves.

But I think the broader markets that are really looking at let’s say a particular use case, will consume custody from these large custodians as they go to market. When a city goes to market, one provides some bankruptcy remote assurances around the custody. They have balance sheet, they’re regulated, they can provide the leverage that the clients are looking for, that asset managers are looking for. I think ultimately, we’ll see many of let’s say the buy side and those that don’t view custody as strategic, move to them as a sub custodian.

It’s a slightly nuanced answer. The strategic will do both self custodys and sub custody, but I think there’ll be a much more consumption of sub custody and more focused on the use case going forward. That’ll be their USP opposed to doing self custody themselves.

[00:05:56] Ben: Great. Thank you very much, Seamus.

I just want to say that we’ve opened the polls, if people want to vote. The first poll is about where people think this is headed. I think Seamus has given us already a pretty good insight into where he thinks the market’s headed when it comes to custody.

Julian, just a question for you then. Clearly listening to Shamus there is a big role for established custodians. What do you think their role is in terms of restoring trust and offering superior service relative to centralized exchanges, decentralized exchanges, or self custody wallets?

[00:06:28] Julian: I agree with what Seamus has said. I think there’s there is a role for third party custodians and there’s a role for self custody, and there’s a whole range of decisions you need to make to determine which is the right one. That really mirrors the ecosystem that is changing post FTX, where prior we had everybody doing integrated everything being in one bucket, and now we are seeing much more segregation. Mike’s here from Hidden Road, a prime brokerage, doesn’t want to do custody. We are a custodian, we don’t want to compete against that marketplace. That is super important.

In terms of trust, trust comes from a whole range of different attributes. Key management is one, but that’s actually quite a small part of the overall role of a custodian. Regulation, capital, governance, risk, compliance – all these things that actually add to a complete picture that enables you to have trust within your custodian. What is interesting now is that clients and people in the market are asking the right set of questions about what are the controls, what is the governance, who owns you, how are you working, what markets are you regulated in? I think that becomes super important.

Some very bright people have quoted how to build trust and how to destroy trust really quickly, it is not an overnight activity. But as Seamus said, I think you are going to get some of the traditional custodians coming into the market. As you said at intro, we are owned by Standard Chartered and Northern Trust. They felt it was better to do it outside of the bank, but owned by the bank. That becomes super interesting, I think, from a way to market and a speed to deliver within a dynamic industry. But I think in the future, you are going to see a number of bank-backed, or bank-owned custodians who are offering their services a across this marketplace.

[00:08:28] Ben: Fantastic. Simon, I’m coming to you next. What Julian’s been saying is about trust, it’s about regulation. Also, one of the themes he was saying there, which I think is really interesting is about specialization. Where do decentralized exchanges fit in this new world where we have increasing specialization? What’s the positives, the advocate I guess for decentralized exchanges?

[00:08:52] Simon: Decentralized exchanges are really decentralized market structure, and the decentralized middle and back office that provides an element of automation. One of the areas that’s possibly most interesting is the automated market makers. That’s what often people refer to as Dexus. UniSwap is a classic example. There are many, many others.

Now, these have got upsides and they’ve got downsides. The downside is, it’s not obvious how you make that compatible with existing compliance and regulation. But the upside is, there’s definite automation benefits. The middle and back office is straight through processing, no matter how many counterparties there are in a given transaction. That is an order of magnitude improvement on current, middle and back office processes. I think that’s why institutions like Northern Trust and Standard Charleston are looking at this area and saying, this is interesting, we should do it.

Having a specialist is going to be super worthwhile because that infrastructure is lightning fast, much, much cheaper, much, much more automated. But now I need to figure out how I make that comply. It would be really great if there was a specialist that could just go figure that out for me. That’s what custodians are starting to play the role of. I think if you look back and talk to a lot of brokers, historically there was a frustration with the inertia of custodians, but I think they got a bad rap honestly. They were dealing with the complexity of financial market structure that is like an onion. The thing makes you want to cry and it’s full of layers. Just horrific financial, it’s maze the existing financial market structure. To be able to automate that would be huge. But let’s not kid ourselves, this is at the cutting edge of both compliance and automation tech, and it’s still not really clear how you make all of it comply all of the time. It’s the cutting edge of cryptography as well.

There are emerging regulations in Europe, like MiCa. We’ll see similar things like that appear in the US. We’ll start to see as well projects from the Bank of International Settlements, like project Mariana, are very worth looking at if your audience hasn’t. This is the Bank Of International Settlements investigating how they could use automated market makers, aka decentralized exchanges, for cross-border transactions. Whilst there is a lot of talk about DeFi bad, there’s an understanding that the infrastructure, the technology that’s running out there and open source in the public domain, has value for financial markets. I think it would be silly to throw the baby out with the bath water on this one. Really, really go look at the infrastructure, but consider how you make it comply because that ultimately is your responsibility.

[00:11:51] Ben: Fantastic. Thank you, Simon. I really like the onion analogy there. Can I borrow that, if that’s alright? Mike, coming to you to get your viewpoint as a prime brokerage, do you think institutional investors will require hybrid custody solutions, i.e. sub custody and multiple custodians? If yes, how can that be offered both technically and operationally?

[00:12:14] Mike: I think my colleagues touched upon a bunch of it already, but I think the short answer, Ben, is yes in some cases. The question really boils down to the type of investors in the market. Unlevered investors have a greater need for custody, similar like in Tradify where the investors’ assets are not used for leverage. This implies that assets can sit in storage, meaning sit at the custodians. But for those types of clients, there’s a high dependency on solid, reliable custodians, which we’re certainly starting to see. As the guys mentioned already, you’re starting to see that emerge with some banks behind it as well.

However, the opposite is true for levered investors. Levered investors typically gain leverage by pledging and title transferring their assets. In this case, what’s more critical is the credit worthiness of the counterparty, and less so of the custodian. It really depends on how the market develops and breakdown of the investors. Till now, frankly, leverage investors have been far more active than unlevered investors. This has been demonstrated by some of the product that the clients are trading.

Just one quick comment on specialists, I think going forward we’re likely to see a series of service providers to help the market function. One of the first things we need to do is separate the function of trading from the function of asset holding and collateralization. By doing that, it’ll lead to best practices across both of those disciplines. That separation of church and state I think is where we end up. You’ll end up with custodians holding assets, exchanges running matching engines and providing matching services, market makers there to efficiently transfer risk, prime brokers or third-party leverage providers to make a capital and cost-efficient way for folks to access the market.

[00:13:57] Ben: Perfect. What all of you said nicely, tell us with the poll, I don’t know if our speakers can see the results here? But the clear consensus is around the institution regulated, crypto custody solutions will be the most popular choice going forward. Which I think very much agrees with what you guys have said so far.

Exactly at the quarter past mark, we’re moving onto our second topic. I just remind our audience that they can post questions and I will put those questions to our speakers here as soon as they come in. The next topic is around crypto failures and the regulatory response. Julian, coming to you first. Do institutional investors feel the pressure from the new regulatory announcements coming up, particularly in the US, around custody? What steps are they taking to comply, and can they realistically comply with everything that’s coming through from regulators?

[00:14:54] Julian: How long do you want me to talk on this topic? We can spend the next 45 going? Look, if you look at the various markets, the EU has got some great attraction with MiCa coming and some greater clarity in the regulatory roadmap. I think all of us would agree. We need to have that certainty, that roadmap for us to invest and for the market to develop. We’ve got in the UK HMT doing a consultation at the moment about a whole range of things, including custody, and I think that is really important. But some of the language and direction of travel is where we would expect that crypto custody is treated very similar to other asset classes, which it should be.

The US has got probably two or three different lenses going on at the moment. One is, who owns the regulatory activity of crypto? Some of that is political, some of that is regulators trying to work out who owns this, whether that is the CFTC, the SEC, the New York DFS, the Fed, all of the above, and probably one or two others which I’ve missed. Until we actually understand who is the regulator, it’s really difficult to understand whether the noises that they’re making and some of the actions that potentially, or particularly the SEC are taking, is actually the right direction of travel for custody.

Actually, what you end up doing is having this risk that what we’d call US clients are not operating on US property. They are out in Cayman or they’re in EU, UK, et cetera. I think that would be bad for the global industry because I think what we should be trying to get to is alignment, not equalization but alignment between the major markets: Singapore, US, EU, UK, and others.

What does that really mean?

I think it means that people are having more of a watch-and-see. talking to people in the market, some of the traditional custodians in the US markets are like, we don’t know. We can’t make the bet. We haven’t got enough information. We don’t know who to talk to, and we don’t know how to talk to them because we don’t know what the questions they’re asking. Which I think will then mean that that market is slower in evolving than perhaps what we’re going to be able to get in the UK and Europe.

I think people are looking at this deeply and trying to work out what to do. What is also becoming clearer is the integrated service providers who are doing custody and exchange, are going to have a real challenge in their business model, and how does that manifest itself in the future? Does a Coinbase, to pick an example, have to split up it’s trading activities from its custody? We can understand the turmoil that that is going to create for them and the market overall.

[00:17:52] Ben: Thank you. Seamus, coming to you next. What do you think are some of the key regulatory complexities for institutions that want to self custody?

[00:18:02] Seamus: Well, I would answer that to start with, echoing what Julian said, I think the biggest regulatory complexity is having a regulatory framework. I think with markets like the US where it’s very ambiguous what the requirements are, it’s a tougher go to market. Now the walls are going up, the hurdles are going up, depending on which regulator you’re engaging with. They all seem to be working, collaborating on making the go-to-market very complex, if not full stop at the moment. Whereas other markets like Germany where we have BaFin, it had been out front with a clear regulatory framework, taxonomy around the asset, the asset classes, and a licensing regime. We’ve announced two German banks have gone to market at the start of this year. I think markets like Switzerland, Singapore, similar story where they’ve really had a very clear process.

But regardless whether there’s a clear regulatory regime or not, I think narrative and how you engage with the regulators matters. I think the key point going to a regulator is, and I think this happens in many jurisdictions, crypto and digital assets is still treated a little bit like a science experiment. It’s gone through the new product approval process and we’ve approved internally, and that’s how it’s pitched to regulators in some instances. The banks have had some pushback there that that’s a nice start, but the key focus is really identifying what new risks does this asset class introduce to the bank, and how are they addressing that? Things like effectively you’re talking about an asset that’s potentially bearer. The keys are compromised, the assets going. How are you addressing that? What are there single points of failure in your control processes? Are there administrators that basically can compromise systems? Who can collude to create effectively catastrophic losses?

There’s some very basic questions that need to be answered. Then I think once you’ve identified those new risks, you need to also make sure that this new asset class is integrated into existing controls and governance programs. It really should not be managed as an exception basis, a separate asset class or process altogether. Things like vendor risk, if you’re working with a third-party vendor providing infrastructure. Has it gone through an internal governance review, which is consistently third party risk management? Often, it’s not, it’s in an innovation department. These are things that to accelerate the, let’s say the regulatory licensing or regulatory approval, you need to change the narrative that this is not something off to the side, but it’s integrated into all your co core processes, whether it’s key management that’s conforming with all your internal NIST requirements, which are effectively the international standards for managing keys and keys backup. It’s really important that there’s no ad hoc approach, that the programmatic controls are fully integrated.

The banks that have been successful where they go to market really have the approach where they identify the key risks and basically their existing asset classes are also fully integrated into all their existing risk processes as well.

[00:20:58] Ben: Thank you very much, Seamus. Simon, I don’t think you guys can see the results of the poll, but you see the questions. But here on the second one, we were asking people effectively what they think the regulatory framework should look like. , the consensus is that it should be light touch and it should be tailored from scratch to fit the needs of the decentralized nature of this market.

I’m going to ask you, this is a difficult question, how you think regulators are doing. Do you think they’re doing good job in terms of creating something that’s tailored to digital assets?

[00:21:33] Simon: Let me preface my answer with, the job of a regulator is actually really, really hard. Let’s be fair to them. They’re outnumbered by financial markets, they’re underpaid, they’re understaffed, they have horrible tools, and they’re given a very hard job and they’re hated by everybody no matter what they do. Let me start by saying that. Also, the regulator’s job is also set by government. They have a perimeter in which they can operate and they have tools that they’re allowed to use. Those tools and that perimeter is not always optimal to what they want to achieve, but it’s all they can do. We saw this, one of the mixes was added to the OFAC list, Tornado Cash, and suddenly we saw all of the unintended consequences of adding decentralized infrastructure to a list of wallets and an OFAC list that wasn’t really designed and wasn’t created. That perimeter and setup wasn’t set up, this infrastructure didn’t exist when that was set up.

There’s a lot of regulators trying to use tools for a context that doesn’t exist anymore. For that reason, I think there’s a lot of enforcing existing rules onto this new technology that are wildly suboptimal. In fact, if anything, they’re actually harmful to risk prevention. They’re harmful to efficient, fair, and transparent markets. They’re reinforcing some of the things we didn’t like about the old system.

We’re not getting light touch regulation. We’re getting the same old regulation, but they’ve no choice. How do you push back against that? I think you have to make the case for what’s new about this technology that is actually better, that’s an upgrade. I think this is the best technology that’s ever, frankly. Decentralized infrastructure is natively a golden source of records of transactions. Everybody has reconciled by default. There are no reconciliation errors, there are no issues of trying to find that piece of paper that happened somewhere in a filing cabinet, because it’s all digital. A lot of that investigative work that compliance departments have to do, and regulators and law enforcement have to do, is done for you. This is why law enforcement has been so incredibly effective at popping dart markets and identifying hacks in crypto. The reason you see so many headlines about those law enforcement actions is because it’s like fish in a barrel, and law enforcement gets to look good. It’s created a negative reputation because it’s really useful for law enforcement, which is so ironic, which creates a political problem. Because now it always looks bad, so we’ve got to kick it harder. When actually we need to reverse the narrative. Let’s lean into what the technology’s actually capable of.

I’m going to declare an interest, I founded an organization called Global Digital Finance. That is everybody from Standard Chartered to the DTCC, ELSEG, METACO, and many other organizations, but also Coinbase and DeFi projects like MiCa; coming together to say there is new opportunities to be better at managing risk. We produced codes of conduct for how you manage the new risks as well as the standing risks. Seamus made some great points. You should follow all of your processes to make sure that you have been thorough and diligent in how you have managed all of your vendors and how you’ve created your new products. But you have to recognize that this new technology presents both new risks and new opportunities to be more effective at compliance. Lean into that. That’s hard because the default is, well, I just need to get it live, the process is really hard, it’s the budget cycle, that person’s just changed it.

I know there’s a lot going on, but if you want an order of magnitude cost reduction, then I think the price is worth it.

[00:25:37] Ben: Fantastic. We’re getting a lot of questions here from the audience. I’m going to start with the first one here, which is from somebody called Alexander. Julian, I’m going to put this to you first of all. I don’t know if you can read it too, but it says, the traditional notion of custody in terms of holding an asset always struck me as odd when it comes to DLT. After all, custodians are not holding an asset where they also have a legally enforceable right to ownership. Instead, they hold a key to a public store, which determines ownership. How do you think this fundamental difference to traditional assets will be reflected in the market?

[00:26:08] Julian: There’s a lot of technicalities in that question, so I’m very happy to take offline if you want to go down any more detail. But some of this is about how you construct the custodian legal agreement. For instance, for us we don’t have Omnis accounts, we have segregated accounts. We have your assets in a trust, so we don’t actually own that. We also ensure that we have CAS rules in place. There are things that you can do with using existing legal structures under English law as an example, that enables you to ensure that you have got that right to that asset. In terms of bankruptcy, then you have that protection.

One of the things that we have seen in the industry in the last three or four months post FTX is the off exchange model, which we’ve got our product interchange and there’s other ones out there, which essentially means that you’re not pre-funding into an exchange in a venue, you’re keeping it with us. If one of the parties, either the trading party or the venue collapses, then we have complete understanding of the bankruptcy and liquidation processes.

I think this is about a maturity of using existing legal structures and best practice to deliver what we need in the end state.

[00:27:28] Ben: Thank you so much. Perfect. I’ll just take one other from the audience and then we’ll move on to the next section. Mike, I’m going to come to you for this one. What are some of the immediate measures that you’ve seen in financial institutions or custodians to prevent another FTX like event? Can I also put to another question which we have, which is, what do you think things like proof of reserves, audits, or proof of assets and liabilities would also make a big difference?

[00:27:51] Mike: I think some of the immediate measures that are coming in in place is that, again, going back to separating the function of trading from the function of asset holding and collateralization, and removing that vertical setup and horizontal, that’s going to require the industry to come together and have different parts of the ecosystem function. We are seeing some movements there where there’s tri-party solutions to hold assets off of the exchange and then reflected there from a credit perspective.

But just taking a step back then, when we first started in the digital space we were calling out two issues. One, there was credit risk in the system that wasn’t being valued or priced. The second again was that challenge around the vertical integration, the notion that the exchanges is running a marketplace while custodying the assets of the users. In certain instances, again, like running an internal market maker is mind boggling and certainly a conflict of interest.

We’re supporters really of educated regulation as well as counterparties educating themselves. They need to have a better understanding of the entities, the legal and operational structure of the entities they’re interacting with. The amount of times we hear people running around saying they’re a prime broker or they’re a custodian when legally and operationally they’re not set up that way, is frankly concerning. The faster that as an industry we can build that customer protection, again, I go back to the separation of church and state and financial transparency, the faster this repricing in the market will come in play.

Really just two quick lessons that we learned from last year. One, a large portion of the crypto market was based on unsecured lending, meaning no assets provided by the borrower. There’s a whole host of reasons that that existed. However, in TradeFi, unsecured lending to investor pool is almost unheard of. It’s very, very rare. Take to the treasury market, repo and reverse repo, it’s secured amongst the banks in the largest asset managers. Most of the unsecured lenders are either eliminated in this space, like the Block Five, the Voy Joseph, the Celsius, the Genesis of the world. But you could argue that the market’s already dealt with that problem and done it pretty harshly. But it’s unlikely that we’re going to see that unsecured lending again.

The second lesson is really around transparency. The lack of good accounting and financial disclosures among some of the biggest players was and is a major deficiency in the market. So requiring standardized and regular financial disclosures is an area where hopefully regulators will help. We need to do that as well.

[00:30:20] Ben: Fantastic. We’ve had a question from somebody called Cheryl, which I’m going to ask you to take in the last section. In the view of the time, I want to move us onto to section three, which is about how the demand for different types of digital assets is changing in light of FTX.

I’m going to come to you first, Simon. Has demand for cryptocurrencies or stablecoins gone down since the FTX downfall, and what can be done to boost adoption further?

[00:30:50] Simon: Yes. It’s gone down. The wonderful thing about crypto is you can go check all of the trading volumes out. It’s all public domain information. All of that exists. If you’re not big users of Dune Analytics and all of the many services out there, wonderful products like Nassari and other research platforms are just great ways to see that, yes, volume is down, activity is down, price is down. If that macro, is that credibility? It’s all of the above. It’s absolutely the case.

I think the more interesting question is what do we do to prevent this happening again? I think a lot of it is, frankly, if you remember the CEO of FTX had gotten into a position of being interviewed by Bloomberg and Reuters, and was really playing that game exceptionally well. Sometimes you can fake it till you make it, and you can fake credibility, and everybody loves a success story and everybody loves a winner. But underneath that, the picture appears a lot more complicated. This certainly appeared to be a phenomenal technology platform. Ask anybody who used it, and I think that’s what brought them the credibility. The tech was actually astonishing. We we should learn the positives from that. That might sound like a controversial thing to say, but why did traders love it? Why did it attract so much capital? It didn’t hurt that they had their own market maker, and it didn’t hurt that it looked like that market maker was doing some interesting things to hide its problems.

But if you even take that out, traders would still tell you it wasn’t just that. It was that it was really fast, it was really efficient. It wasn’t just how they manage collateral, it wasn’t just the unfair advantage. It was a good product. Let’s learn that lesson and separate that out, because I think that opportunity still exists to build incredible market infrastructure that works. I think we should. We should absolutely focus on that as the North star, because that is a rising tide for everybody if we keep that focus and take that lesson.

What can be done to prevent it? I think we’re already taking a lot of those steps. Frankly good diligent separation of concerns would be a really nice idea. I want to see us push the boundaries in terms of what on chain audits look like and what the technology can. Hiring an audit firm appears to be what everybody is crying out for, but FTX was audited and it wasn’t like the same auditors that Tether uses. There were decent auditors in there.

What we need is to recognize that part of the reason the problem was obfuscated is that they’d created a token, FTT, that looked like this wonderful little loyalty token that you got for using and trading the platform, but they were actually able to use that to obfuscate a relationship between Alameda and the FTX itself. How do you manage. Well, there’s probably going to be lots of things. On chain proofs are going to be really helpful, proof of solvency is going to be really helpful.

But you have a commercial issue there. If everybody has to declare their positions on chain in a public and open domain way, everybody’s going to know my trades. That’s no good. What happened to commercial privilege? What happened to confidentiality? What happened to privacy?

Balancing those two is going to be really important. I think that is Reg Tech’s supervisory tech, and it’s one of the things that I’m certainly spending a lot of time with from a GDF capacity under Sardine capacity, looking into how can we start to ensure that we’re using the best of on chain and off chain data in a way that is privacy and commercial confidentially preserving, that gives us adequate proofs that this is true at a state in time and can be ordered if there are any questions about it? I think if we know what questions we need to ask, which I think we do, then we can design that system. That’s one of the things that the digital custody working group at GDF is focusing on quite heavily. It’s one of the areas that I’m speaking to regulators out on a regular basis off, and I’d love to see standards emerge. I’d love to see us as an industry say, this is how we balance privacy, but this is how we meaningfully upgrade audit for the digital age.

What does audit 2.0 look like? Because I think that would mean that it will become near impossible for an FTX to occur, because regulators would have a dashboard, the compliance teams would have a dashboard. One of the biggest issues with FTX is most of the compliance people had no idea what was going on. By the looks of the evidence given by the new CEO who’s taken over the ftx, there was only two or three people that had the, this privileged information about the relationship between Alameda and Nord. The internal compliance controls probably looked absolutely fine to most people. We need this to not be possible, to prevent against internal fraud, to prevent against external fraud, but we need to do so in a way that preserves commercial confidentiality.

[00:36:14] Ben: Perfect. we’ve had a great question from Vene here, which I’m going to come back to at the end cuz he invites everybody, all the panelists, to share what they think is the most promising use case now and in the future.

But before we get there, I just want to ask a bit more about the different stakeholders in this market. Seamus, can I come to you next? METACO, as you’ve said, primarily works with large financial institutions, large banks. What are they doing? Are they still ‘touching’ crypto, or are they more interested in market infrastructure around securitization and tokenization? How are big banks acting in response to FTX?

[00:36:54] Seamus: I don’t think FTX has really impacted what they think so much. I think the last 10 years we’ve seen hyper pace of innovation in the crypto space. As I said earlier, I think the banks in the last couple years have recognized the technology’s not going away, it’s something they’re going to embrace.

From a crypto perspective, whether they get involved in a crypto or not, I think the reality for a large bank is it’s a tiny asset class still. Its peak was 3 trillion, you’re hovering either side of a trillion now. I think the way they’re looking at this is from that perspective, it’s not going to have a huge impact on their bottom line, whatever they do in a trillion-dollar asset class. But I think they are, as I was saying earlier, thinking of this as a much more transformational. I would say the last five years, last six years, even the last decade, the hot thing next year has always been tokenization will be taking off. Obviously it hasn’t happened yet. But I think now we have the largest institutions, I think their focus really on investing in that space. If they do crypto, that’s great. If they ever go to market there, they can start there. They can learn about all the risks issues, all the operational process, all the compliance process around this new asset class called Bitcoin, Ethereum, et cetera.

But I think they’re looking at a bigger opportunity. I think that opportunity, and we hear this more and more from some of our largest clients, that’s public, I have a podcast and I interviewed HSBC, they said at some point they view all assets will sit on chain. Now, if you think about that, you’re talking about a thousand trillion plus opportunity. Traditional capital markets are somewhere either side of 700 trillion, you’ve got fiat currency 40 to 50 trillion, 10 trillion in private assets, real estate’s somewhere around 300 trillion. If all assets, that’s how they’re starting to frame the opportunity.

They need technology with that end state. Now, the pace of tokenization of which asset starts first, that’s still to come. But I think we see the largest firms investing without eventuality. They’ve got a legacy technology stack that’s 20 to 40 years old, built on cobalt, running on mainframes, and anybody that knows how to support that is dead. It’s really about can they tweak that infrastructure? They don’t want to touch it because it works. What’s the next generation technology? That’s where they’re investing right now.

Indeed, I think dependent on the jurisdiction talking earlier, if there’s a regulatory regime, they may start with crypto. But given the size, that’s not where they view the longer term opportunity. They really view an opportunity to start tokenizing assets. You’ve got some of the largest firms now announcing they’re getting this space. I think it is the opportunity in the next 5 to 10 years. That’s really where we’re going.

[00:39:30] Ben: That’s cool. Julian, coming to you next. I want to maybe delve in on what institutional investors are doing and whether they’re still investing in a broad range of crypto coins or whether they are only their reputable ones, and whether there’s any geographical trends that you can point to.

[00:39:50] Julian: I just want to go back to what Seamus said, because I think it is spot on. There’s some people who want to go into crypto, and they are looking at this as a multi-year investment. A bump in the road like FTX, while terrible for everybody who was impacted, is a bump in the road and look back at it such, I imagine. But there’s a lot of institutions who are saying, what’s the tokenization? What do we do? How do we do it? What is it? What are the risks? What are the controls? What’s the technology we require? A lot of those answers are: well, if you do crypto, if you understand crypto, and that could be Bitcoin but it could be stablecoin, it doesn’t have to be the volatility of some of those assets; you’ll start to learn some of the complexities, some of the right questions to ask, and the risks and opportunities that Simon mentioned earlier.  

I think we’re seeing people saying, oh, tokenization, great. Then they go back to crypto to understand what are the systems and processes, as I’ve just said.

In terms of coins, it is super interesting that in a bull market, particularly on the retail side, you’ve got to be listing 2, 3, 4, 5, 600 coins and more. I think the last piece of data I saw was like, there’s 27,000 coins out there, which is just crazy. I think for us and for our institutional clients, it is about getting to the right range of assets.

We’ve just actually launched 38 coins coverage and supported at Zodia. We’re not going to go to 100. That’s a long way away. But we need to have enough in terms of what clients want to be able to help their assets. But without a doubt, our main focus and our client’s main focus is on Ethereum and Bitcoin, and may dabble or play with one or two others, or five or six others. But I think it is interesting that the clients that would come to us as a regulated, bank-backed, will be the ones who are more mature in their thinking and more mature about this asset class and the tokens. The ones that want to go to the 100th, 200th, 300th token is probably not a client that we would want to onboard or could onboard from a risk profile perspective.

We see a pure institution of crypto native world, and it’s very dominated by the two market leaders.

[00:42:12] Ben: Fantastic. Mike, a question for you then about the buy side how the buy side is engaging with crypto and digital assets.

[00:42:20] Mike: A couple of comments back earlier, I think Simon mentioned it, and I think one of the things we need to do as an industry is stop idolizing folks that have strong influencer presence. The community needs to come together and be more proactive in calling out those bad actors. That happens all the time in other industries, like in sports and Hollywood, where they frankly outcast the bad characters.

But to your question, Ben, around buy side and different trading strategies, we see a whole host of different strategies in the market that are active now. That ability to just run across platform has become hyper-competitive. This market similarly, like foreign exchange, is highly fragmented. You need to be able to access that whole ecosystem. I think like in Tradify, you need third party capital to enter the market. Credit providers or prime brokers like Hidden Road are experts in counterparty credit risk, managing liquidity, pricing, term liquidity, and setting appropriate limits. Leveraging PBs for capital efficiencies coupled with the largest trading firms that are now entering the space with real alpha, I certainly think we’re going to see more competition.

We are starting to see more of those startup type guys come in from the buy side. As the market matures and becomes more efficient, you’ll be able to run in a more efficient trading strategies.

[00:43:36] Ben: Fantastic. I wanted to come back to Vene’s question. Vene asks, it would be interesting to understand what digital asset use cases each panellist believes holds most promised now and in the future. I’m going to come to each of you in turn. Can you see the results in the poll now? I don’t know if you also want to work that in as well, because it seems like most people listening in think that the best use cases is tokenized regulated securities.

Who should o pick first? Seamus, you want to go first?

[00:44:06] Seamus: Sure. I think it’s tough to pick one because I think there’s a lot of different initiatives as we see our clients and folks in different areas. But if I focus on one that’s public in the market that I think is particularly exciting, is what JP Morgan’s doing with the JP Morgan coin.

You can think about the bank, and they’ve described it to me in this context as well, they’re connected to all the existing payment rails in most global markets. That’s effectively a layer one where you have real payments, real physical payments. What they’ve built on top of that is a layer two. That’s effectively the JP Morgan coin, which can be transferred instantly 24/7, 365, effectively with no friction.

You have this global clearing coin. Previously in another company we were pushing this idea of corporate coin. If you’re a large multinational, you could have a clearing coin that nets all your internal flows and you really just go ahead in the real market to pay coins. I think this is may transact actual real payments. This is what JP Morgan’s created. You can go to a large global cash intensive business, which has a lot of internal transfers across multinationals, and provide them a lot of treasury efficiencies with this type of coin.

That use case to me is one that I think has a lot of applications to a lot of corporate clients, and to me is a very exciting pathway. I think they’ve got clients demonstrate that there’s demand for it as well, or at least clients are learning why and they’re starting embrace it.

[00:45:35] Ben: Fantastic. Julian?

[00:45:37] Julian: I think there’s really two things. One is tokenization, and I think we’ve touched on that. Stable coins have a way of transforming a number of broken industries, whether that’s cross payment, remittances for consumers, supply chain finance, et cetera. I think that is going to be super important.

But I guess in my mind, wouldn’t it be great if we didn’t talk about this? We just talked about how we helped companies, people, individuals, consumers, governments, charities, in doing stuff. We don’t tend to have a lot of conferences about SWIFT and the inner workings of that. We don’t need to, we just need to know how we can move money. I think that becomes a really interesting point, where in, hopefully in a few years time, we’ll stop talking about what is the blockchain, what is the coins we’re using, and talking about use cases that are helping people, and evolve to those killer use cases.

Fr me, more of the near term I think is stable coins, we’re going to see more of that. I think when it becomes more regulated, I think that becomes super important. Then tokenization in the middle term.

[00:46:45] Ben: Mike, anything you’d like to add?

[00:46:45] Mike: I’ll take it from a different lens, but I do agree with Seamus and Julian around the many use cases that JP Morgan coin will allow markets to operate certainly more efficient. But I’ll do a different one from the DeFi side of it.

Our view is that DeFi on the institutional side will end up with these permission pools. There’s a use case that I’ll describe in a second. But currently there’s a few challenges in that space. Anonymity is something that’s attractive, but doesn’t really work for institutions because it trips across that AML and KYC stuff. The other part of the challenge is there’s a lack of intermediation there. It’s fully funded and there’s no intermediaries to prop up the leverage. But again, I think the future of DeFi and some use cases there is we need to build this institutional grade infrastructure.

Going forward, Ben, I think we’re going to see a bifurcation in the DeFi side of it. On the retail side, there’ll be these fully anonymous pools that are cost effective and efficient, but really in small scale. On the institutional side, this concept of permission pools, where we’ll have an independent auditor come in and stamp wallets to approve them, I think is definitely something.

The use case I’m thinking of is, take equities, the likes of BlackRock that are lending in equities to banks, and then they’re lending those out to hedge funds to short sell. If you use DeFi and smart contracts for that, you can disintermediate that trade. Again, if you did that in the permission pool, then we can get across or around that concept of the issues around AML and KYC. The beauty of this permission pool is really you leverage that blockchain technology and achieve efficiencies without tripping up that AML, KYC. It’s early on, but I think there’s certainly a use case now.

[00:48:29] Ben: Thank you very much. Simon?

[00:48:31] Simon: Yeah. I think everything here, Julian made a point a few minutes ago, which is like a lot of folks start wanting to do tokenization of what they do today and then realize they need to move to crypto to learn. A lot of CEOs say tokenization, good, crypto bad. But the reality is it’s all the same stuff. To a technologist, to somebody closer to the subject, it’s the same, go figure out the risks. I just wanted to make that point right upfront.

I think stablecoin are the most underrated conversation to have. Seamus spoke to it, Julian spoke to it. But really the ability to automate the PVP settlement of cash with a complex workflow at the top of it, is incredible. You can essentially program a contract. Like derivatives market, but you take an ISDA, and then everybody skips the first 90 pages to get to the end to see what’s actually happening in the contract. That little bit of logic is very, very programmable. But typically to figure out what’s happening with margin calls, you’ve got to find that bit of contract, enter it to a system, so that the system knows to update the spreadsheet so that we can move the payment and send the payments team so that they do a SWIFT message. What? That’s ridiculous. Some organizations have it a little bit more efficient than that, but most don’t. The reality is most of digital and financial services was turning that paper contract into a PDF and emailing it. Maybe it’s now a more secure email. But actually turning this stuff into funds, flows, and settlement that is atomic, even if it’s with collateralized, even if we’re managing those complex workflows, I think that’s going to be critical. But stable coins are going to be really key.

We need to win not just the institutional mindshare, because I think that’ll happen, we need to win the public mindshare. I think the way you win the public mind share is that by talking about the fact that stablecoins are already used. People miss this, but it’s already live. If you go to Nigeria, it’s much easier to move money cross border there via stablecoin than it is anywhere else. Chances are the wallet you use at the other end probably got better KYC, AML rules than most of the banks. It’s probably true. Probably got better fraud tricks as well, because they’re not doing it on paper.

The same is true with Latin. What they do is they do remote pay EA with the wifi issue. If you’re not familiar, this popped up during the workpfrom-home era where people could work in any other country. What you saw is lots of talent in Latin America started working for US companies. But of course the problem is moving money across borders is unbelievably expensive. You can as an Argentinian citizen go open a bank account in the US and get paid in US dollars, that’s absolutely fine. But Deal didn’t want to do that because it’s too much compliance risk. Everybody else didn’t want to do it because they’ve got to get on a plane and open a US bank account. FinTech companies couldn’t get it done. Guess what? Stablecoin just work.  It’s the same as taking your $10,000 in a briefcase that you’re allowed to take across a border. It’s cash. But you can do KYC, AML on it because it’s digital.

There are these use cases that are already live. About 5% of that platform that’s getting paid in Latin America, it’s already using stable coins. There are billions of dollars being used for real-world use cases in stable coins. It’s not just a trading thing. Once we understand that, we understand the need to level up the compliance in it. That’s why I think MiCa is really important. We need stable coins we can rely on. Project Guardian from the Monetary Authority of Singapore and JP Morgan and DBS is an really important project, because what they’re talking about is backing stable coins with deposits.

I don’t think consumer CBDC’s are going to be the thing. It’s not going to happen. CBDC’s are going to be amazing for wholesale markets and cross-border at some point eventually, in like 20 years, but stablecoin will get there first. Figure out how you make it compliant.

[00:52:52] Ben: Okay, so we’ve got five minutes left. I did want to touch on this last section, which is around opportunities. We’re calling this the building opportunities that crypto winters bring. We’re in a crypto winter, people have a little bit more space to build stuff, and I suppose to correct some of the things that haven’t been perfect in the past.

What I’m going to do is ask each one of you where you think there’s a major opportunity here. I’m going to come to you first, Julian, because you’ve been talking a lot about the ability. But when you unbundle custody from exchanges to create more liquidity, is that where you see one of the biggest opportunities?

 [00:53:28] Julian: Yeah, and I think that follows what Tradify does in separation of roles and responsibilities. I think then you look at where is the risk and how to minimize risk. Separating in its own way doesn’t change the risk, it just moves the counterpart. You’re having the risk assessment. I think things like off exchange settlement is going to become the norm. Standardization; in traditional markets you have a lot of MI and information and insight, which we don’t have within our market at the moment. I think that is super important.

For me, I think it’s, is going to be a regulatory challenge for organizations to work out how to separate, if they are doing an integrated business model. It’s not straightforward given the geographies and the local registrations and the requirements from a compliance perspective. It feels like that will be a big ask for these integrated businesses to actually separate.

[00:54:24] Ben: Fantastic. Mike, what about you? Where do you see a major opportunity here?

[00:54:28] Mike: I’m going to do it through the lens of a prime broker. I think the digital market is going through and maturing like Tradify did, just at a higher velocity. The reality is what took 20 and 30 years is happening in 5 years.

We’re making the same mistakes. There’s credit issues, liquidity issues, there’s counterparty credit risk issues. Technology can solve some of those things. Really, there’s no difference to what we went through. I think the demand for institutional side is still strong. Again, from the lens of a prime broker, there’s a demand for like a real PB to step in this space – truly unconflicted, provides real credit intermediation, helps mitigate counterparty risk, provides leverage and financing, and ultimately allows for a capital and cost-efficient way to scale across this fragmented market.

I think Ben, institutions are creatures of habit, probably for the right reasons. They require certain infrastructure to scale. I do think that firms are going to continue to build very interesting solutions. I think the custodian side, the prime brokerage side are very early stages, but necessary evils for this market scale.

[00:55:33] Ben: Fantastic. Seamus?

[00:55:35] Seamus: Well, I echo a lot of what’s already been said. I think it’s very sensible. From a technology perspective, I think the last 10 years have really been driven by innovation. Let’s just move fast, very much a VC mentality, move fast and break things. I think post FTX and as we enter the winter and the large institutions come in, agility is important, but security and compliance are number one, and how to scale this in a secure and compliant way. We’ve talked a lot about the different risks. Understanding those risks and addressing that, whether it’s counterpart risk of an exchange or unsecured lending, there needs to be solutions that probably can learn from what we do in the traditional wholesale space and apply that and leverage the new technology to create even more efficient processes.

I don’t think these things, innovation for its own sake is not going to happen.  We still need innovation because the space is moving very quickly. But I think the key point is understanding that there shouldn’t be any single points of failure in your processes. You shouldn’t have somebody like SPFF, Sandbank Fried, that has this god-like powers. You want to ensure all processes are fully distributed, the organization has proper risk frameworks, they can manage these assets in a secure way.

Echoing the scene, we’ve said many times, you have to understand the new risks and they have to be addressed. These are not afterthoughts. It’s not about let’s get into TradeFi fast. Let’s actually build for the long term, and let’s have proper processes and infrastructure that’s going to enable them to scale not just the crypto opportunity, but eventually this idea that everything will be tokenized, and what infrastructure you need for that.

[00:57:11] Ben: Fantastic. At last we are out time, unfortunately. I’m not going to attempt to summarize everything that we’ve discussed. But I think the certain key themes have emerged right around how this space is going to become more specialized. Mike used the term separation of church and state, how regulators have a difficult job, but there are massive opportunities for them to embrace here and they need to introduce some clear frameworks.

The other key takeaway was just around how this is amazing infrastructure, and a lot of investments going to go into it. The possibilities and ends benefits for consumers will be massive.

That was a great discussion. Thank you so much to the four of you, our speakers, for taking part. Thank you for all the questions. I guess you guys saw, we had a whole bunch of questions that we weren’t able to take during the course of the webinar. Maybe we’ll try offline to answer those and share those with the people that asked them. Thank you everybody for your participation.

If you’re interested in attending the next one, the next one’s going to be next month in April. We’re going to be looking into venture capital investing in what is now a slightly more challenging market.

Great. Thanks everybody again and hope to see you on the next 4×4. Thank you.

[00:58:26] Seamus: Thanks, Ben. Thanks, everybody.

4 x4 Virtual Salon – the Year Ahead for Embedded Finance

with Christine Schmid, Kelvin Tan, Paul Prendergast and Christoffer Malmer.

We are delighted to share with you  this 4 x 4 Virtual Salon focused our recently released Embedded Finance predictions report Ben Robinson [aperture] hosted a lively panel discussion featuring 4 speakers: 


Main topics discussed:

1. Are incumbents fighting back?
2. How embedded finance is changing
3. How to achieve differentiation in embedded finance
4. Lessons learned and getting the strategy right

We ran 4 polls and we took questions from the audience. Watch the recording below.


4 X4 Virtual Salon – The Year Ahead For Embedded Finance


Full transcript:

4×4 Embedded Finance predictions

[00:00:11] Ben: Hi everybody. Welcome to today’s 4×4 virtual salon, where we’re going to be discussing what’s in store for the embedded finance market in 2023. I just wanted to remind you of the format. In one hour we’re going to attempt to cover four topics. We’re going to take four questions from you, our audience; we’re going to hold four polls, and we also have four speakers, who I shall introduce now.

I’ll start with who is bottom left, at least on my screen, which is Kelvin Tan, who is the lead for Nexus, which is Standard Chartered Banking a service offering which launched in 2020. Next, we have Christine Schmidt, who is head of Strategy Additiv, which is a Swiss-based platform providing relationship banking as a service. Next, we have Christoffer Malmer, who is the CEO of SEB Embedded, which is the bass arm of Sweden’s SEB Bank, which launched officially 18 days ago. It’s fresh, fresh, fresh. Lastly, we have Paul Prendergast, who is CEO of Kayna, which is an embedded insurance company, which goes to market through vertical sass platforms.

The 4×4 format is intended to be interactive. Do please submit your questions, comment on the discussion, and please do also vote in the polls.

I’m going to move on to the first of our four topics. Until now, embedded finance has been dominated by start-ups. the first question that we want to discuss is whether in 2023, this is a year when large incumbent institutions start to get more active in this market. Chris, I want to come to you first and I want to ask you, why did SEB decide to launch SEB Embedded in January 2023?

[00:02:07] Christoffer: Thanks for the intro, Ben. Great to be here and thanks for hosting this event. The story goes back a little bit further. Back in 2018, we started something in SEB called SEBX, which had a very free mandate to effectively explore new product offerings and build new tech. We went about starting doing that and we started piecing together a new technology. SEB Bank dates back to 1856, we’ve been building our own legacy system for many, many years. Here was a fresh opportunity to say, look, if we were to rebuild a bank from scratch today, what would look like?

One of the things we wanted to get into the equation early on was this openness and connectivity to the outside world, to make sure that whatever we build should be able to be distributed by ourselves, but it should also be able to be distributed by others.

We went on, we launched our first internal product on this platform, which is a small business offering in Sweden. Then SEB Group started looking at building next generational mobile apps on top of this platform. Then in the beginning of last year, we officially made public our first external customer who’s now building their product on top of our platform, and that’s a retail conglomerate in Sweden called Axel Johnson. They are now embedding our platform into their user journeys. When that became public and when we started talking more about our strategic ambitions within banking as a service, and we’ve sat it for the group, SEB as one of our strategic targets for our next business plan is to be a leading player in banking as a service, we really got a great response in the marketplace and we’ve had so many exciting conversations. We’re starting to see that, we really think there is an opportunity.

We think coming from being an incumbent bank, piecing together both the license, the capital, liquidity, all those things, the brand recognition, and having that technology piece that sits on top, that is really designed to distribute product internally, but as well as externally.

When we started to see that, we think there’s an opportunity in the market, we really felt that there was a good response, we said we probably need to take it out of the innovation lab, which was SEBx, and put it as a business unit in and of itself. That was announced back end of last year. We’re calling it SEB Embedded, and to your point, officially launching 1 January, 2023. We’re hard at work right now broadening the product offering, onboarding more customers and really trying to scale this business.

[00:04:37] Ben: Fantastic. Well, congratulations on the launch.

Kevin, I wanted to come to you next because you’ve been at this for slightly longer. I’m wondering, what is your sense of what the Nexus competitive advantage is? I would mention three things that Christoffer said, license, capital, brand recognition. Would you say they’re the sorts of things that help to differentiate a large incumbent versus a start-up in this market?

[00:05:04] Kevin: Yeah. Thanks, Ben. I’ve spoken to Chris before, a couple of months ago when we caught up, got introduced and had a real conversation. Everything that Chris said was effectively this; we went through this exact same journey. Pretty much the same thing. I started a couple of years earlier than Chris. I started five years ago when the whole idea of this embedded finance, before it was even called Nexus, before embedded finance was even in the official Lexicon of financial services, this was me and five slides and a coffee with the CEO of Standard Charter Bill Winters. That’s how it started.

As part of building up exactly the same, the technical platform in order to enable massive scale, we decided we should really try to solve the of scalability for the bank in multiple geographies. From Standard Charter’s perspective, everything that Chris said is absolutely true. It is not just the license, the regulatory know-how, the capital, all which the banks have in relative abundance to most of the other fintechs, but specifically at Standard Charter we also have the footprint in most of the developing markets in the world where this becomes the most impactful from one of our key stands, which is lifting participation. It drives financial inclusion at a scale that the bank has never experienced before and did not have the capacity to do previously without the advent of this capability.

Just as an example of that, in Indonesia where we have launched with our first partner, Bukalapak, which is open account in Indonesian, it has almost 60-70% of the accounts being opened outside of Jakarta. As you know, Indonesia is a massive archipelago with 200 islands. It’s quite good. We have a huge number of customers that previously had not been reached by Senate Charter Bank, and now we are able to do that. We are about to go live, hopefully with second partner really soon in Indonesia, and we also have expansion plans to other developing markets which we’ll announce in due course.

But I absolutely agree with Chris in terms of the advantages. The only other thing I would say on top of that is, because obviously Chris is in Europe and we are in the Middle East, Africa and Asia, the license footprint becomes a lot more beneficial than the European one where you get passport licenses.

[00:07:33] BEN: Just one small follow up question. You’ve said that a lot of the focus is on financial inclusion, is that why you’ve been able to coexist so successfully with the rest of the group, because they don’t perceive any cannibalization risk? Because you’re going after effectively new customers, people that have not been banked before?

[00:07:54] Kevin: Absolutely. To be fair, we are not thinking of deploying in large, mature city states like Singapore and Hong Kong. That’s not really the place you want to do embedded finance, at least at scale. We are looking at Singapore, we’re looking at Vietnam, we are looking at Thailand, we’re looking at developing markets across the world. That’s where this is a good, effective, cost efficient way of onboarding, acquiring, as well as serving those customers. We want to be able to crack a profitable mass market banking, which is really what we all about.

[00:08:27] Ben: Clear. Fantastic. Christine, question for you. Additiv works with a lot of different brands on the demand side, a lot of different financial institutions on the supply side. Do you have a preference in terms of the kinds of partners that you work with on the supply side? Do you favor, for example, large incumbent institutions like Nexus and like SEB?

[00:08:50] Christine: I would say we are an open orchestration platform. Maybe one or two words on Additiv, because this brand might not be as known as the other twos that were before me, we are a wealth tech house. We provide services across Asia, in Europe, and we are live in the Middle East. As Kevin just stated, we are live with solutions as well in Indonesia. We are on the ground in the Philippines, we’re on the ground in the Middle East. We provide solutions into the Nordics, but also we are live with clients in Germany, UK, or Switzerland, for example. We are the technology, the glue in the middle. Yes, we partner with regulated financial houses, obviously.

No, we do not have a preference. We are an open orchestration platform and I think that’s one of the big differences. But there are certain prerequisites that definitely helps, back to your question, Ben. First of all, clearly the financial house has to be technology wise ready. Not talking about having the solution but on a PowerPoint, but really have it built that we can dock on, and to get a sell towards brands and clients.

More important, I think that’s where SEB and Standard Charted nicely fit. The mindset has to be ready. It has to be a strategic opportunity by the management. It has to be a business opportunity. This is not IT, what we talk here. Absolutely clear. It is a business model change. As McKinsey calls it, it’s a 20 trillion breakup opportunity. This what will drive business forums, what we strongly believe into.

Thus what we need to partner with are win-win situations. We have a lot of inbound at the moment client brands that are looking to engage on the embedded finance side, but they want to engage in an open situation. For example, we partnered with Saxo, where we provide services across the Middle East. We partnered in the Philippines, for example, with Atram, where we provide financial services to the wealth management side across the Philippines.

[00:11:11] Ben: Fantastic. Thanks. I would remind you that if you submit questions, I’ll put them to our guests. Paul, I’m going to come to you next. In your stack, in the Cana stack, how much do you work with incumbent insurers?

[00:11:25] Paul: Well, that is our model. We’re a non-regulated, we’re that infrastructure, not unlike Christine, that infrastructure layer. We’re big fans of working with incumbents, whether it be insurers or brokers, giving them an opportunity to open up new distribution opportunities through vertical SaaS platforms, which is what we’re pretty much obsessed about.

Yeah, we’re working with relationships with some of the largest insurance brokers and insurance carriers globally as we roll this out. Again, if you look at some very similar themes, embedded insurance in our view is a number of years behind your traditional embedded finance. We’re learning a lot and taking lots of notes in terms of what’s happening in embedded finance. Working with people who have the regulatory know-how, the capital base, the knowledge, really understand. When the InsureTech started in 2016, everybody said insurance is dead and the start-ups are taking over. After a grind of six years I think people realize, okay, this is not as easy as everybody thought. This is not a zero sum game. This is about collaboration, and our job is to bring some technical know-how, and to Christine’s point, a different business model to the market. It’s a win-win situation for the small businesses we’re working with, the vertical SaaS, and the incumbents.

[00:13:05] Ben: Fantastic. I’m going to move us on to our second topic, which is about how the embedded finance market is changing. I’m going to come to first, Paul, so I’m going to mix things up. I wanted to ask you, in a lot of the things that you’ve written, and I saw you on a podcast recently or I’ve watched you on a live interview recently, and you were using the expression embedded finance 2.0 quite a bit. My question to you is, what do you mean by that? What’s changing in in embedded insurance?

[00:13:3711] Paul: The first wave of embedded insurance, embedded insurance has been around quite a lot. You walk into a car, buy a phone you get mobile phone insurance, you go onto Rhino Air, you buy travel insurance. Quite recently there’s been a number of companies doing embedded insurance 1.0, which is effectively being, we have a product, we’re going to put it on digital platforms, and it’s going to be a better customer experience. Fantastic. Some really, really good companies doing some decent business.

Our view is the next wave of embedded insurance, and there’s some really interesting companies in the space, and we’re one of them, we would hope, is not just treating the distribution partner as a distribution partner, but treating them as a source of unique data. You see it in FinTech, and as I said, we’re taking lots of notes, where people are using data on the platform for capital ending, et cetera, in real time. That’s exactly what we’re doing. We’re enabling the platforms to solve their customers’ insurance problems using the unique data on the platform. It’s not just a product that you can get on the high street, this is a unique solution but using the data. That’s the big wave we see coming in embedded in insurance 2.0. Again, learning from our colleagues on the embedded FinTech side.

[00:15:09] Ben: Thank you, Paul. Kevin, I’m going to come to you. I would invite you to also apine on whether you think embedded finance is going to become more personalized in the way that Paul says embedded insurance will become. But I also wanted to ask more specifically about Nexus, whether you are starting to see some changes in the kinds of brands that are approaching you or the kinds of services they’re asking you to embed in in their offering.

[00:15:38] Kevin: Yeah, absolutely. First, I’m surprised by Paul’s view of embedded finance 2.0, because I think embedded finance 1.0 has hardly taken off. We are still in its infancy. It’s not even a toddler, hasn’t started walking yet. But what we’ve done is, in Nexus we see a significant amount of interest, and it is spans all industries. We are looking at mobile wallets, we’re looking at telcos, we are looking at e-commerce platforms, we’re looking at o to o retailers. We are looking at even PE firms who want to embed their services within their own ecosystems that they built. Hotel chains, and airlines across the world. Depending on the region, the asks are different.

We have had conversations from what we’ve done in Indonesia, which is effectively gave Buka Lapa its own version of its own bank to its customers, to completely embedding the experience via the provision of APIs and accepting specific data from the partner in some of the markets, which we are in the midst of deploying and designing right now.

But I absolutely agree Paul’s view on using data. Even today as we’ve executed it, we get access to the partner’s data and that changes the way we onboard and we underwrite the customer. In Buka Lapa’s case, for example, we would see data on the customer’s activities, which is the equivalent of an Amazon in Indonesia. That completely changes the way we onboard. We’ve managed to create the ability, I would imagine a first in Indonesia, whereby it’s fully digital end-to-end onboarding. There is no video call-back, no physical kiosk, nothing.

Our fastest onboarding to date, I believe the record is 1 minute 30 seconds, in Indonesia. It’s pretty sweet. Our average median time is about 8 minutes. Obviously the guy who onboarded it 1 minute 30 seconds read less of the decencies than the guy who onboarded at 8 minutes.

But absolutely, we see a lot of interest in some, we see a lot of interest across all industries, depending on the geography. The ask for how we deliver the embedded finance experience also varies across geographies, from truly embedded to a companion app, to specific use cases only. Each one is obviously evaluated on its own merits and business case, and whether or not it makes sense for the bank, both from a strategic standpoint, from a tactical revenue standpoint, and from lifting participations and financial inclusion standpoint before we make a decision on who to partner.

[00:18:18] BEN: Fantastic. Chris, you raised your hand, so I’m going to come to you.

[00:18:22] Christoffer: Yeah, I wasn’t sure about the house rules here, Ben, but I politely raised my hand there.

[00:18:25] BEN: No, please. The rule is there are no rules.

[00:18:29] Christoffer: Just chime in whenever you want. Okay. I just wanted to make that comment on what Paul was saying about the data, and Kevin followed through, but this point about, I think one of the things that we found certainly, and we talk about the relative competitive advantages as well versus alternatives in the market, I think one of the things that we found certainly as a key point of discussion is access to that data.

In our case, embedding an SEB embedded product into the usage journey of a distributor means that that distributor gets access to a whole range of data that previously wasn’t available, and that is entirely for the distributor to manage. The distributor can decide what role they want to take, a processor or controller, or however they want to set things up. But they can also be confident that we are not using that data in any shape or form at our end to present something coming from SEB or cross marketing between different distributors, or approaching those end customers in any shape or form.

Here our offering is really to say to the distributor, hey, here’s an opportunity to you to level up significantly on data and insight in your ability to build relevant products and offerings on top of that, and keeping and accessing that data for yourself. That we’ve found has been certainly a compelling part of the of the value proposition.

[00:19:50] BEN: Chris, it’s easy to understand how better data leads to better insurance, because insurance is all about risk and if you understand the customer better you can manage the risk better. Where do you see the opportunity is more in the banking domain for better data? Do you think it’s just greater personalization, or do you think it’s bigger than that?

[00:20:15] Christoffer: I think there’s a number of interesting use cases. For example, if you provide access to data to a distributor who is not active in financial services, all of a sudden, for example, our first customer Johnson, their billion loyalty program, with data from financial transactions that otherwise wouldn’t have been available to that distributor to that same extent, the ability to gather the financial footprint of that customer from outside of their traditional channels or outside of where maybe the way they would normally meet their customers, enables them to build with partners and develop those programs.

I think the second aspect is also credit scoring. To be able to gather data to better credit score and build credit models that becomes both personalized, but more and more clever over time as you gather those data points, which I think certainly is another area. Particularly let’s say if you are an ERP provider, sit with accounting systems, and all of a sudden you start embedding financial services. Well, then you have a data from the accounting systems straight into the heart of the corporations, and then you can start building credit models that take those data points into account.

Another one, we’ve been talking to retailers who want to more effectively deal with their returns to make sure that some customers we can give the money back before they’ve even sent me back that television set or whatever is that they bought, because I trust that that customer will then immediately be able to redeploy those funds, whereas others we probably need to wait till the goods are back in our warehouse before we release the funds. There’s so many valuable usage journeys that can be enhanced and improved with that data.

[00:22:00] Ben: Fantastic. I completely agree on the three areas that you highlighted there: loyalty, credit scoring, returns.

Christine, I wanted to come to you because our poll suggests that people very much believe that embedded finance is moving from being very transactional to being more relationship based. That’s certainly the view at Additiv. I wonder, could you just expand on how you see Additiv, the market evolving towards more relationship based embedded banking?

[00:22:31] Christine: Let me comment briefly before I answer your question, on the comments by Chris. We have done a vast consumer survey asking clients across Asia, Europe, but also the Middle East. What came out, I think are thought staggering there, as well as the loyalty programs. From a loyalty programs it can be consumer platforms, it can be even an airline. They have a lot of insight into their clients. Clients are super, super open also to use that loyalty programs on the finance side. The ‘don’t make me think, don’t make me feel my savings’ aspect here is a very, very strong one. That opens I would say another slightly different angle on the loyalty programs, but where embedded finance could come in.

Now coming back to your question Ben,  on the transaction versus the relationship aspect of embedded finance, I think Paul has mentioned it. Payment we started early the year 2000, later came ‘buy now pay later’. Both of them are closed transactions. I buy something, it’s done. But we are now, our strong belief and I think the consumers underpin that, and the banks in particular I hear you talking, realize it’s a business opportunity, we are at the business where the revenue stream for the banks is first of all material, and the services material. We enter on the embedded finance side what we call the wealth angle, the insurance angle, but also the pension angle. Mortgage, for example. Again, these are businesses that normally come with a longer term relationship once you’ve closed it, it’s not a single transaction. These are businesses that might come with an additional advice angle to it, and even advisors that help you as a consumer over the lifespan.

If you think alongside financial planning, where wealth pension comes nicely together, this is not a simple transaction. This is a relationship business. That’s where embedded finance is starting to enter into. This value chain breaking up further.

Again, coming back to our consumer survey, clients are ready to jump to non-financial brands that provide that service. It can be a pension platform. It can be any HR system. Just think alongside HR systems’ new kids on the block, such as Personio, where you could include these services. Thus, I think the distribution channels we have here in front of us are materially changing the way we serve the consumers. Our finding is, having asked the consumer, because it only flies if we all use it, the time is now to engage.

[00:25:40] Ben: Just a follow up question. Our audience definitely agrees with you, if you look at the poll, but as this shift happens, do you think the way in which embedded finance products or services are delivered will change? Because at the moment, they’re very seamless, they’re offered exactly at point of need. But when you talk more about relationship banking, I think that’s something that might be less digital. It might be it more difficult to understand exactly the context and deliver something very concrete at that time. Because if you’re talking about wealth management, for example, that tends to be something that’s not delivered at a moment in time, but over a period. How do you think the nature of embedded finance will change if it becomes more relationship-based?

[00:26:26] Christine: Again, the services will be delivered at the point where the client has frequent interaction, because the interaction outside of the financial system then triggers the demand, the demand as well to interact. We think the digital traffic you have and the contextual relevance the service has, is absolutely crucial as well for the relational services going forward not only for the transaction.

Just think alongside, if you’re looking for example for an apartment, and you can directly link it to a mortgage, it’s the channel where you screen for an apartment, even if you own one and you want to switch, it’s not the bank you engage. But it might need a bit of an interaction. Maybe fully digital up to a certain size of a mortgage, and evolve a certain size of a mortgage non-standard might be a bit of interaction. But you have to keep the client close, and if you do that in a siloed approach you’re not keeping a client close. I think this is changing.

The same with, if we think alongside financial wellbeing or sustainable development goals, one as well is tailored to all of us; if you are employed, not self-employed. Thus for every employer out there, this kind of service is gaining importance. HR system and on the accounting side, like Chris has mentioned, the accounting systems, and that’s where the interaction is way stronger and where the services will be provided.

[00:28:07] Christoffer: Ben, can I interrupt you? We can’t really see the poll. I don’t know if you have participants. I can’t see the poll results from my end. I don’t know if they have participants.

[00:28:15] Ben: Okay. I can, so let me just tell you. The first question was unanimous, that incumbent institutions will play a bigger role. It’s 100% in favour. The second one is slightly mono nuanced, but there’s a big majority that believe that it’s going to become more relationship based. We’ll see if we can fix that so that you can see the poor results as well. Kevin, you’ve got your hand raised. I’ll invite you to comment.

[00:28:47] Kevin: I pretty much agree with most of what Christine has said. The only thing I would add to that narrative is, so far we’ve been talking about embedded finance as a singular silo. We’ve been talking about, oh we work with one airline, or we work with one mobile app. That’s not the case. What we really want to do, I’m sure SEB Embedded, and at least the ambitions of Standard Charter Nexus, is pretty similar. We provide the platform and you onboard multiple partners, and it’s multitenant and multi-market. You onboard multiple partners on the front end.

Now what happens when the bank now gets access to various forms? It’s your e-commerce partner, your airline partner, your property shopping platform, whatever that may be, in the same market and with a singular custom ID. what does that change in terms of our ability to offer just in time capabilities, and build that relational aspect, which Christine talked about?

I think while we believe that a better finance will take on a more relationship or relational role, that doesn’t preclude the ability of it to be completely digital. I think that’s something we need to think through.

[00:30:04] Ben: Great. Thank you very much. I think this very, very neatly brings us into our third topic, which is about achieving differentiation in embedded finance.

Christine, I know you just answered the question, but I’m going to ask you to speak first, because what Kelvin’s talking about there, which is moving from siloed financial services to something which is more bundled, if you like, is something you are very much a believer of. I think you’ve coined the phrase ‘orchestrated finance’. What is orchestrated finance? Tell us how you perceive that it will change and become or less siloed and the services become more bundle to what customers need.

[00:30:50] Christine: We often say as Additiv, we are a two-sided open ecosystem. It’s exactly what Kelvin said, it’s no longer siloed. Honestly, orchestration is the simple act of combining and the ranging services for an optimum result. This means on both sides various partners, where you can learn and exchange and learn from. This means rearranging the financial services into the value chain, because the value chain is breaking up further what we have in front of us. This gives the consumers the financial experience, not only contextually, what we all fully agree, but also in the right form, in the right size.

Orchestration is bundling to such an extent that you have the right service at the right point in time, intelligently and seamlessly delivered. This is literally, it might sound a bit academic, but this is what we do day to day. We bring the services together, for example, for an insurance company going into, into banking services, for any asset managers going direct and leveraging up from there, for any non-financial brand wanting to enter be it on the landing side or be it on the wealth side, and combining with any loyalty points. This is what orchestration means. It combines, be it our services or partner services, into the value proposition for the client.

[00:32:30] Ben: Sorry to interrupt. We had our first question, which is basically about, can we give some examples? Could we make this slightly more concrete? Could you give an example of one brand you’ve worked with, what they embedded and how complex that was?

[00:32:45] Christine: Yep, that’s another question. Let’s take an insurance company that is not in banking and wants to offer advice beyond the insurance services they do. Of course we partner there with the banks, on both sides. In that case it’s multiple banks across three countries. On top we link that into the service for the full advisor network of this insurance company to leverage out on the wealth side. Nicely, additionally, this is an open ecosystem as well on the asset manager’s side, to offer the right investment products via the Insurance Advisor Network out.

This is one example of what we have done. That’s not new, we’ve done that a couple of years ago. I think it was before it was called on the embedded finance side. We are growing there as we speak with further services, on the mortgage side, for example.

What all finance was called a couple of years ago, or decades ago when I still was a banking analyst, and this is now technology-wise enabled, and driving forward. We see a lot of demand from the insurance side coming in for these services. I think Chris has raised his hand.

[00:34:20] Christoffer: I think it’s interesting. To the question as well, what does it practically mean? I think when we talk about customers here, we think of banking as a service very much as what we deliver. That is in our minds, very much of a B2B product. When we talk about our customer, that is the distributor. Then we’re talking here also a lot about the end client, the mortgage holder or the insurance holder, or the credit holder. In essence, the primary relationship sits between them and the distributor.

If you take our case for example, and I was also trying to answer the question in the chat, for us we are asking Axel Johnson to set up a front end. They have the user experience, they have the front end, they do all the customer interactions. Technically speaking, they access our APIs. What happens is you step into the mobile app of their brand, and you say, apply for a card, and then card application goes down in with our APIs and we create the arrangements, the agreements, everything digitally. We do all the checks and controls, we do the sanction screenings, we do the fraud prevention, everything, then we send back yes or no onboarding to that card.

Practically speaking, how complex is it to onboard? I think is one of the relative competitive advantages for how easily and how smoothly can you actually onboard a distributor? I think the question is spot on. This has to be really easy. Right now, I think Kelvin is spot on when he says this is in its infancy. We are still developing our offering, we’re still building the product, still piecing it together. But what we’re certainly finding in our conversations, in our experience with Axel Johnson, is that onboarding of a distributor is a critical competitive advantage, particularly if they’re not dealing with financial services prior. If you are a financial service institution, you a lot of those things. But if you’re not, there’s a lot of new things to pick up.

Our vision for this is that we want this almost to be self-service, so that you should be able to onboard yourself fully, digitally select what are the features you want on your financial services product. That’s all being configured and operated in our platform, then results come back up. But I think this is something we’re working a lot on to make that onboarding as smooth as possible.

[00:36:44] BEN: Thank you, Chris. We’ve had another question here from the audience, and I would invite everybody to comment on this one. I’m going to add a second part to it as well. The question is, what are the biggest hurdles you face when convincing brands to embed financial products, and how do you overcome them? I want to add a second part to that, to use your term, Chris, distributors, or we call them embedded brands in our parlance, a lot of times they know they want to launch a product, but they’re not banking institutions, they’re not expert in taking financial products to market. The second part of that question is, how much do you have to help them to package the products and take them to market? The assumption here is, they know what they want, they come to you, you provide the service and then they’re on their own. But I guess it’s not that simple, right? Maybe Kelvin, you can start us off there if that’s right.

[00:37:42] Kevin: Well, in my experience, there wasn’t much resistance in terms of convincing brands to embed financial services. That’s really quite easy conceptually. The devil comes down to the details. What does the brand want? Does it want it fully embedded in their app? Do they want a companion app? Do they want something else, or something in between. How do you want to execute? What’s the data sharing arrangement going to be like? How do we embed the permissions? And so on and so forth. The conceptual resistance is next to none. The actual conversations on the details is where it gets a little bit more complicated to execute.

But from that perspective it’s not been the biggest hurdle. The biggest hurdle really is convincing the bank to start taking progressive steps towards becoming a lot more open-minded on how to get business and how to grow balance sheet, how to create user journeys. Can it be completely embedded? Is the brand of the bank that super important in our discussions or for this particular segment? Those are the conversations that generally take a lot more time to get through, rather than convincing the embedders to take on the service. That’s my experience so far from Nexus perspective in Asia.

[00:39:02] Christine: If I might add to that, that’s what I said the first question, it’s really the mindset of the boss provider, on the management. It’s a business opportunity. It’s not technology. It’s a business opportunity out there. Adding to Kevin, we see the same from a distributor or client point of view. For them it’s, it’s a business case. Conceptually convincing them, that’s not the hurdle. The hurdle is in the two nitty gritties. I think you mentioned one, is the nitty gritty on the technicalities. But also I might add what it needs and what we have learned, it needs a very solid legal framework underneath. You have to define the rules; who has what rules in this concept very clearly. Then it flies. This is what we have learned. Then it flies and it takes up from there.

[00:40:07] Christoffer: I completely agree with Kelvin’s experience and Christine’s comment. I think what we have seen though is that there are very different categories of embeders or distributors. You have those who have a very clear idea what they want. It’s like, this is what we’re looking for, then we go straight into the practicalities. Then you have those like, yeah, we think it’d be cool to explore this space, and we’re much more ideation sessions and thinking how this could be done, what are your business goals, how can we help you achieve them, and what are they?

Our experience is that when there is that view, and I think the most exciting conversations are really the ones where there is a business problem to solve but it’s not crystal clear whether that should be an account with a credit line or whether that should be a prepaid card or whether that should be something else. But where there’s really the challenge in the business, we can solve this with financial services and this is how we set it up.

Those are the different conversations that we’re having and the different categories of conversations that we’re seeing.

[00:41:20] Paul: I think from an insurance point of view, culture is a huge thing. There’s a big clash of cultures. Software platforms are used to having a simple API, they don’t build everything themselves, they consume services all day long from different providers. Then when they talk to some insurance incumbents who are saying, yeah, no problem, we’ll get this going, it’ll only be a 12 month IT project. That’s just a whole different world. That’s not acceptable. That won’t work, number one. The second interesting piece we find is fear around regulation. It’s tail wagging the dog, compliance rules, the roost in a lot of places. Obviously hugely important, but it terrifies people who are not in a regulated space.

Obviously regulation is super important, but like anything else, it can be managed and it could be done. I think it’s educating them how to do that and the different approaches and the different technical implementations that will match up with those types of approaches.

Culture, regulation, I think to Kelvin’s point, everybody loves this. Everybody wants to do it, but it is the nitty gritty. It is the getting into the details, and we would enable to happen in an interesting place. It’s great to see some incumbents on this panel who are so enthusiastic about it. We’re working with some really interesting incumbents who bring huge amounts of value to the table. But sometimes they need a little bit of a helping hand making it happen.

[00:43:10] Ben: One question about that relationship with incumbents. A lot of the value adds that you bring, and to get back to this point about differentiation, is you provide every single type of insurance that a small business would want, right? How comfortable is an incumbent allowing you to arrange that on their behalf? What discretion do you have in terms of deciding on who gets what?

[00:43:37] Paul: We don’t. We’re the technology enabling layer. Our customer is the software platform, we bring a huge amount of insurance experience, we bring the insurance ecosystem to play, and then the insurance or the broker will contract directly with the software platform. They decide. We’re not going to change their thoughts in terms of risk management, et cetera, what lines they want to cover and don’t want to cover, their pricing. That’s not what we do. Obviously over time, as we get access to huge amounts of data, we can help them build new risk models down the line. But if somebody says, I don’t want to cover plumbers who work with heat at height, that’s not up to us. Most insurers really know their business and know what lines of business they want to cover.

 What I would say as well is the worry as well I think about taking a view on platforms and just say platforms or platforms. They’re not, they’re hugely different businesses. Some are very much transactional, some are very much building. We are very much focused on one particular platform type. We see this in financial services as well, but that’s not my area of expertise, where there’s lots of start-ups now emerging and they’re just going after certain subsegments of business. I’m just going to be the payments company for restaurants, for example, or et cetera. That’s verticalizing from an insurance point of view. That’s where the word came in, but we’re seeing a lot of that in financial services because platforms are not just platforms. It’s just like saying retail is retail. That’s madness as well.

[00:45:39] Ben: Just one tiny follow up question, we had that question earlier on about examples getting specific. I remember when we chatted before, you were working with in the equine space, which seems a bit exotic. Just tell us what that is, just to give a concrete example. That might seem quite fun.

[00:45:58] Paul: We’re working with a really interesting company. You’ve got trainers and horse owners who are managing all their medical records of all the horses. That’s incredibly unique information. Number one, they have a really close relationship with those owners and you’ve got really interesting data about those horses that are completely unique. You’re leveraging all that to provide a better insurance experience. It’s fascinating. From our point of view, we do not have to become an expert in equine insurance, thanks to God. The data is there, the distribution is there. We have the right insurers now lined up to provide this and let’s going live in Q1 of this year.

 On purpose, we’re going after very different platforms across lots of different lines of business. But the whole vertical SaaS type approach is quite different than say, working with Rhino Reiner. That’s it, transactional one and done type relationship.

[00:47:18] Ben: Great. I’m going to move us on to our fourth and final section, which is on lessons learned in getting this right. We’ve already alluded to the fact that, I’m going to borrow your phrase, Kevin, because I thought it was excellent. The conceptual resistance to embedded finance is almost zero, but once you actually move into trying to do it, it’s much more complex than people think. I would say much, much more complex, having worked on a few of these projects ourselves. I want to start and to delve into that, both the organizational standpoint as well as the standpoint of the distributor or the embedded brand.

Chris, I’m going to come to you first, because both you and Kevin, your businesses were ventures built within a large organization. That’s a hard thing to do, because you always have that immune system reaction to whenever you try to do anything different, particularly change business models. There are other large institutions listening to this. What’s your recommendation for those that are looking to launch BaaS services themselves? Do you think it can only be done if it comes out of a venture, like with the case with Nexus and the case with SEB Embedded?

[00:48:35] Christoffer: Yeah, it’s a great question. I think some of the comments that were touched upon previously is that there needs to be a clear a strategic direction that this is a business that you want to engage in. That means overcoming the conversation. Somebody alluded to cannibalization previously. It’s overcoming that to say that, if this is happening, if this is adding value to end customers, if our B2B customers are asking for this, we have a choice. Either we say, let’s just hope it doesn’t take off and we can keep all the relationships that we would like to keep in the banking system. Or we’d say, this is probably happening, why don’t we lean into this and become a player and a provider?

I think critically, it does not mean that we’re not going to have our own distribution channels. I think that’s an important distinction. When the conversation around cannibalization comes up, and of course I’m sure Kelvin would’ve had the same, we’d say that there’s no reason why we shouldn’t continue offer our products and services under the SEB brand. We do that really well. We’re top ranked with customers in many segments and markets. But we’re not offering everything to everyone in every channel. If we have a platform that lends itself both to distribute under our own brand and through others, there’s really the added opportunity. The only reason that you wouldn’t do it, in my mind, is if you don’t think it won’t ever happen. If you strategically think embedded finance is not going to work then don’t waste your time. But if you think this is a direction of travel that you think will come more and more to fruition and we think will take off, then lean into that space.

 But then critically in our mind, dealing with it as a B2B business, it’s a different value proposition. If we distribute a credit or a mortgage or an account through a third party distributor, it is not the SEB B2C offering. It doesn’t mean that you can step into an SEB branch. You don’t see the account in an SEB app. You don’t call SEB call center. Somebody else takes that customer relationship on that first line. It becomes a wholesale product that we offer to the distributor, the distributor comes up with the value proposition, the usage journey, and everything else.

I think it really makes sense to ground that conversation and say, how do we look at this strategically? Once you’ve concluded that this is something that we want to do, it fits into our strategy, then we’re having great conversation with our whole corporate coverage team. Because we’re talking to so many large customers across. Just like Kevin being part of a universal bank, a lot of customer relationships are already there on the wholesale side.

Sitting with those client coverage people and talking about what are the opportunities in your portfolio, which customers could be relevant for your portfolio, aall of a sudden you say, hey, here’s another product that we have that we can offer to our customers. Then the organization’s like, this is cool, we like it.

I’m absolutely humbled and conscious that it’s a conversation that needs to be had and it needs to be buttoned out so that you feel that, hey, this is something that we really want to lean into.

[00:51:31] Ben: I think you already said this, which is, it was very much customer driven. It wasn’t like you had to make the business case and convince all of your internal stakeholders. It was something that was more customer led in your case. Is that right?

[00:51:44] Christoffer: Yeah. From our experience when we started to put the platform together, we started using it ourselves and then we started to see the opportunity, and we got the demand for distributing through distributors. That’s what we had set ourselves up from the beginning. Then the response in the market since our first customer became public, and I think Kelvin would mirror that experience. Then all of a sudden it becomes very business driven.

I think that’s an important distinction. Wwhen we started SEBx and when we started the initiative, we said, this is to build new business. It is not just to check if AI is cool or if machine learning could be used for something. It’s like, I wanna be measured on business, on revenue and profits. With that in mind, you have a driver inherently in the culture that you want to add and grow and build a business. That’s also an important message for the rest of the organization, I think.

[00:52:42] Ben: Fantastic. Kevin, I’m sure you’ve got a ton of things to add to that. Also, if you don’t mind, we’ve got a really good question, I don’t know if you’ve seen here in the Q&A, which is, how did Nexus and SEB (you don’t have to comment from the SEB side), but how did Nexus manage the transformation from being only a bank with a B2B B2B business to becoming a partner bank, which also operates as a best provider in a B2B to X business? If you could bring that into your answer as well, that would be excellent.

[00:53:11] Kevin: Sure. I love having Chris on the same call because that saves me so much time. I don’t have the same thing. The journey is almost completely the same, right? Just I started maybe one or two years earlier. The mindset shift, the bank has been ridiculously supportive at the senior management level of getting this done. The only difference between me and Chris here is that I didn’t start out having a ton of corporate customers asking for it, because it’s slightly earlier. We came up with the idea and then started sourcing for the deals. But like Chris points out, once we had the first one up and running, suddenly so many people come and say, can we do this together? We had plenty of conversations with our corporate RMs on this opportunity with their clients.

To give a better answer to the question that was raised in the Q&A, it’s a mindset shift. At the highest level, we are extremely supportive. It is the day-to-day, the nitty gritty, where we need to change the conversation. There is compliance, having a real conversation around can we actually access partner’s data and use it? What fields can we use? There are 5,000 fields that Ben, Chris, Christine, and Paul, all of us use Amazon or Netflix to some extent, I’m sure. How much data do they have on you? What fields can we use with or without consent? How do we explicitly get consent? And so on and so forth.

That conversation causes pain across the cause of execution. But we should not mistake that pain for the conceptual support that the bank actually has for something like this. I just want to make that clear.

The mindset shift from saying, now you have two real customers, Chris. You have a customer, you have the partner in our case, we call it the partner, which is the corporate customer, and you have the end customer. Both of whom will want proper customer service from us in two different veins. One is, for the partner or the corporate customer, the ability to build, iterate customer value propositions according to their designs, according to their customer journeys, and having a close cooperative relationship with multiple partners at the same time, is going to require for some a mindset shift on how to actually engage multiple partners concurrently. For the end consumer, our standards for onboarding, our standards for credit underwriting, it has to be programmatic, completely digital, and yet provide them the comfort and security that a bank would provide as if you were being served by an actual human being on the other end.

In my view, it raises the standard for the bank, both from a corporate relationship as well as from a consumer relationship standpoint. That’s been a very exciting journey to be on. I can’t say we’re perfect. There’s always a gap. Every day we see a gap that we need to fill, and every day the partner comes back to say, this is something that we need to improve on. But I think we are all starting on that journey. Check back with me and Chris, I guess in the next three to five years.

[00:56:36] Ben: Thanks so much. I’m just going to try squeezing two more questions if I may in the time we have left. Christine, I wanted to ask you a question specifically about managing complexity. Because in many of the embedded finance implementations that we’ve seen, it gets very complex very quickly as you start to work on multiple use cases. What’s your best advice for brands that could be listening to this about how you can help them to manage complexity?

[00:57:02] Christine: Yeah, you’re absolutely right. The appetite rises while eating. First of all, it is an open discussion on the business development side and deciding where to start. What helped us materially was integration. We’re in that business for quite some time now, rolled out the first insurance into the bank service five years ago. We have standardized integrated partners. That helps. Then take it from there. The second thing is, start with an option and do not spend tons and tons of time in the UIUX side. Go out, and then it’s easy to adjust. That’s certainly something. The playfulness, don’t lose playfulness. On our side, we are fully flexible to handle that.

I think there is another business line, what we have learned that will come fast our way, which is more in the marketing angle, which is all the data analytics and the add-on services there. That’s where what we call our orchestrated finance will, by the way, move on next and quite fast.

Have a clear plan, decide where to start. Don’t be afraid to adjust. That’s the second thing, don’t be afraid to adjust. Keep the playfulness and then add from there and grow. This is what we have seen with all the clients we have so far. Literally all of them are coming back and we’re growing together with them.

[00:58:44] Ben: Fantastic. We’ve got one minute left. I’m going to come to you, Paul, for the last question, which is, this is your third start-up. The two start-ups previously were in InsureTech, but they weren’t an embedded insurance. What’s different third time around? What are the challenges, opportunities that you see, advice you would give to people trying to get into embedded insurance?

[00:59:07] Paul: Yeah, it’s quite new, the regulatory set of things. Obviously, you’re not going directly, it’s not just selling to insurance companies, which we had done previously. You’re really getting those software partners on board. We’re very much focused on the small business space. There’s a big shift in how they’re starting to run their businesses online on these vertical SaaS platforms. We see that as a complete game changer and will fix the massive issues around small business. 40% of small businesses in the States have no insurance. Three quarters of the rest of them are massively underinsured, and it’s a huge data problem. All that data is on these vertical SaaS platforms, and that’s where small businesses are going to live, and that’s where we’re going to enable insurers to distribute it properly there.

It’s a big structural shift, I suppose, for us, but it’s a much more complicated. You have lots more people to get on board. But this is our third InsureTech, myself and Peter, and this is definitely the most exciting one to date.

[01:00:12] Ben: Fantastic. Unfortunately, we have run out of time.

[01:00:17] Christoffer: I’ve been trying to answer some of the questions in the chat, Ben. Me and Kevin have been typing away there.

[01:00:22] Ben: Oh, good. Thank you. That’s good, we’re multitasking. I told you it was interactive. Good. I just want to finish by thanking our four speakers. Thanks so much for participating, for your openness. I think you were very open with the questions we had. Just to recap, we covered the question of whether we think incumbents are fighting back and I think the audience consensus was yes, and I think the consensus from this discussion is yes. We talked about how embedded finance is changing, and I think the consensus there was it’s becoming less siloed, more bundled, and moving more multiples relationship-based interactions. Then how to achieve differentiation we talked about, and I think a lot of that was around personalization, and that was also the consensus of our poll. Lastly we talked about some of the lessons learned, and I think we got some excellent sage advice from our speakers here. Thank you for that. The last thing I’ll say is, if you enjoyed it, we’ll share the recording and you can share that with your colleagues and connections.

The next 4×4 we’re going to be doing, which is going to be next month, is on AI, how AI is going to be impacted by open AI and ChatGPT. If you enjoyed this and you think you might like to listen to that discussion, we’ll send around details in a short while on that. Thanks again, and thanks to our panellists. See you on the next 4×4. Thank you.

Embedded Insurance 2.0: Best case studies

4×4 Virtual Salon with Graeme Dean, Sriram Jayanthi, Jim Dwane and Roberto Gonzalez.

Following the launch of the Embedded Insurance 2.0 Market Map report, we run this virtual salon to showcase some of the best case studies of brands exploiting Embedded Insurance from around the world.  Organised by aperture and Embedded Finance & Super App Strategies, Simon Torrance hosted four excellent guests:


Main topics discussed:

1. What (exactly) is ‘Embedded Insurance 2.0’ and why is it important to business and society?
2. What specific problems does Embedded Insurance solve for brands and their customers, and how does it do so?
3. How to make an investment case for Embedded Insurance, at a brand and an insurer?
4. What does the future hold for brands and insurers with embedded insurance?

Read transcript ->

The Market Map
Embedded Insurance 2.0

The most comprehensive analysis of the multi-trillion dollar Embedded Insurance market opportunity for brands, insurers, entrepreneurs and investors.

90+ pages; 46 Embedded Insurance providers profiled; 19+ Charts, diagrams and tables; 20 case studies; The Market Map quadrant.

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Embedded Insurance 2.0: Best case studies


Full transcript:

[00:00:00] Simon: Hello everybody. My name is Simon Torrance, and I’m going to be moderating this webinar on Embedded insurance 2.0. We’ve gathered some people who are experts on this topic. They are going to share some of their experiences of delivering this concept in different parts of the world. Let me introduce them to you.

Firstly, we’ve got Graeme Dean, who is VP of Global Insurance Solutions at Cover Genius. Cover Genius is one of the leading embedded insurance companies. It raised, I think recently about $80 million in a new round of investment, and works across 60 countries around the world helping brands create embedded insurance programs. One of his clients is Sriram Jayanthi, who is a Senior Product Manager at Omio. Omio is a unicorn business; it’s a multimodal journey booking platform that helps you get from A to B through any type of transport. Omio operates now across many countries in the world, and indeed facilitates about 10 million journeys per annum in Europe alone. Sriram has been leading the insurance program, working with Cover Genius for the last year; he’s going to share his experiences.

I’m delighted also to welcome here Jim Dwane, who runs Bolttech in North America. Jim’s a veteran from the insurance industry. For the last few years he’s been in the tech industry, driving Bolttech forward. Bolttech also is a unicorn business; it describes itself as an insurance exchange. It connects brands with insurance solutions and insurance companies. Last year they facilitated insurance quotations to the value of $44 billion, Jim, wasn’t it? Doing really well, growing very fast, and operates across the world. One of his great customers and clients is Roberto Gonzales, who runs Keller Covered, part of Keller Williams. Keller Williams is one of the biggest real estate companies in the world. It operates in 80 countries, has 170,000 estate agents that work with it. Keller Covered is their insurance proposition which has been set up, or been updated in the last year or so, works closely with Jim and Bolttech to enable that.

I’m really delighted to have this group of experts together with you today. I should give you one word of apology: we are all men. We normally like to have a mix of sexes in our webinars. Next time we’ll ensure that we do, but for now bear with us, please. The agenda for today’s as follows: I’m going to share a few slides to set the scene and create the framework for our discussion today, then I’m going to ask the panelists to give their views on these questions here.

Firstly, what is embedded insurance and why is it important to society and businesses? Then we’re going to spend a bit more time delving into the details of what problems it addresses for brands and their customers. We’re going to ask Sriram and Roberto about their experiences, then Jim and Graeme are going to share some of their knowledge and expertise working with other companies as well. What problems is it addressing for brands and consumers? Then we’ll look at how do these types of companies, brands of different types and different sectors create business cases for embedded insurance? What are the methods and processes and lessons for that? We’ll end by looking at the future. How might the future look? How is this market going to evolve?

To engage you, the audience and the people who are taking their time to come and listen to us today, we’ve got some polls, some surveys that will run throughout the discussion today. You can also input your questions and comments in the chat or the Q&A function that you can see. I know you’ve all used Zoom before. Please do that. We almost certainly won’t have time to answer all of them during this session, but we will commit to responding to them afterwards. We’ll review them and we’ll write up a Q&A, FAQ document to cover the questions you might have.

Thank you all of you who’ve taken time to be with us today. Big thank you to the panelists as well. Let’s get started on this interesting topic.

The background to it is a report that myself with my friends at Aperture have just finished writing, called Embedded insurance 2.0. It’s been a labor of love for the last six months, looking at this market and how brands and insurers and others can take advantage of developments. It’s about 90 pages long. We surveyed and spoke to nearly 50 leading pioneering companies in this space, including Bolttech and Cover Genius, and we benchmarked them against various criteria. You can see a redacted version on the right hand side. The reasons we invited Bolttech and Cover Genius along today was they were very much in the top right hand quadrant there compared to others. I should say that there are many players in this space. Many of them do different things in different ways, and there’s a great deal of innovation happening in this market. It’s still early stage, but very vibrant and growing much faster than the rest of the InsureTech market today. If you want to get details of this report, you can see the URL there. It’s also in the chat space here as well. The URL, if you want to get more details on the report, is there.

Let me set the scene. What is emerging that is enabling embedded insurance. 2.0 is the following: essentially some brands have sold insurance for some time, but technology is dramatically changing the way that’s happening, and also the nature of the insurance solutions and the nature of the way that consumers consume them. Let me just try and bring that to life briefly for you. We always need to start with the end consumer. As many of you know, the world is getting riskier. There are more and more severe risks facing us as individuals, businesses, and humans on the planet. That is creating protection gaps, gaps between what we need to be resilient and have peace of mind, and what we have; the types of solutions that are available to us and that we have, that are going to protect us. Those gaps are getting bigger and bigger as the world gets bigger in terms of more people, and the risks increase. There is increasing demand for protection solutions.

What’s interesting in the past is that traditional insurers would provide those to consumers, if the consumer knows about them, understands them, can access them and can afford them. There are many people in the world who are completely uninsured. There are even more people who are underinsured. Even in advanced economies like North America or Europe, there are many people who don’t have the right type of protection to suit their lifestyle or their situations. The UN is very worried about this.

What we’re starting to see is the potential for a new type of organization to help consumers get what they need. Let’s call these brands, brands and digital platforms that interact with consumers on a more regular basis than insurers do, that understand their needs in the context of what they support their customers with, and have a lot more data – often real-time data – about customers that can be used to create more appropriate, relevant and affordable protection solutions for end consumers. Of course, brands and digital platforms have their own pressures. They need to find, keep and retain customers. They’re looking for new ways to do that. Insurance, we’re going to hear about it later on, is a way of helping them to keep closer with their customers.

At the same time, on the supply side, in the past individual insurers would sell their products to customers and those products, those capabilities tend to be tracked within individual organizations. But now digital technology is allowing those capabilities to be released, abstracted into software, turned into almost Lego bricks that can be reconfigured by organizations in new and creative ways. We are seeing the capability, not just in insurance, but also in financial services and other adjacent areas that are relevant to protection, prevention services, or other types of value added services.

What we’ve now seen, and this is what our report was focused on and why we’ve invited the panelists to join us, is a new breed of organization that is sitting in the middle, that is enabling those Lego bricks to be drawn in, configured to help brands support their customers with their needs. Cover Genius and Bolttech are two prime examples of companies that are doing this, that are focused on this as their business. I call them operating systems, because they essentially help to orchestrate innovation between the supply base, all the capabilities that are needed; and the demand, which are brands, digital platforms and end users.

Today, where our panelists fit in, we have Roberto from Keller Williams, who is a brand in the real estate sector, which is digitizing rapidly; and Sriram, who runs product management for Omio, which is a digital platform. Bolttech and Cover Genius are companies that enable them to offer protection solutions to their end users. Down the bottom, those companies also create some of their own solutions, customized solutions when required, and collaborate with other parts of the value chain as well, often the traditional insurers.

That’s the framework we’re going to use to discuss around. In terms of why this is such an interesting market, we’ve done some sizing and it looks quite attractive in terms of the growth of embedded insurance over the next 10 years, which is essentially a new method of distributing protection and insurance solutions that will eat into other distribution channels. If you are on the insurance side, wondering how this affects you, the value at stake for traditional distributors. We also see that if we can enable brands that have large customer bases to be involved in the creation and distribution of new protection solutions, we could also grow the total insurance market as well, create net new value above where we are or the current forecasts. If you are a brand or if you’re an investor, if you add up all that written premium, the premiums of insurance that could be distributed in this way, you get to an exciting business opportunity in the trillions for brands to not only add value to their customers, but create value for themselves as well. That’s why there’s a lot of investment and focus on this topic today, because the opportunity is so significant.

Finally, what’s our noble purpose with Embedded insurance 2.0? I think it’s something like this. If we have these protection gaps, how can we close them by working with brands that have closer interactions with those end users on a more regular daily basis, enabled by new operating systems? Maybe this is our noble purpose. It’s not just about making money. It’s about ultimately enabling more and better protection to be baked into the everyday lives of everyone. I think that’s something that we can all get excited about in terms of helping to achieve.

I hope that has been a useful opening stimulus for our debate. I wanted to ask each of the panelists just to give their opening thoughts of what Embedded insurance 2.0 means to them, and what protection gaps ultimately do you think it could address? Then we’ll get into the meat of how it works for brands and their end users. Roberto, would you like to start?

[00:13:54] Roberto: Of course, Simon. Thank you for that, that was a great introduction. I think it explains to everyone very nicely how this ecosystem is being built. From my perspective working for KWX, which is the holding company for Keller Williams, which as you mentioned is the one of the leading real estate franchises in the US, what we do at the end of the day is have a team of realtors, over 170,000 realtors, help people purchase what ends up being the most valuable asset for most people in their lifetime, which is their home. The whole idea of how insurance fits into that is in every single home transaction, you need to buy insurance.

But his is what’s interesting, the person is buying the home. The person isn’t buying insurance; no one gets excited about, I’m going to go buy insurance. Insurance is like an add-on that you have to have. From our perspective, and the reason why Keller Covered was created was not only to help the end user, but also to help the realtor, who is the enabler in that transaction, have access to a tool that can provide the most value to the end user. The realtor helps the customer find the right home in the right district with the right schools, for their right lifestyle. The realtor doesn’t really need to be an insurance expert in reality; they can’t even give insurance advice unless they’re licensed. That’s why providing them with a tool such as Keller Covered, powered by Bolt Insurance, is so valuable.

Answering your question, what is embedded insurance, it really means automating or facilitating the right coverage to make sure that when that person led by that realtor is buying their home, that they don’t have any gaps in coverage. I love the way you said it, because a lot of people are underinsured or they’re overpaying for insurance. But having the right protection, that is really something that most of us sometimes take for granted, unless a disaster comes along. Being able to provide that guarantee to a consumer that, hey, you’re going to have the right protection, the right levels of protection, you’re going to have enough money to rebuild your home in case something happens, you don’t have to know all the details because we’re going to use third party data to facilitate and to automate the underwriting and make sure that the real risk is assessed, automating all that process, which otherwise it’s very tedious because insurance is a complicated issue, that is something that people don’t understand and they don’t want to get into, making that easy for them is just the end game for us. That’s my view on it and how it relates to the real estate business.

[00:16:29] Simon: Yeah, because after just your health your house is really quite critical. I’ll ask Sriram, your views on this?

[00:16:40] Sriram: Hello everybody. On this, I think it’s a very interesting question. Because if you look at embedded insurance, I would think it’s like some sort of disruption to the insurance industry. I think it’s very analogous to what happened in payments and banking. Across the globe, there are a lot of underbanked and underserved individuals, which basically the new payment services help disrupt and provide access to them. I think with insurance it’s very similar. It provides access and relevant access to a wide variety of consumers who currently don’t have insurance.

If you brought it down to the noble purpose, this can actually provide access to a relevant insurance for a wide variety of uninsured customers, because essentially most of them are also one catastrophic event away from poverty. Embedded insurance can essentially save them if they get access to it.

[00:17:36] Simon: Great. Thank you. Jim, your perspective.

[00:17:40] Jim: I love the fact that you use the term gap before, because one of the ways we characterize this emergence of embedded insurance is insurance distribution is essentially democratizing. Why is it democratizing? The reason it’s democratizing is the traditional means of insurance distribution, which is certainly not going away, was as you said, creating a large population of un and underserved consumers. There was a lot of protection not being served.

I think embedded insurance fills almost three different dimensions of gaps. The first gap it fills is one of, of different places. You can now buy insurance in a multitude of different places. Those places may be physical. You want into a store, you buy a cell phone and you can buy insurance on the spot. That in essence is an embedded experience. It’s a physical embedded experience. Then you’ve got the digital embedded experience, where you’ve got a digital journey. There’s something broader happening, like someone’s buying a house, and there are a series of things that people need when they buy a house, including a mortgage and title insurance, you need some access to legal services, and if you’re going to get a mortgage, you can need homeowner’s insurance. There’s a digital gap created, or a digital location. Finally, one of the most fascinating parts of this, and I thought it was great that you had Cover Genius and Bolttech on the product side portion of your slide as well, that is the emergence of these previously unknown exposures. The whole sharing economy has created a multitude of previously unaddressed coverages.

Embedded insurance affords the opportunity, not just to distribute insurance in unique ways, but it also allows you to concurrently invent coverages that satisfy or protect whatever the particular circumstance is, whether it’s the emergence of pool sharing or boat sharing and things like that. There’s all sorts of interesting things you could do in terms of product invention. I view it as a three dimensional filling of the gaps.

[00:20:12] Simon: Thank you. Graeme, what do you think?

[00:20:15] Graeme: To use your 2.0 language, I think embedded insurance 1.0 was really finding a way to offer an insurance at a point of sale. Typically, it was probably an airline selling insurance, a travel insurance with their flight. But as we’ve evolved, and people are using more digital and technology companies where there’s different touch points, there’s different channels that they’re interacting with those brands, I think 2.0 is the evolution of that in just being broadening the product suite that we’re able to offer and make available to customers through all of those different touch points, through all the different experiences. I think it’s just double downing on a lot of those experiences that people are used to, and they want to interact with those brands. They want to continue that experience that they’re used to. I think it’s about making products available at a relevant time at the right price.

People don’t really want to go and do a lot of shopping now. The likes of Amazon have made us impatient and lazy. We want it all to be ready for us and ready to go in one simple click. I think it’s just utilizing that same ethos, and then broadening the products suite. Because it’s not just for consumers. It’s also for businesses. That’s the evolution where it’s going to go.

[00:21:36] Simon: Brilliant, thank you. Let’s do a little poll just to engage the audience. If we put up the poll, Diana, let’s see what they think. Here it is. Which of these questions do you agree with most? Protection gaps being the gap between what you need and what you have. Let’s think about it on a global basis, but which of those statements do you agree with most? Does it have a very significant role, a significant role, a limited role, or a very limited role in helping to address protection gaps compared to other things that are going on? If I can ask you just in the next 20 seconds to submit your vote, and we’ll see what you are thinking about this, then we’re going to move on to talking about some of the practicalities of creating an embedded insurance program for brands and the value to their end customers.

Let’s just give you another 10 seconds now to cast your vote. Unfortunately, the host and the panelists are not allowed to vote for some reason. It means that we can’t be biased, I guess. I think time is up. Let’s see what you said. A significant or very significant, that’s good to know. That’s great. There’s a reason for getting out of bed in the morning to enable this topic. Thank you for that.

Let’s move on to the next part of the discussion. I wanted to get into the nitty gritty and ask particularly Roberto and Sriram first about their company. Let’s bring it to life with a case study. I wanted to ask you how you are using embedded insurance specifically. I know Roberto you gave a little bit of a hint of that, but maybe go into a bit more detail. What specific problems does it solve for you and your customers? If you could just bring it to life in terms of how exactly it works, where it’s placed, how it’s offered, how much it costs, things like that, that would be great. I’m going to ask Sriram, would you be happy to go first? I’ll ask Roberto, and then I’ll ask the other guys to give some other case studies and news cases that they’re seeing in the market.

[00:23:50] Sriram: Sure, I can first. I think when we looked at embedded insurance as a brand as Omio, the first thing that we wanted to do was look at user research and understand what users particularly think about insurance. It came to be one of the top concerns. I think it was also driven by the fact that we had a pandemic, and a lot of cancellations and people lost a lot of money on different travel tickets. Insurance and flexibility was top of minds for our customers.

Once we decided that we were going to be investing in this area, what we looked at was the fact that accessibility was very important. We wanted all the customers to have access to one insurance product, at least. The second thing was, we are also a digital first platform. We placed very strong emphasis on tech fidelity. We wanted the APIs to be up all the time, even if they’re down, so we can reach out to teams and then get them back up and running. We had issues in the past when working with traditional insurers, when APIs were down, sometimes for months. That was the second important thing that we looked at. Thirdly, we also innovate in the travel sector. We tried to provide unique travel products to our customers. For example, we tried to stitch together a journey. We wanted somebody to work along with us in offering unique insurance solutions for this, like a guaranteeing, a connection between a trade and a bus. This is not something that you can take off the shelf, but you need to work along with somebody to build these products. These were the things that we looked at when we considered investing in embedded insurance and why it made sense for us.

[00:25:26] Simon: You were telling me that something like 10% of the journeys that you enable people take is insurance, is that correct?

[00:25:37] Sriram: Yes. A little more than 10% of our journeys that we enable currently have an insurance attached to them. This metric, we worked on it for the last six to eight months along in a partnership with Cover Genius. We brought different value additions, we changed the customer experience, we gave them data products. Currently more than 1 in 10 Omio customers traveled with an insurance.

[00:26:02] Simon: Is it convenient that makes it attractive to the customer? Would you say it’s just there when you need it and it’s easy to access, and if you’ve done it once because the claims process is nice, you’ll do it again? Is that it?

[00:26:18] Sriram: I think it’s convenience, and also the fact that it is also relevant, because we are offering relevant insurance products that tailor to their particular journey. We also believe that our customers trust our brand. When we are offering an insurance at the right point, we believe it also extends to them that we are saying that this is a relevant product for you to be using right now, given that there’s a little bit of flux in the travel industry. I think both put together.

[00:26:48] Simon: It’s very commercially attractive to you, isn’t it? Because if you’re doing 10 million journeys, 10% of a million journeys that are covered, you charge about 10 or 15 euros, isn’t it? That’s a lot of money. Then you take your revenue share, which is quite significant as well. That’s quite a lot of high margin new business for you, isn’t it?

[00:27:13] Sriram: Yes, exactly. Not just for the customers, like I said for the customers it’s very relevant and it’s top of mind, top of needs, but even for us as a company it’s a significant source of revenue. That warrants the investment that we had. We have teams working behind this that make sure the product is serviced in the most relevant way, and customers have the most relevant experience. To do that, we need case study and we need some numbers to back this up. Like you said, with the current numbers there is quite a significant addition to the bottom line, because margins on journeys with insurance attached is quite high.

[00:27:53] Simon: I think you said also when you moved to a more modern, what I call operating system, in this case working with Cover Genius, you quite dramatically increased your attach rates of insurance as well?

[00:28:07] Sriram: Yes. I think that is because we worked on the product in close partnership, and then we decided that this is the right product strategy and the right product to be offering to this particular set of customers. We do multiple transport; we have like trains, buses and flights, and we need to be offering relevant products. Also the way we service it up, at what point we do, we needed somebody who work along with us in data mining and making sure that we have the right tools for this. This is very important for us. This was quite an equal partnership right from the beginning.

I think that helped us improve this metric, which was quite stagnant when we worked with more traditional insurers before. Post this, we managed to more than double our rates with this.

[00:28:49] Simon: Brilliant. Well, thank you for that. Let me just ask Roberto, can you tell us a bit more about how in practice your proposition works, and then the benefits because you’ve got the agents and you’ve got the end customer and then you’ve got you as well. Just tell us a bit about how that works in practice.

[00:29:09] Roberto: Like you’re mentioning, from our perspective for Keller Williams, I think it’s a very unique position because every initiative that we undertake at KWX the first question that we have to answer is: how does this benefit the agent? Because at the end of the day, that is our core business. Keller Williams is a brokerage, it’s a training company. We help agents succeed, build large businesses, successful businesses, and provide the tools so that they can do that.

We also have to keep in mind that whatever service that has the Keller brand attached to it has to have the highest quality of service, the highest quality of products. These are all the things that we have to look at. KWX has different companies that have been created with the goal of forming a home ownership experience that helps the realtor remain at the center of the transaction, and be able to like compete with other realtors from other brokerages because they have access to additional tools. Additional to Keller Covered, there’s Keller Mortgage Keller Offers, Keller Manage, Keller Title. There’s other companies that are out there or in the making to help this this whole ecosystem succeed.

Going back to insurance, how does insurance help the realtor? When you buy a home and you’re using a mortgage, like Jim mentioned, you need to have insurance. That is just one additional hurdle that everybody needs to go over in order to complete the purchase transaction. Having a tool like Keller Covered, the idea originally was helping the end user have a very streamlined, very efficient, very effective, very unintrusive experience where they could go into a website, they could answer a few questions that everybody knows, not ask anything random or that. You wouldn’t know about a hazard you don’t even know, like how far away are you from a fire station or how far away are you from a fire hydrant, which are questions you need to answer in order to get a quote from an insurance carrier. We built this website that is very streamlined. We ask only seven questions. We use third party data to prepopulate the rest of the questionnaire. We send all that over to Bolt. We leverage their insurance exchange to get back the quotes and populate the quotes.

Basically a realtor doing a transaction with a customer is able to get that customer in less than three minutes, most of the time real accurate quotes on what insurance would cost and what protection they would have for that new property. It makes the realtor seem more knowledgeable, makes them seem more efficient. It provides additional value to the end user. It’s just part of the ecosystem where you bring this additional value. Where we insert Keller Covered, and that’s really my job, we integrate in our own CRM so that realtors have an easy way to invite customers to shop for insurance. We we’re embedded with our Keller Mortgage affiliated business so that every loan that comes through also gets invited to shop for insurance, and make sure that when the loan goes through that insurance is already there and it’s not something that’s going to hold off on the actual approval of the loan.

We’re trying to find these spots where people are going to need insurance, and make sure that we service the solution at that point in time while we work with Bolt to provide the quotes for the customer.

[00:32:32] Simon: That’s very good for the agent, because it’s also an excuse after the sale of a house to get in touch in a year’s time. You might want to change your insurance, let me get in touch with you about that. You keep in touch every year until the time when they want to move house again. It’s a nice way of keeping in touch, isn’t it? I guess also for you it’s a great product, because typically the average lifetime of a house insurance is about eight years. It’s a nice recurring revenue, if you can retain them for that time.

[00:33:09] Roberto: Absolutely, what you’re mentioning is very valuable because for us providing the agents with an additional touchpoint, like you’re saying, outside of the transaction, that’s something that none of the other affiliated businesses in Keller Williams universe do right now. That’s a really nice piece of insurance right there. You’re absolutely correct.

[00:33:26] Simon: Great. Well, I want to ask Jim and Graeme about maybe another case study in other sectors that you are seeing, that you think demonstrates the art of the possible. Graeme, would you like to go first? Give us an example.

[00:33:39] Graeme: Sure, I could give you a couple of examples that that might be interesting. What we’ve found is that when we’ve embedded insurance to be sold alongside another product or service at a point of sale type scenario, that the actual underlying product or service conversion rate has increased by the mere fact of having the insurance offered. We’ve tested this in various products and various markets. It’s a really interesting case for the brands to be able to not only potentially making money for yourself from a commission point of view of the insurance, but your underlying product and service by offering the insurance is increased as well. I thought that’s an interesting case to share.

Also what we found is by giving a little bit more choice to customers, rather than ramming down their throat a really big comprehensive type policy, actually breaking it up and what we call unbundling that a little bit and allowing a little more choice to customers, builds a higher attach rate in the long term and yield as well, because they want that little bit more flexibility and the ability to say, “I want a little bit more control. I don’t want you to tell me that I need everything and I don’t feel that I do.” Or having that negativity around, I bought this policy but I don’t even need these sections so now I feel like I’m getting ripped off. It’s having that little bit more control back to the customer. We’ve found it increases the conversion rate as well.

[00:35:18] Simon: Good, thank you. Jim, any good examples that you are seeing at the moment?

[00:35:23] Jim: Listen, but one of the exciting things about embedded insurance in the future of embedded insurance, Simon, as you touched on in your opening is there feels like there’s a limitless opportunity for, the way I say it is the intersection of commerce and risk. It’s constantly changing where commerce, some type of a commercial or personal transaction intersects with some moment of risk or some identification of risk. We joke around at Bolt, about how every week we wake up and we find a place that might be appropriate to sell insurance. We think about it in the context of commerce and risk. That creates lots and lots of different scenarios. That’s the first thing.

I like what Sriram said before, and I think Graeme touched on it as well, this whole continuum of simplicity to choice. There will always be a robust market for the simpler type products. I almost analogize them to the point of purchase display when you’re checking out of the grocery store. You get to the end and they say, would you like this? They’re not giving you choice, but it’s a simple, seamless pleasant experience that just catches you on your way out. However, on the other end of the perspective, you’ve got choice. Graeme is exactly right. For the insurance geeks among us, this is some of the exciting stuff around optimizing conversion. At the end of the day, it’s about economics as well as protection. Figuring out what that optimal combination of choice generally for the more complex products; the more complex the product the more beneficial choice is as it relates to conversions. That’s something that we consider important, and something that at this juncture of the embedded journey 2.0 is something I think we’re all learning more and more every day.

One of the things that I think is the next frontier is services. Right now many of the insurance offerings are oriented around indemnification with not as much services. Again, it depends, obviously something like travel is service. But I think we’re going to see a proliferation of services as well here in the future. It’s almost like a three act play. Act one was the simple line, act two is the choice, and act three is the service oriented offerings on a much broader scale.

[00:38:04] Simon: Do you mean services in terms of risk services, to help prevent risk or mitigate them?

[00:38:09] Jim: Exactly. Risk services, response services et cetera.

The last thing I’ll say Simon is, I think what the industry’s beginning to learn, and when I say industry it’s everybody, it’s Sriram, it’s Roberto, it’s Graeme, it’s myself, we all do slightly different things, but at the end of the day we’re all part of this journey, roper intent wins the day. What does that mean? You can plug insurance into a bunch of different situations. But if you haven’t plugged it in at a place in a moment where the intent is high or where the intent is appropriate, you’re really not going to accomplish a whole lot. It’s one thing to actually run around embedding the insurance purchase opportunities, whether it be choice based or more simple based. The true winners are the ones who are going to figure out how to optimize, not just the where, but the when of that journey.

Finally, along those lines there’s something else I say called the myth of the digital journey. I think we all know that insurance purchasing is going more and more human-less. The current hypothesis is the companies that are going to win are not the companies that are going to force their consumers into a completely digital journey. The companies that are going to win are the ones that perfect when exactly someone might need to be plucked out of that journey and carried across the finish line. Technology can’t front run human behavior and human comfort. As human beings become more and more comfortable with the digital journey, the companies that are succeeding are the ones that know, this person’s about to abandon, pluck them out, carry them across. I think that’s also something we have to keep an eye on.

[00:40:06] Simon: Yeah. There’s a great example during COVID, where some Uber operations just couldn’t get anybody to drive because people were worried they were in a catch COVID, they’d be ill, they could die, they couldn’t work, and so on, particularly in emerging markets. In the middle east, they gave insurance for free to their drivers to enable their business to operate at all. That encouraged people to. We talk about products, selling products, but there’s also the component of risk mitigation or risk transfer capabilities that you can insert into a proposition, like the example I just gave there.

Let’s ask the audience again, a poll. Could we put the next poll up please, Diana? Here it is. If we think about brands and maybe think about a brand that you know well, what’s the most attractive proposition to non-insurance brands for adopting embedded insurance? Is it to create new revenue streams from insurance sales? Is it about making our core business offerings more attractive by adding insurance components to them, a bit like the example I gave? Or is it retaining existing customers by integrating insurance solutions into loyalty programs, things like extended warranties, for example? Or is it a mix of the above? Let’s get your thoughts on this. Again, I’m going to give you 15 seconds this time to give your vote on that. We’ll see what you think about the value to brands. Just use one of those and we’ll see what you think. I’m going to ask you separately about value to consumers in a minute, but let’s just see what you think.

You’ve got another five seconds to make your vote, and that is just about up now. Let’s see, Diana, what do people think? Well, yeah, a mix of all of the above. I think that’s exactly right. Because the examples we’ve just talked about are not just about reselling insurance or about making the core business offerings attractive or about retaining. It’s mix of all of that. That’s a great result there. Good.

A quick other poll, thinking about consumers now. If we can put the next poll up. This is from the consumer point of view. What is the most compelling aspect of embedded insurance proposition to end consumers? So they could be business customers, or individual consumers, but which of these three? Is it convenience? Like Sriram was saying, I’ve booked my trip and now I’m going to buy some travel insurance. It’s so convenient to access that solution at the right place and time. Is it price? Because maybe the brand will make it cheaper because they’re trying to package it up with other propositions. Or is it simplicity? It’s just so easy to understand, to access, to manage; and particularly what these guys do is to make the claims experience really easy as well. Is it just, I don’t want any hassle, it’s so simple to do because brands have worked with companies like the ones that are with us today to make it a much better experience.

What are your thoughts on that? Again, I’m going to give you another five seconds now to get your final thoughts on that, or is it a blend of all of those three? Let’s just see what you’ve said to that. Convenience. This is really interesting Graeme, isn’t it? Because I know you always say convenience is really important. Price is less of the driver. In fact, people are happy to pay for something that’s good. Graeme, any comments from you on that one.

[00:43:54] Graeme: That’s right, you probably heard me say it before. Convenience is the number one driver. It isn’t about price, and it isn’t about the insurance brand per se either because it really is about the brand that’s actually offering it, which is the distribution brand. It’s at the right time, the pricing is likely right because you’ve probably had some smarts in there, but it’s not the main driver. It really is convenience.

[00:44:22] Simon: Any other comments from anybody else on this one to tally with your experiences?

Good. Let’s move to the next section about creating a business case. Part of the reason for us writing that big report recently is to try and educate and engage brands about the art of the possible. It feels to me that this is a very Greenfield market still. You’ve had big companies in the past that, like retailers or banks that have sold or resold insurance. Telcos have done that to some degree with handset insurance. Then there’s big manufacturers or retailers that have sold extended warranties.

But what it seems to me is that that’s just part of the market. There’s a huge sway of the rest of the market that doesn’t even realize what they can do, the sorts of things we’re talking about, particularly non-digital companies. There’s a lot of small companies that never thought they could embed insurance. Small retailers of e-bikes, as a classic example, which it’s great to offer at point of sale theft, injury, warranties, and so on. But in the past, it was just way too expensive to do that. Now through technologies any company can do this.

I wanted to ask you a bit about how even for very sophisticated digital companies like Omio and increasingly Keller Williams, how does your organization go out thinking about creating a business case? What are the key things that the CFO and the CEO and ultimately the board resonates with? I’m going to ask Sriram and then Roberto, and I’ll ask the other guys to come in with their experiences. Sriram, what made this compelling to your leaders?

[00:46:17] Sriram: I think the first thing, like I mentioned previously, is the fact that there has to be an inherent customer need. We saw in various user research that we did that there was this need to have flexibility and peace of mind. That was top of mind. Once we took that problem statement then we started understanding the economics behind it, we created the case in terms of, what is the potential reach that we can offer this product to? We wanted to offer, for example, on let’s say a hundred percent of our transactions, all our transactions have one insurance product attached to it. We took industry leading, we attached rates to these products, we had consultations with different partners. We understood what is the potential, attached it for these products. We also had historical data from working with traditional insurance partners, so know potentially what percentage of our transactions or bookings or journeys have or can potentially have an insurance with them.

Then we also know the market size of the insurance product. We have an estimate of what the value proposition for insurance. Then we took that into how it will affect the company’s bottom line and economics. We built a very simple business case using this, and when we looked at those numbers, they were very compelling. First, there was an inherent customer need to offset risk, especially in the industry. We looked at the numbers and the adapt rates and the market dynamics. Everything put together, I think it was a very compelling case both from the customer standpoint and from the company standpoint. While we are offering something that offsets risk, we are also adding significantly to our revenues.

[00:48:08] Simon:  Great. The numbers stacked up quite easily once you put them down and work them through. Roberto, just tell us from your point of view. I’m just wondering, if I could ask, because once you’ve started to sell, you’re selling a certain type of insurance, maybe you could go on and sell other types of insurance to your customers given that you have this relationship with them. I was almost thinking, could you not sell insurance to the agents, liability insurance and so on? Tell us your thoughts on at least the business case, and how that might evolve.

[00:48:42] Roberto: In order to understand that, I’ll quickly go over how this whole thing started. Keller Covered has been around for four years. Originally, we had direct relationships with carriers, and we just had a legion website where we would collect the information, send that information to an array of different carriers, and just show the quotes. That was the end of it. We started to realize that there were some pain points, and this is where we started to create the business case for switching the business model. Some of the pain points that we had were complaints from our agents saying, I sent the customer through and I don’t know what happened. Can you tell me if they purchased a policy or not? Can you tell me what happened with this customer? We had no idea because all we were doing was collecting information, showing quotes and sending them off to 20 different call centers.

That’s when we started to analyze the possibility of not just being a legion website, but becoming an insurance agency. When we decided to become an agency, we had two options. We could become like a real agency or we could become a virtual agency. That’s when we started to look at the availability of how quickly are we able to scale to support 170,000 agents in all 50 states overnight. That’s really where we started to do the whole process of, let’s find a partner that can provide us with the technology to replace what we already have, which is a connection with carriers that shows quotes, but also allows us to have the servicing part of it and have the agency and have that human touch, which is still necessary.

That’s the history up to this point. We started with homeowners’ insurance because we are Keller Williams. We work with realtors, we work for realtors, and that’s initially the solution that they need. Today, through our partnership with Bolt, we’re able to sell auto insurance and an array of different policies, but we don’t have the online solution yet. When will we get there? Eventually. We’ll eventually have an auto flow, we’ll eventually have a bundle flow. But we’ll always add on top of the home ownership, because that is the sector that we’re in and that’s the starting point from where we will go forward.

[00:50:53] Simon: Great. Thank you for that. You touched on one thing, I know someone asked a question in the chat here about regulation. You explained it quite well there; you didn’t want to take on the burden of being a full agent and being regulated that way so you have this proxy approach, which essentially you’re outsourcing that licensing to Bolttech.

[00:51:16] Roberto: No. We are a licensed agency, but the operation is being handled by Bolt. The manpower is outsourced.

[00:51:23] Simon: Exactly. One of the questions we had was, do brands then need to take on all the balance sheet overheads and license, and so on? What we’re saying is that these new operating systems that are in available now take that worry away. They can manage that for a brand if it doesn’t want to take on some of those regulatory overhead.

[00:51:49] Roberto: That’s correct. A lot of the overhead is absorbed by their operations. But because of the existing regulations, if you have an entity and you want to sell or promote or solicit insurance, in the US you need to be licensed. That’s why we got the license in place.

[00:52:03] Simon: Perfect. I want to ask Jim and Graeme, in terms of creating business cases, are there any other things that you’ve seen that have been really compelling beyond what we’ve just heard now?

[00:52:16] Jim: I might just add something to what Roberto just said. It goes to how we got where we were as partners. Our view of it is in terms of building a successful embedded insurance strategy over a long term, a durable strategy over a long term, there’s a continuum. On one end of the continuum, our companies that want to be digital, but are not. On the other end of the continuum, you’ve got companies that are completely digital already. But the reality of it is the vast majority of companies either by preference or just where they are in their journey, are somewhere along that continuum.

Our philosophy is we can deliver the best in class technology, however you’ve got to have that human element. Regardless of where a company drops in along that continuum, you essentially catch them and help them along their digital journey, wherever that may be. Not everyone wants to be completely digital, not every business orients itself toward digital. That’s an important part of the broader embedded insurance story, is having as minimal amount of human intervention as possible, but not abandoning it. At the end of the day, and it gets into the business case question you asked Simon, which was why do people do this, there’s more than this but I think about it in three very simple buckets. The first one is, and Graeme touched on this earlier, it’s the economics. There’s direct economic benefit to doing something like this, and there’s indirect economic benefit to doing something like this. Graeme used a great example of when you sell a product alongside another product, the other product gets a lift from a conversion perspective. We all have data that proves that. The second one is just brand and product value. By having a more comprehensive offering, you create extra value and tangible value in the product you’re offering. Finally, and this really is where the technology works as magic, is creating a great experience. You could argue that that’s not terribly dissimilar from point number two, but I think it’s important that creating that beautiful experience and that easy convenient experience is really important. I think when people are putting business cases together, they think about it among other things across those three dimension.

[00:54:48] Simon: Yeah, that’s great. Graeme, your perspective.

[00:54:52] Graeme: I think it’s actually about understanding the motivations of that brand, because each vertical has quite different motivations. It might be a case of just wanting to make money, and that’s fine pretty early on. Or it might be a case of maybe they need to offer some coverage because there’s some regulations around those customers having, or their members needing some cover, or maybe they want to increase the total basket price of what they’re selling. There’s many different motivations. You’ve got to understand that to then build the business case for that partner that you’re talking to for their internal purposes.

But on top of that, and going further from what Jim was saying, you’ve got to be able to service these brands. They want to know, can you service them now, but also for their growth plans. They obviously have growth plans. It might be expanding internationally. It might be expanding to different verticals and things. From a Cover Genius’s point of view, we identified that pretty early on. We’re very big on making sure that we have that global framework to then service those big global brands. then the technology, can you service, can you do multi lines, multi products? because part of the business case, they don’t want to have to do multiple integrations with multiple contracts and things like that. You’re actually solving a real issue there. It’s just simple and they can actually go, I’ve got the provider of choice now and in the future. That’s where we come from.

[00:56:24] Simon: It’s very important because often some of the digital companies that you’re working with, they might be quite small today, but they’re growing fast, you want to latch onto that. If you are there at the beginning and you are helping them to do that, it’s a collaboration because it’s a revenue share, then you can really take off with their success as well, which is good. Of course traditional insurers say, we must make this profit margin or we’re not going to do the deal if we can’t do that. But often that can be a bit shortsighted.

We’ve got just three minutes left. I’m going to ask the audience about the barriers to this. Then I’m going to ask you for a very quick comment to all of you if I could. In the interest of time, let’s put up the final poll, which says: what are the barriers to embedded insurance? The biggest barrier, you have to just choose one if you had to, to more widespread adoption of Embedded insurance 2.0.

I’ll read it out for you and please make your vote. Is the biggest barrier awareness and understanding by brands about what is possible? Is it that business cases are quite difficult to create? Is it regulation? Is it about the incumbent insurance industry being slow to develop this market? Is it there aren’t enough insurance techs like the guys with us today, to help develop the market? Is it technology? Or is it end customer willingness to adopt?

I want you to choose one. You can do it in order, but just choose one now. In the next five seconds, we’ll show the results. Then I’ll ask the panelists to give a very brief summary of what they think the future might look like, if I can ask you to think about that. Then we’ll finish right on time. Let’s see the result now. Here we go. Quite interesting. The one that’s got the most, interestingly, is the ability of the incumbent insurance industry to develop this market. I guess the point being that the incumbents have all the power today, and we need to co-op them and enable them to, to drive this market. We probably can’t do it round them or without them. The second highest was just the awareness and understanding of this topic by leaders of brands. There doesn’t seem to any be any problem with VC investment in startups to develop the market.

I’m just going to ask it, we’ve got one minute left. If I could just ask you to have a brief statement; you could either respond to this in some way, or how you think the market is likely to develop, which will be useful for our participants and listeners today. Let’s start with you, Roberto.

[00:59:20] Roberto: I agree with the poll; I think it’s the incumbent. I think it’s the legacy carriers, because even if we have companies like Cover Genius and Bolt facilitating and enabling technology, we still rely on those carriers to update, to be sure that they’re on track to provide these services. That that’s my perspective as well.

[00:59:36] Simon: Brilliant. Sriram.

[00:59:40] Sriram: I tend to agree with the poll too, but I think I’m more in the awareness category. It is more awareness that prevented us from doing it, but once we were aware we did this case study and then it was an open and shut case for us.

[00:59:58] Simon: Brilliant, thank you. Graeme?

[01:00:00] Graeme: Well, I’ll give you final thoughts. I think what needs to evolve with the future is just making sure that that customer experience is optimized the whole way through, right from the buying and through to claims. If the claims fall down and is poor, it’ll reflect on the embedded insurance generally, because they’ll go, I bought it from this brand, I had a bad claims experience. They won’t want to buy again from that brand or perhaps even others. I think we just need to optimize the whole thing.

[01:00:28] Simon: Brilliant. Jim, final thoughts from you?

[01:00:30] Jim: I think what will be interesting to watch over the coming years, and it’s not today, it’s not next year, but it’s into the future, is this blending together and the seamlessness that’s going to occur between either a purchasing experience or an experience of a coverable type situation and the actual insurance offering itself. You see it in some of the OEMs now in the auto industry, when you buy the car the insurance can come along with it. I think we’re going to see that proliferate over the next 10 years. I don’t know exactly where it’s going to go first, what’s going to happen, but just watching the blending of the insurance into the actual daily lives of people in terms of providing that protection. Essentially they will become one and cease to become two things.

[01:01:16] Simon: Yeah, baked into the everyday lives of everyone. That’s great. Thank you, lovely sum up. There’s a few questions people have asked, I should say the report does answer many of those questions and it’s in the chat. The link to the report is in the chat if you want to have that details of that. I know that a lot of you who are here today can be startups, smaller companies. Although it’s a payable report, get in touch with me if you’d like a special often.

Finally, thank you very much to the panelists. I’ve really enjoyed it today. Thanks for your expertise and sharing that with the world. Thank you who’ve joined and listening in, and we will be in touch. Please do connect with me on LinkedIn for more access to useful information, insights, and knowledge. Thanks to everybody for their time today. It’s been a great pleasure to be with you. Thank you.

[01:02:10] Jim: Thanks Simon.

Embedded banking: cutting through the noise

4×4 Virtual Salon with Christine Schmid, Eric Mouilleron, Scott Gordon and Tue Mortensen.

Today, we have a special podcast episode, which is all about Embedded Banking. We hosted four excellent guests:


Main topics discussed:

1. What is embedded banking?
2. The mechanics of embedded finance
3. Making the business case for embedded finance
4. What creates differentiation in this space?

Read transcript ->

The Market Map
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Embedded Banking: Cutting Through The Noise


Full transcript:

[00:00:00] Ben: Hi, everybody. Welcome to today’s 4×4 Virtual Salon. The topic of today’s discussion is embedded banking. For this discussion, I’m joined by four esteemed practitioners of embedded banking. Just before I introduce you to the speakers, I just wanted to make sure everybody was familiar with the 4×4 format. The reason we call it a 4×4 is because we have four speakers, because we cover four different topics under the umbrella of embedded banking, because we have four polls, and because we’re going to take four of your questions.

The topics for today are on defining embedded banking, the mechanics of embedded banking, the business case from embedded banking, and what creates differentiation in this space. As I mentioned, we’re going to have a poll related to each of those topics, and we’re going to take one of your questions related to each of these topics. I would invite you to please get involved in and to submit questions, to post comments, and to also take part in the poll.

Let me now introduce our speakers. I’m going to start with Christine who’s in my top left. Christine Schmid, she’s a regular on these 4×4 Virtual Salons. She’s head of strategy, Additiv. Additiv is based in Zurich in Switzerland, and it’s focused on investment management. It has two business lines: software as a service and banking as a service. For the latter, it partners with a broad range of service partners, including regulated banks, such as Saxo Bank. Which brings me nicely to the next segue to talk about Tue Mortensen, who is regional head of institutional business at Saxo Bank Saxo Bank has been active in banking service long before it was called banking as a service, or long before it was as fashionable as it is today. Since 2015, Saxo Bank has been providing its investment and trading services via APIs to companies that want to build products on top of one; to embed those services into an existing offering. It serves banks or financial institutions directly, and also works with some intermediaries such as Additiv to reach a broader audience.

Next, we have Eric. Forgive me if I’m pronouncing your surname incorrectly, but Eric Mouilleron. He is the CEO and founder of Bankable. Eric was early to the space. Eric is a bit of a visionary who saw early on how banking distribution was splitting from banking distribution, and he created Bankable back in 2010. Bankable helps brands and financial institutions to bring innovative payment solutions to market more quickly and easily than would’ve been the case otherwise. One of his customers is Kard, which brings me to Scott Gordon, who is CEO of French Mobile Bank Kard, which is focused on the team market. A core part of the offering is a prepaid payment card, which allows parents to have some control and visibility over what their children are spending. As I mentioned, Scott chose Bankable as its platform on which to build that card offering.

I’m going to now move on to the first topic, which is, what is embedded banking? I’m going to start with Eric, by asking you that seemingly simple question, which is, what is embedded banking?

[00:03:44] Eric: Thank you Ben for the intro. I’ll try to make it very simple. If you remember Matt Harris from Bank Capital, what they said very simply that everybody understood that is the goal is to make every company a FinTech company. What that means is that we’re repackaging the bank into relevant B2B or B2C solution, instead of a product. It’s a way to put the bank in the backend with API, and we co-work with the financial institutions to build things that are innovative and real-time. Embedded finance has been around for quite some time, especially in e-commerce. By all definition, a bank is more to provide people with what, the brands that they’re missing to their clients. They don’t do that clients to sell the distribution to their clients. It’s a finance solution to create proximity with the client, so you can understand your clients a bit more and go direct. That’s for brands.

Bank as well are quite keen to all those embedded finance, because I think they are not as static as journalists think. I think they are somehow agile and retaliatory. For us, we have two categories applying to the FinTech. We’re going to provide embedded solutions to corporates or others. Then there’s the provider of the banks, who as well are not staying put for some of them, and they’re using the tools of FinTech to go to market quickly and to address all these markets. It’s more of a solution view of the world than a product view of the world, I would say.

To address the embedded finance market, you need banking as a service. That’s transitions from my friend Scott, that’s how those two are linked. You can’t go with a theory, that I’m going to go to embedded finance. You need tools; and tools that are modern, real-time, and that put together an offer. It’s more what you had in the past – before embedded finance you had the bank period. You’d go to the branch. The world has changed, and we can work with multiple banks, multiple solutions, and build a Bespoke solution. I don’t like Bespoke, but it’s customized more than Bespoke because Bespoke you can scale and do once at a time.

It’s all about customer experience. That’s where we are leading with embedded finance. I think the opportunities are enormous. When you talk to a client who’s got 1 million, that’s an opportunity to have a 1-million client. Nobody loses. In FinTech there is always a bank. For us, we’ve been at banking over the five years since inception, and we want to keep it this way. FinTech is going to market, but it’s the same for banks. They want to demonstrate the speed with the tools that the FinTechs are using, and not with their legacy advantage.

I think that puts the picture of embedded finance clearly. Matt Harris is right; his vision is materializing every day. More and more companies want to add additional revenue by embedding financial solutions, and they know their customers.

[00:07:42] Ben: Good. Scott, I think Eric has lined you up for the next question. The question for you would be, why didn’t you build all of these services yourself? Why did you choose to work with a partner to bring your services to market?

[00:07:57] Scott: To be honest with you, why are traditional banks being drastically disrupted and have been drastically disrupted the last past 10 years is probably because if you’re trying to do everything, chances are you’re not going to do everything well.

When you look at a bank, perhaps 75% of all their investment from the tech side are made on maintaining legacy systems – legacy systems that are built in the 1970s and the 1980s, which is incredibly hard to maintain, and simply de-focuses their main value proposition, which is driving customer satisfaction. For us, when you’re trying to create a banking product or a payment product, there’s two sides of the equations. One, what are you trying to solve for? Customer experience. We had identified a very clear pain that financial literacy is not happening in younger generations. We wanted to fill that gap by offering families a banking product that really solved that.

Either we have the opportunity to, one, say we’re going to try to recreate all the tech stack of a bank. That would probably take us maybe 36 months if we managed to do it, and we would have probably failed 20 times trying to do it, and ultimately down the line we would have never touched a single customer or gathered feedback. Our main DNA was: what we want to do is drive customer satisfaction. We want to be very, very close to our customers. We want to understand their needs and we want to better serve them. Let the experts do the rest. Down the line, I think it’s just about finding the right experts at the right positions and really build that product. At the end of the day, my teenagers and my parents don’t care if it’s bankable or if it’s XYZ behind. It’s really about driving the proper solution at the right time and delivering the right customer experience and the right services at the right time.

I think the area or opportunity guys like Eric and Bankable are driving is pretty phenomenal, because it gives the opportunity to broader actors in fintechs to drive satisfaction, drive customer engagement, and answer needs where customers had really tremendous pain in the past. I think it’s a great opportunity for traditional banks. Instead of maintaining legacy systems, they’re going to leverage solutions like Eric’s or others to drive customer satisfaction. At the end of the day, when you look at Banks NPS today, that’s where they need to be focusing on.

[00:11:10] Ben: If I were to attempt to summarize what you’re saying, it is about speed of market, it’s about specialization, and it’s about opening up innovation or wider pool of companies. Quick follow-up question if I may, how quickly were you able to take this service to market? You said this would’ve taken years if you tried to build everything yourself. How long did it take using somebody else’s platform?

[00:11:34] Scott: We were pretty much up and running in four and a half months, five months. We obviously worked day and night together with Eric’s team. But from kickoff to first better customer, about six months. Now, the  solution wasn’t amazing! We bootstrapped the product. But up and running, yeah, it was really efficient.

[00:12:00] Eric: I think there was a sense of urgency because you had thousands of clients waiting for the solution. We were all running to sell them.

[00:12:10] Ben: There’s nothing like creating a problem, to move quickly. Christina, I want to come to you because a lot of people say that banking as a service is just another name for white labeling. But it seems to me that there probably is quite a bit of difference between white labeling a banking service and building something which is much nimbler and agile. Can you tell us how you think about the difference between embedded banking and white labeling?

[00:12:40] Christine: Sure, thanks. White labeling literally is taking an existing solution end-to-end, and simple said, color-code it differently. Which, if the solution is changed, you need to adapt it as well, you have full dependency, you have no flexibility at all with the providers, how you run it, with the ad-ons. It’s really super static. It might be a cheaper and faster way to market, yes.

What we see currently, for example, take three regional banks, all of them want to launch a pension offering. One does it in blue, the other one in red, then the third one in green. The development might take them less long than the alignment they had to align on the solution. In the end, it is just static.

Embedded finance is completely different. You start with open sourcing, and that’s very important. You have flexible partners such as the Saxo on the banking side, that can serve as well a broader expansion, for example. An open sourcing is absolutely crucial. Then you have such as Additiv or Bankable – the orchestration layers, the service providers in the middle, that sewers your add-ons, whatever you want in an ad and provide to your end client. Then either you build yourself upon the APIs, which is a way to do, or you look into predefined value proposition on a predefined set of platform. Just to give you some examples, the first platform, and we soft launched that on the wealth management side in the Nordics a couple of weeks ago, we’re adding literally as we speak one IFA after the other. It is a pick and choose a solution to go into the market. You do not have a dependency. If you want to change, for example a data provider, let’s talk a bit ESG, do it, include it, and run ahead.

Dependency is a big topic. If I might add up to the debate, we had an embedded finance before in the end. It’s all of us who decide. Absolutely the key is the end customer. What embedded finance means for us is we get the solution at the point where it’s relevant for us. Payment. When I’m hungry, I order something. Mobility, holiday booking. Or I want to buy a house, and guess what, you might need indirect motorization and all that stuff. It brings more complex use cases together; not only single transitional radials, but really complex use cases at the point of contact. Maybe no longer at the banking channel. If I order a ride, I don’t want to open another app to pay. It is seamless. It is super convenient.

I completely agree with what was said before, convenience and the customer is what is driving embedded finance. It’s a paradigm shift what we have in front of us.

[00:16:12] Ben: Fantastic. If I were to summarize, more flexibility, fewer dependencies, lower switching costs, you’re able to build more complex use cases to meet the end customer needs.

Tue, I’m going to come to you next because I want to ask: what are the conditions that have come together that have made this step change from white labeling to embedded banking?

[00:16:39] Tue: My vantage point is that we today cover around 150 banks, so we see a lot of these, let’s say tendencies playing out. Working with Additiv as an example, we really see it up close. We have a course a lot of other client examples as well, but we see this really playing out.

A lot has been said already by Eric and Scott in terms of what are the drivers, time to market. For or the bank, the speed is a low complexity compared to building stuff internally. There is of course also a scale advantage, and they don’t need to invest CapEx, and they have a lot of running costs and so on. It’s a much nimbler. You pay as you go rather than setting aside a big team of developers and other people to build these services and then hope that it will go well at the end of the day.

One observation we haven’t talked as much about is that the banks now are starting to redefine themselves. They have seen the successes of Amazon and others, and they’re trying to mimic that to the extent that they are able to do that within the confinement of their business models. I’ve had several meetings with CEOs and others, where they start saying: if we can’t do it in a superior way ourselves, executing to better timelines and a lower cost and whatever we can like buy our source from the product ecosystem, then we shouldn’t do it. Which is a massive paradigm shift from just three to five years ago when we came out with the API, and where a lot of the bank were saying: that’s interesting, that API talk, about we need to control everything that goes into delivering a service.

Now they understand they want to be in control of the last mile and what the client sees, and be able to work with a more flexible third parties to deliver that user experience. But they don’t need to own the plumbing to deliver these services. I think that’s a major shift. The trust in working with the ecosystem has grown a lot in the last five years that I’ve been a witness to this.

[00:18:52] Ben: Would you argue that one of the things that’s made a difference, some of the tech stack is new? But would you argue the other thing that’s changed as the maturity of the ecosystem around banking as a service?

[00:19:08] Tue: Yeah, the whole concept has evolved a lot. But there was also just that basic thing called margin pressure that the banks are seeing. They’re seeing margin pressure. They want to increase the non-interest income, and they start looking at the different business lines. How can we scale this without adding a lot of costs? We have a lot of cases also where banks are coming to us, they want to improve the client experience and the last mile, but maybe the main driver for them is also getting rid of costly back office processes and the cost and other things. That’s a part of it, along with what we talked about before – the competitive pressure from new entrants and the ability to create a whole new different way of embedded experience for the client, which is very hard to do if you are siloed and working on mainframe systems, stuff like that.

[00:20:07] Ben: Fantastic. We’ve had our first audience question, and it’s addressed to you, Scott. This is a question from Mike O’Sullivan. He says: love the speed at which the team have established Kard. Could Scott comment on the appetite of French people for new, more clear banking solutions than the old banks?

[00:20:30] Scott: It’s a very good question. I think the appetite for good financial services is pretty much the same everywhere. Particularly in Southern Europe, certainly in France, where Banking NPS has been negative, negative, negative, and terrible customer experience. I think all in all banks have failed to address transparency to their customers, have taken margins where they shouldn’t have and without being transparent. Ultimately, since the subprime crisis, there’s a hatred from banks, in France particularly, or traditional banks. They’ve failed to be there for their customers when they needed to.

I just think people are looking for good, practical, driven UX, UI banking services. We’re seeing the appetite where, particularly in our market, if you look at the teen market, for instance, it’s still a very much untapped markets. Less than 15% of teenagers actually have a debit card or a credit card to their names. COVID has been a crazy accelerator for our markets.

Put it that way, I think we’ve probably gained three to four years in the acceleration to digital payments, which is already the case in Northern countries where people in pay in cash. It’s pretty much, you’re not from the world. In France, it’s coming in a very high speed. It’s a serious lack. I’m 32 years old; when I was 14 years old, I could pay everything I wanted with cash. Today it’s really not the case anymore. Teenagers, 50% of their spending has to be made by a digital payment. Today there are they’re left by using cash, which doesn’t serve them; or using their parents’ credit card, which is not practical. We’re clearly seeing amazing adoption towards products like ours, and ultimately towards product that serve customers in a better way than traditional banks haven’t in the past. It’s great for the consumer, it’s great for the customer, it’s great for traditional banks as well, because they’re really redefining their model and the way they serve customers.

At the end of the day, we’re all trying to better serve the customer. It’s a very good way to do it,

[00:23:25] Ben: Fantastic.

[00:23:26] Christine: May I add to that? We had yesterday a long discussion at an event with a smartphone bank called Neon. It’s a Swiss example. Not even looking only at the teenagers, but the broad population; they are close to reaching 100,000 clients. It just gives you an idea; if you have the right value proposition, easy serve to the clients, providing an overview. Another example in Switzerland, I would say well-banked, it’s not overbanked, really well-banked. But if you reach clients and if it’s intuitive and attractive to use, not only from a pricing point of view, but the user experience, the market is there.

[00:24:14] Ben: A follow up question: do you think that in the new world of embedded banking, you get higher adoption because you don’t have to switch in the way that you had to in the past? You don’t actually have to close down a bank account to have a new bank account. Well, these services are complimentary and they can coexist. Does that make customer acquisition much easier? Anyone can take that, maybe you Scott, because you’re living this everyday.

[00:24:36] Scott: I’m a firm believer that primarily banking relationship wins. I am in awe and admiration of Revolut’s success and their ability to attract millions and millions of customers. However, when you look deep down into their customer base, about 15% are, I would say, daily or weekly active users, i.e., they get their salary and Revolut acts as their main bank account. Why is because churn in the banking industry is very low, simply because there’s an incredible stickiness to banks. When we look at our case, a teenager is going to inherit from the bank of their parents at 90% of cases. It’s just how it goes. The real churn happens when you get your first mortgage, where whatever bank is more generous will ask you to switch banks.

For me, the whole play is really get in there as soon as possible, which is amazing because by definition they have never been met in the past. What is great is you can invent a new banking product from a blank sheet of paper and from scratch. What is hard is these kids have been growing up with incredible business models, incredible apps, where if you tell them: we have instant notification for payments, they’re going to say: what else do you have? It’s just very uncommon. You’re going to have to drive your products, your UX, or UI in a very different way than in the way Revolut has. It is, we’re just prettier and much quicker, we can give you an error of freight or product.

I very often described Kard as if you know, Revolut had a baby with Snapshot and Venmo. That’s how we think of the product. Ultimately it is creating a real value proposition to a customer base that is in demand and in need of a product, and not a replacement product. I do think that by equipping and giving teenagers their first bank account early and serving them, hopefully they will never leave and we will be able to continue offering great services as they grow older.

[00:27:12] Ben: Fantastic. We’ve started to get more questions through from the audience. I’m going to move us on to the next topic, then we’ll work on some of these other questions. The next topic is more around the stack, the mechanics of embedded banking. Christine, I’m going to come to you, if you don’t mind. Can you break down that banking as a service stack for us, and the different players that you see within that value chain?

[00:27:40] Christine: Sure, we can look into that from the basic product to the end solution, to embedded on the channel side.

Clearly, the first layer is the supplied side, or how we call it – which are the finance as a service provider. It can be an account, it can be an e-wallet, it can be a Kard, it can be an execution service. That’s really the base upon which it is built. The second layer normally is how to run the operations. The operations can come from the supplier side, but they can come as well from an efficient third party, or it can as well be fully automated. Yes, if you talk a bit the wealth management space, rebalancing a portfolio can be done by an operations provider, but also it could be done fully automatically with certain supervision. That’s how we look at the second layer. Then comes the whole orchestration layer with the sourcing part to it, which brings the intelligence to it – the portfolio management tools, if needed the CRMs, with the data, the regulated part as well. We have more and more reporting regulated needs, in particular in wealth management, alongside ESG, but also MiFID or Filec. That’s the intelligence layer on that stack.

The we have on both sides, our APIs. Then you go into the front end solution. The front end solution, the beauty of it is it can really play around of what you want to build for your end clients. The front end is important. It’s no longer only a financial company. It’s wide open. It can be a search engine. It could be a super app. It can be a real estate provider. As we have learned mortgages and all that stuff might be related to it. Pension might be related. It can be any corporate providing financial wellbeing. That’s the last layer. How we look at it, it’s the demand side, i.e., the ones providing the solution to the end client.

[00:29:53] Ben: Fantastic. Eric, I’m going to come to you next. You sit in that chain between the regulated service and the brand. Why would somebody need to use Bankable when they could get directly to the underlying regulated license holder? Make the case for Bankable and for these bass intermediaries that are popping up all over the place.

[00:30:30] Eric: We work with banks as well. For a client, we need to own log values. First, the stack is very simple. It’s an account. Our system is an account management solution surrounded by a processor. We own all the stack. then we have an API orchestration layer that provides the option to clients to build a customized solution. If you want to go to a bank, it’s possible, but I think it’s going to take in most cases much longer; unless you go to Saxo, because they’ve been in this space for quite some time.

I think the forest is very important to provide a service with multiple regulated entities, as opposed to just one. If it’s a very big project, the risk appetite of the bank, there’s different views of the same risks. For us, we are the ambassador of our client to pitch the business case to the bank. Going to the bank you will not achieve time to market, you’re going to go for their compliance and all that. It’s going to take you a lot of time. plus, the tools that the bank uses are made for them. All the regulated banks that you find on the market, and there’s more and more, the purpose of their stack is to serve their own regulation; whereas the purpose of our stack is to serve multiple regulatory entities in multiple jurisdictions. That’s why we can address global brands or global clients like Paysafe. We’ve launched Paysafe in 17 countries, and there’s others to come. It’s not the same.

There’s a lot of different BaaS, and I think the bank might be the right solution if you’re a top 20 corporate client of the bank. We see that more and more. We are in discussion with very large banks to become their BaaS, so they can onboard quicker corporate clients. Otherwise the bank is a chat-chat. “Hey, would you like to do banking as a service?” Okay, that’s a nice chat, but banks should stop chatting and should stop proposing pilots to their clients. That’s what we will see on the market now.

I think when you’ve got 30 million clients, 50 million clients, that’s a huge opportunity to address. The bank adapting is not something you can do. I’ve got nothing against legacy, quite frankly. That’s what the banks have. Legacy shows history, and history is good. But to address embedded finance, you’ve got to use the systems they have, so you need to be a bank on the side to serve your multiple business cases. I hope I’ve replied to your question.

[00:33:31] Ben: I don’t want to position Saxo in any way as a legacy bank, but you are a bank and sometimes you do work with BaaS intermediaries. I suppose the question is: in that stack where you’ve got the brands, somebody like Kard or any consumer brand, then you’ve got the best intermediary and underneath you’ve got the bank, is the bank not being reduced to a utility over time? If you don’t have any access to the customer directly, it’s difficult to have pricing power, it’s difficult to be able to upsell or cross-sell. I suppose to make the case for the bank working with a bas intermediary.

[00:34:15] Tue: It was a bit special in this case because we both act as the BaaS intermediary sometimes. We have a lot of developers and so on. We are a mix of a bank and a tech company. But we also work as the custodian bank, for instance working with Additive, where they orchestrate the client experience and work with the financial institution to deliver what’s required there, and we work then in the back on the so-called boring things of execution, custody, and asset servicing and all of that stuff that needs to happen. Of course these things are to some extent a commodity, so there’s a lot of other banks that could provide. But even there, there is a lot of parameters for differentiation. You could say, like Eric talked about, being able to work across legal jurisdictions, understanding the compliance layer that comes now. All the regulatory changes being on top of that is a massive investment on our side, and also something that we can then leverage and help other providers with.

I think there’s plenty of room for differentiation even within something that is fairly commoditized, both on the reg side, but also in terms of the products. As you can see many of the new investment models coming through, for instance, they rely on fractional services, they rely on margin and segmenting, and other things to be able to bring good economics into those solutions. For me, there a lot of interesting innovation going on in that space as well.

As I mentioned earlier on, it is also very much a scale game. We can see on our side, when we started with the API about five years ago, we had around 15 billion of assets. Now we are around 80 billion euros of assets. Unfortunately, we haven’t seen this similar rise in revenue. You really need to bring scale to a platform like this.

[00:36:16] Ben: Fantastic. We’re going to take a couple of audience questions. the first one is: can the panel share with an example, what we mean by orchestration layer and what an orchestration layer might do?

I think it was Christine that used the term orchestration layer. What do we mean by an orchestration layer, and if we can, can we get a practical example?

[00:36:36] Christine: Well, I can share it certainly from a wealth management point of view and Eric can share it from the Kard’s point of view.

From a wealth management point of view, it is really the system that provides you the end solution. If you want a simple ETF savings plan or robo, someone has to orchestrate it; has to handle the design; has to do the link over then to what I explained, execution; has to make sure that it runs smoothly. This includes as well what we call role model, not role model by different client segments. An example that was made before by Kard, if you want to handle community features and real client features, with Kard you could take the prospect view and turn it upside down. Today’s clients are the teenagers and your prospects are the parents. But you could run on an orchestration layer to different segments and make a seamless solution to the end client.

For us, a huge topic is the wealth transfer, the next generation wealth transfer. Therefore, you want prospect handling, for example, and current client handling, and you might want different end models. If you look into a search engine, they might have real estate on and they might need an offering that helps in direct amortization on the mortgage side. Sounds quite complex. Isn’t that complex? What do you need behind? You need what Tue has described, then you need the right icings and the right setup. You then can provide that as an embedded wealth model into the solution. This is what is meant by orchestrating – by bringing the supply and the demand side together seamlessly.

Maybe Eric you might want to add?

[00:38:45] Eric: I agree. For us it’s a technological layer to on board and unlimited number of partners. We don’t do everything. We do the accounts, the processing, the payments and all that. But we don’t own our own card manufacturing. We are connected to TELES and Idemia or Globalli. The purpose of this API orchestration layer is to add relevant partners on a long-term basis.

When I go see a Scott at Kard, I can provide him optionality. Would you like this or that? It goes from KYC, AML, account manufacturing, the list is pretty long. Some partners, like Visa or MasterCard. are global, some are regional, the majority are domestic. It’s regional or national. If it’s multiple countries, it’s multiple terms, multiple regulations. This is for us a key part of what we provide. It’s to make sure we can tailor a solution for customers based on all these things. That’s how we can achieve to market.

Otherwise we’d have to buy a puzzle ourselves. We’d go see 20 partners. But I think that’s more ambitious than building a puzzle. It’s building something bigger with real customers. When you have a good business case, your priority is not to become yourself regulated, it is to reach a certain level of customer satisfaction and volume. Without orchestration, we can’t satisfy demanding clients like Kard and others.

[00:40:40] Christine: The point you raised is super important. It is the flexibility that is added for the end client. On our side, it’s exactly the same. In terms of typically investment, barriers on the asset management side, the same with the data providers or the regulatory layers, there are various providers out there. We bring them together on one platform and the end client chooses. It is like using a puzzle, but instead the puzzle is completely white. We provide potential that it is an end solution, a beautiful picture on top.

[00:41:16] Ben: Yeah. Scott, anything you would like to add? You’ve been talked about quite a lot there on a third person, anything you would like to add? I just have another question for you from the audience.

[00:41:23] Scott: I totally agree. I think vice versa is, whenever we get the customer need for us it’s really important to go to bank and say, “I need this. However, I don’t have time to focus on one, benchmarking; two, implementation; three, I just need this for my customers.” Then it’s up to them to figure out which is the best provider, and leverage that provider, given the fact that they have much more scale and they have more customers.

For us, just about not defocusing our engineering teams on the front end bids, and let the experts do it on the back end bits. Just being much more efficient in order to accelerate time to market.

[00:42:13] Ben: Fantastic. The next section is more on making the business case from embedded banking. I think it might be good to focus on some of the more interesting use cases that we’re seeing. I’m going to take a question here from Parak. This is coming your way too, I think it is best if you kick us off here. Doe the panel have any examples in the wholesale banking or B2B banking space where BaaS has been successful? Which corporate banking use cases could you point to as working well for embedded banking?

[00:42:48] Tue: From my own neck of the woods, we service a lot of smaller hedge funds and wealth managers and others. That’s where you could say the wholesale bank is also involved. But where I’ve seen most innovation are cases we have already brought up, the likes of Revolut, Robinhood and others, where we see some of these mass marketplaces that have been extremely successful.

I’m really looking forward to see as the next step, and maybe that’s jumping a little bit ahead in the discussion, but we’ve seen a lot of plays for, as we talked about early, adopters and younger generations waiting for the wealth transfer to happen and all of that, and then banking on that, which I totally get that play. But what I think is really an interesting next wave is to also see some of the more affluent and wealthy clients, how they will be better serviced by embedded finance. We are seeing things come out of that again, where you can use what I talked about before with fractions and different ways. Some of the models you see playing out in the retail space will also be relevant for those more wealthy segments. But that’s really what I’m looking forward to see.

I’m also looking forward to see some of the models which today are very person-driven. Either you have a tied agent, and you have a banker, advisor, or whatever they’re called, but how do you blend that with technology to give clients relevant engagement and not waiting for a call from some guy? That blend of the client wanting to express their own views in terms of buying shares, stocks, whatever it is, but also having access to advice and to some discretionary services when that comes into play.

Some of the stuff that banks and private banks are doing today still has a huge need to be digitized. I think there’s a lot of potential there. That’s some of the stuff we work with Additive to make happen. That’s probably where I have had the highest expectations. As a bank, we’re not in the space of doing corporate banking, so I don’t have a lot of views on how that sector is working.

[00:45:13] Ben: You didn’t mention crypto; I suppose the question to you Christine: is crypto a big area for growth for embedded banking? Or is that still a bit an edge case, do you think?

[00:45:24] Tue: We are offering cryptos, but so far it’s been a bit more of a marketing gimmick, I will say. There’s always demand for that, people want to be able to access it in their portfolios, but it’s a very small percentage of the investible assets right now. Even though some banks are warming to it, like you have the Goldman Sachs and others taking it more seriously now, but it’s still a fairly small part of at least the portfolios that we see. But as a provider of access to markets, we need to also have that in our armor.

[00:46:05] Christine: I completely agree. You need to be able to combine what is called digital assets and today’s traditional assets into one portfolio. It really reminds me of the early 1990s, for example, structure products, or when we had the debate about adding alternatives into a portfolio.

The first are warming up, looking at strategic asset allocation, and guess what, a 5% percent addition could be a diversifier. I think it will start to broaden. As Tue has said, you need providers that can deliver both.

[00:46:43] Ben: Eric or Scott, what use additional use cases are you guys seeing or thinking about within the whole payments card area? What other use cases are working well?

[00:46:59] Eric: Well, there’s tons! What I always say, we’re as good as the business case we support. The average business case is not going to be a great solution. But if you look at Spendesk, for example, they grew in multiple countries from scratch. They are changing the way a team can buy or purchase a subscription or a trip or whatever. It’s team finance.

You usually used to go to the pool treasurer, you had to do a cash advance and all that. That’s what Spendesk is displacing, to make sure you have a budget for your team and your team approves the budget that the team can use to buy Amazon license or going to assure all that. It’s what Scott said before, it’s new. It’s a very new way and a very powerful niche.

We’ve had success as well with Deutsche Bank. We’ve done a corporate product completely outsourced, with them in the past, corporate product that was sold to Airbus and Emirates and others. The majority of what we do is B2B. Kard is probably the exception. We also do B2C, but B2B is where we are focused initially, because it’s predictable whereas B2C is not. You never know if that customer is going to buy an iTunes Belmont’s, or are going to buy a motorcycle, or whatever. That’s why we’re on B2B.

I think the success is on B2B. With Emirates, we’re in 160 airports doing real time cash disbursements. That’s something they could not do with their bank. But it’s something that we could do with the bank. There is a lot of together with the bank that we can enable.

I’ve never liked this story that FinTech are better than banks or banks are losers and we’re winners. That’s completely stupid. There is no FinTech without banks, why not complement each other? What’s the business logic? There is no business logic, it’s just ego. We have no place for ego at the bank at all5, it’s not good for business.

[00:49:33] Ben: I’m going to move on to the final topic, which is, what creates differentiation? I’m going to take this from multiple vantage points if I can. I’m going to start with you two. When you work with a BaaS intermediary, how discerning are you about who that partner is, and what are you looking for when you look for a bass intermediary? When we think from the source supply side up, what do you look for in a bass intermediary?

[00:50:00] Tue: I almost wanted to quote my good colleague, Eric, on this call. Even the best solution without the right business plan is not really going to go anywhere.

Reflecting on the six years we’ve had a full API solution in the market, we’ve worked with maybe 50 different entities on API solutions and we’ve been in talks with probably tenfold that number. From the outset, we were so keen to get our APIs into market and have them tested and so on. If there were two guys in a garage rocking up with a cool app, we would just start integrating it day one. We learned pretty soon that one thing is having a great UI or smashing idea, but if it’s not backed up by access to a client franchise of some sort or ability to go viral in some way, then it was very hard for some of these early players to have a sustained business. Quite a few of them went out of business or got bought, which was their other option.

We realize we’re not in private equity, trying to pick the winners. If we were super good at that, then you shouldn’t be doing banking and the things, but we should just be investing in our own fund and making fortunes out of that. We are looking much more at some of the established players who have the client franchises at their disposal and who are now looking to see how they can offer more relevant, contextual, and so on, service to their clients. That’s what we talked about before, where the orchestration layer comes into play.

The agenda for us has changed quite dramatically, but we still have a lot of discussions with newer banks and others. But we also, each I would say each week, turn down if some new robo that wants to do something for a niche segment of whatever white men above 50 who like to play chess, would like to have their own little investment circle and then they would bring an app out on. Even though I’m a white man around 50, I don’t think there’s a market for that. Again, we’ve been a lot more discerning than we used to be in the past.

[00:52:37] Ben: Fantastic. Same question to you, Scott. When you were looking for a bass partner, what criteria where you taking into account? Was it the breadth of services that that partner could give you access to? Was that geographical coverage? What things were important to you when you chose a bass provider?

[00:52:57] Scott: The first thing was the quality of the tech stack, by far the main driver. Ultimately, due diligence, the tech stack gives you answers to a couple answers. The first is the quality of the team to implement new products at a very efficient rate. That was definitely the first and main driver.

The second was array of products or offered solutions. Lastly, I don’t remember exactly who said it, but the distinction between the licensing and the technology for us was a no-brainer, simply because I don’t think the two fit together. Either you’re trying to be a technology company or you’re trying to be a bank. For us, it was very important to partner with a tech company for the reasons I just mentioned.

Lastly was international; the ability to go really fast in other countries. For a very young and ambitious startup, it was one of our main drivers.

[00:54:11] Ben: Great. Can we infer from that that Kard is coming to other countries?

[00:54:17] Scott: Fingers crossed.

[00:54:19] Ben: Fantastic. Then Christine, you’re head of strategy at Additiv. With your strategy hat on, what are you thinking of in terms of how you’re going to build increasing differentiation for Additive, versus whatever the competitive landscape looks like for investment management as a service?

[00:54:43] Christine: I’ve lost you, Ben, briefly.

[00:54:46] Ben: When you think about Additive and the competitive environment, how do you think that you’ll create more and more differentiation over time? What things are you thinking about beyond the tech stack, the breadth of products, international coverage, if anything else?

[00:55:03] Christine: In the end it is who you can serve as not end clients, but as your clients. One of the main differentiations, what we see in the wealth management, embedded wealth space, we can bring financial planning to any employer out there for his or her employees. It’s really opening up the way the channels the services are provided.

If I might add to one of the discussions before, in the past in the wealth development management side, various tried to cooperate with the banks. But then it was rather captive, i.e., if you get the execution and the custody, please as well get our views and our products. That’s opening up completely.

You can source in terms of the investment products, in terms of the end solution, literally anything you’re like. Differentiation and development management side will be with the end clients to be served, as said, corporates, search engines, retailers, but as well as what you serve there. There important point is the aggregation.

Like on the Kard side, we want to know what we have spent. The same on the wealth management side today, we have to build it, quite cumbersome. We want to know what our pension looks like, to be able to simply dissimulate it, from a mortgage our amortization and over into long-term planning. I think this services are coming our way and provided through channels that do not need to be traditional channels, but it can be partially provided by financial companies.

It was said FinTechs and banks always go hand in hand, and I completely subscribe to that. It is opening up new ways of distribution, serving all of us best IU and clients.

[00:57:09] Ben: Fantastic. Eric, anything you would add in terms of when you look at your competitors, where you see areas of differentiation?

[00:57:20] Eric: As you find in the report that appear, for us there’s one thing we need to do right. We need to connect our platform to as many banks as we can in different countries. Why? Because we are now meeting clients, they want to start, and that’s what we’ve done. They say they are in dozens of countries., they want to open in a new country. Instead of being led by the client, we push our network to the client, saying: we are now opening Brazil, are you interested?

If I come to Scott with, we are live with IBAN accounts, everything in 20 countries, why don’t you raise 50 million to address that? Why don’t you get marketing budget? The world has changed. I think 20 years ago to be on an international company was much more difficult. Now you’ve got a lot of tools. We want to facilitate this network of global bass for global clients, either fintechs or corporates, or even banks. There are some banks who are overpaying services in companies outside their native country. For us, one agenda is to change the way custody bank is set up. If we have an account in all of these banks to power corporates, then we’ve got something powerful for the bank as well as for the premium flow we could bring to the bank.

[00:58:54] Ben: Fantastic. Sadly, I think we’re out of time. I just want to thank the four of you for what I thought was a really wide range and interesting discussion. I’m going to conclude with something you said, Eric, which is, I think embedded in banking is really about giving every company the possibility to be a FinTech company. I think that was a pretty pithy comment from me right at the start.

I can’t resist, Eric, what you mentioned there, we just published a report about the embedded banking market in which we evaluated 45 banking as a service providers. Both Bankable and Additive are considered by us to be best in class as transformers capable of transforming both business models and technology of the companies that they work with. We are lucky to have the two companies on this discussion as part of this panel.

Thank you also to you Scott, for your insights.

We have more questions that we didn’t have time to ask, but that sadly was the case. Hopefully you guys will agree to come on another 4×4 in the future. Last thing to do is thank everybody for attending. Thank you for your questions. We’ll make the replay of this available if you want to watch it again or share it with any of your colleagues. But thanks very much everybody for participation and your attendance at this discussion. Much appreciated, and see you at the next step 4×4.

[01:00:19] Eric: Thanks.

[01:00:23] Tue: Thanks.

New Business Models in Wealth Management

4×4 Virtual Salon featuring Chris Bartz, Christine Schmid, Dmitry Panchenko and Bertrand Gacon.

Lively panel discussion on New Business Models in Wealth Management, featuring two of the leading wealth management software vendors identified in our new 150-page report “Digital Age Wealth Management“. 🏆

💭 Chris Bartz (CEO of Elinvar)
💭 Christine Schmid (Head Strategy at additiv)
💭 Dmitry Panchenko (Head of Investments, Tinkoff Bank)
💭 Bertrand Gacon (CEO of Impaakt)

We discussed:

  • Changing consumer trends
  • Changing technology
  • New business models
  • New fitness landscape for wealth managers

This webinar was the second of two discussing some of the key trends from our recently launched report on “Digital Age Wealth Management“. The report introduces The Market Map, our own methodology which upgrades vendor assessment criteria to help those charged with selecting, scaling or investing in wealth management software solutions to make better informed decisions about what characteristics matter in the digital age.

Read transcript –>

The Market Map |
Some surprising results

We get very different outcomes compared to conventional evaluation studies. A lot of smaller vendors rise up the rankings thanks to advanced technology and flexible architectures. And for incumbent software vendors, it clearly distinguishes those that have kept up with technology change and those that haven’t.

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Full transcript:


Ben: Hi, everybody. Welcome to the 4×4 virtual salon today where we’re going to be talking about new business models in wealth management. So if you’re new to the format, let me just quickly explain why we call it a four-by-four virtual Cylon. So we have four speakers who might go into introduce in a second, we cover four topics, which today are going to be customer trends in wealth management, technology trends, new business [00:00:30] models, which is where we plan to spend most of our time.

[00:00:32] And then the outlook for wealth management. And in addition, we have four polls. So you’ll see on the portal that the polls are uploaded and you can answer those polls at any time and we will make reference to the results during the discussion. And then the last thing is we’ll take one question, one audience question per topic.

[00:00:51] So you’ll also see that there’s on the portal. There’s a button where you can leave your questions and I’ll incorporate at [00:01:00] least four, hopefully more than four questions during the discussion. Okay. Right. So let me introduce our speaker. So I’m going to start with what is my top left, which is Dimitri Panchenko, who is head of investments at Tinkoff bank.

[00:01:14] And Tinkoff bank is Russia’s largest digital bank with over 13 million customers, but it’s best known for its super app, which covers a whole range of digital services. In addition to banking, such as insurance travel and ticketing restaurant bookings. And [00:01:30] e-commerce. Tinkoff investments, which is the part that Dimitri leads was only launched two years ago and already has three and a half million customers using it for automated portfolio management, digital brokerage, and wealth management.

[00:01:44] Okay next. We have Chris Bartz who is CEO of Elinvar. Elinvar is a Berlin based wealth management technology company. It’s platform used by over a hundred wealth and asset managers in Germany covers the end to end customer needs by supplementing it services. [00:02:00] But those are third party application providers, but also third party services providers having recently raised another 25 million dollars in VC funding.

[00:02:08] And embark is now looking at scaling up the platform and increasing self customization. Okay next. We have Christine. Christine Schmid is head of strategy at additive. additiv is a wealth management software company operating across Europe, middle East Africa and Asia it’s DFS orchestration platform enables private banks and wealth [00:02:30] managers to deliver rich omni-channel experiences while giving them the intelligence to maximize customer.

[00:02:36] engagement and then last, but definitely not least. We have Bertrand Garcon who is CEO of Impaakt and Impaakt is a platform that is crowdsourcing the intelligence to be able to get beyond rudimentary ESG scores, to understand the real societal and economic impacts of companies, activities in doing so impact is helping asset managers to build better portfolios that better represent their [00:03:00] client’s preferences.

[00:03:01] And values. Okay. So we’re going to kick off now. And the first topic we’re going to cover is customer trends. And so I just remind you that there’s a poll that you can complete, and there’s also the ability for you to post a question, which I’ll put to the, to our panelists. Okay, Chris, I’m going to start off with you if that’s okay.

[00:03:20] So, Chris. We’re seeing a massive intergenerational transfer of wealth from, from baby boomers to that, to their kids and [00:03:30] grandkids rural. So seeing just through the change in, you know, in any economic activity that youngsters are controlling more investible assets, what is the impact in your view of younger people having more wealth than they have done historically?

[00:03:47] Chris: [00:03:47] First of all, thanks for the invitation and great to be here. Really looking forward to the discussion with all of you when we first thing from my perspective, which is important to understand, because sometimes it makes up when we are talking about gang people in Wells [00:04:00] tech, we are not usually not talking about super young teenagers, but we are often talking about people who are in their thirties or forties.

[00:04:07]So when this is important, when we think about like the puzzle, not in mind, The biggest difference from my perspective is that this generation is much more used to technology supporting basically everything in their daily diet. And one example I like is when you think about booking a restaurant and you’re out there on a regular basis, very good hosts are very used to know everything about [00:04:30] you.

[00:04:30] They know your favorite table. They know your favorite dish. They know your favorite wine. So you basically have a very consistent high end experience because this is driven by CRM systems. This is driven by good showing of knowledge, same as true for basically every service we use today.  other OnStore experiences.

[00:04:49] One of the very few example, exceptions is as well as management because wealth management is done very manually. Very paper-based. And basically, if you advise us on [00:05:00] holiday, there’s a fair chance that you’re treated like a completely new customer, even though you are with the bank for quite awhile. And that’s, from my perspective, the biggest challenge.

[00:05:08] So traditionally the super manual process was part of the. Increased service because it was so personal. Now the lack of organizational knowledge is one of the biggest challenges and that’s from my perspective the challenge, but also the opportunity because whilst managers in their core are a very, very trusted partner and especially worst management time.

[00:05:30] [00:05:29] Also the clients who are younger. Half a hype based trust in these institutions, but they do expect them to really make use of all the knowledge. They have to share this knowledge and to create armies in the organization knowledge so that they are less dependent on a single advisor and what they discuss with a single advisor, but really benefit from the strengths of the complete organization.

[00:05:50] And this is a challenge from my perspective, wealth managers have to solve that they are better able to make use of all the knowledge they have about their clients to really. Develop the best and [00:06:00] most individualized solution for these times. And not only the solution that one advisor has in mind, but really the solution where the whole power of new formulation comes to the benefit of the client.

[00:06:10] And this is absolutely expected from the younger generation, as I said, not the 18 year old ones, but more the ones in our age group. If I look

[00:06:18] Ben: [00:06:18] around. Okay. Dimitri, I’m going to ask you the next question. There’s a follow on, I guess, to what Chris just said, which is what, you know, what Chris is saying, is that, do we trying to deliver personalized [00:06:30] services manually or through just a human interface?

[00:06:33] Means that you get quite a lot of spread of, of outcomes, right? Sometimes it’s good. Sometimes it’s less good. And, but it’s not that consistent. Do you think that that delivering that digitalization is the now the means to deliver really hyper-personalized serviced at scale? And is that where Tinkoff has, do you think a competitive advantage?

[00:06:55] Because it has just so much customer data because the super app covers so much of our [00:07:00] digital lives.

[00:07:02]Dmitry: [00:07:02] Yeah, so that’s a really interesting and a really important question because the Mo well only we don’t have any branches, so we don’t have an ability just to meet the clients and to do this paperwork.

[00:07:15] So our challenge and we have already done it. So we get three off. We got rid of every paperwork in onboarding by brokers services and I was saying that was one challenge now is to organize the asset [00:07:30] management services in the same way. So of course the reason is small problem here.

[00:07:34] There is an issue here because our customers would like to take everything under control and the brokerage services. And this means to this demand and. On the other side, we see the problems that people in this pit of so many fronts would like to. To see as an asset manager in there has, there is a bias that there should be [00:08:00] a very, all the professional guy who got the rules assets and will say some re difficult to end not so really clear speeches.

[00:08:08] And now we We are offering and work on the decisions, which allows us which will allow us to get 3000 is. And we, we succeeded to a little and maybe I will tell you about it later, or right now it depends.

[00:08:23]Ben: [00:08:23] Yeah, maybe if you wouldn’t mind, give me one, one example of where you’ve succeeded.

[00:08:30] [00:08:30] Dmitry: [00:08:30] So I think that’s all our robo-advisor is the best rural robo-advising decision in Russia. So we. We call it owl. As the belt I’ll Russia in Russia is a symbol of rezone capability. I don’t know. Is it the symbol somewhere else, but here in Russia, it’s very smart. So it asks the customer several questions about risk attitudes about investment horizon about currency and some.

[00:08:57] And some others. And after that, it’s [00:09:00] offers diversified and rather big portfolio. And so we launched it two years ago and it has already formed more than 9 million portfolios. Well, but, but the problem is another one. So we have some problems with conversion on the last step.

[00:09:17] So in comparison with our other decisions. So it’s as a conversion on the last step, when a customer should just put a final bottom and we tried to research and [00:09:30] we found out a very interesting conclusion. So. We researched what the user really do after the all offer teams, his portfolio he refused to buy it by

[00:09:44] But after that, he goes to our mobile application. So in as a part of mobile application and purchase the same stocks and bonds, we all recommended it to hitchhike himself. That means that our customers would like to take or to take the control. They would [00:10:00] like to take his final decision by themselves.

[00:10:03] And those it’s really interesting issue. And now where we’re working on the 2.0. To solve this problem.

[00:10:13] Ben: [00:10:13] A little problem, even. Why is that out? Yep. Okay, good. Kristen, we’re going to come to you next because I think Chris and Dmitri have raised a couple of really interesting questions here. Right? Which is the.

[00:10:23] There’s, there’s no doubt that technology can allow us and all the data that gets thrown off by digitalization can allow us to give you [00:10:30] to give much more contextual advice, much more, you know, to be, to deliver much, much more personalized service at scale. But as Demetrius saying, there’s always, there are always things that play with wealth management.

[00:10:40] They’re a bit distinct, right? There’s this sort of reassurance factor. There’s the, you know, there’s the there’s the ability for there’s the desire for people to take control? W, what does that mean? Do you think, in terms of optimal delivery delivery models for, for wealth management, do you think it, it sort of leads us towards some sort of hybrid [00:11:00] optimum delivery model?

[00:11:04] Christine: [00:11:04] So certainly an assisted one, certainly an assisted one. In particular in times where you have high volatility uncertainty. Is is very high. You not only need advice can be automated, personalized content but also. You want to know if, if there is someone behind it. So systems is something we, we clearly see to grow in terms of the business model on the, [00:11:30] on the robot side that you have the ability for a call center or even on the, on the wealthier side that you have a full fledged hybrid hybrid model where you can.

[00:11:42] In the digital interaction can deal exactly the same as in-person meeting the same efficiency, the same documentation handling the same. Advice handling optimization in a [00:12:00] very, very efficient way and seamless, no matter if we’re unfortunately rooking all from home again in a lockdown or meeting going forward again.

[00:12:11] So yes, we clearly see that trend.

[00:12:13] Ben: [00:12:13] And you think the key is to make sure that that whatever channel you use, the the experience is seamless and consistent. Right? And I guess the other, my follow-up question would be, do you think that, because I think, you know, the other surveys we see where it says that younger people, since we’re talking about [00:12:30] younger people always prefer digital channels.

[00:12:32] Do you think that will change as their wealth increases? And they may want more reassurance, more personal interaction or human interactions, right. Okay.

[00:12:42] Christine: [00:12:42] It has a function to, to the, to the amount of files. Does it need to be a human interaction? Not sure, but doesn’t need to be an assisted interaction.

[00:12:51] Yes, definitely. In particularly if it comes towards topics that we all will need which is financial planning [00:13:00] because it’s likely will have pension gaps. We had acid inflation that helped nevertheless interest rates, a record low and the pension gaps that need to be addressed need to be advised.

[00:13:11] So it needs very early financial planning guidance, and maybe even beyond. Pure pure vowels only we would call it valves and Hells pure Wells own. They’re really advising, advising the client, providing trust, providing stability. And in, in [00:13:30] simple terms, huh? Not with, not with the financial jargons, but in very simple terms.

[00:13:36] Ben: [00:13:36] Veteran I’m gonna continue next because I don’t know if you’re looking at the poll, but what people are saying is that they think that the biggest trends affecting wealth management will be the transfer of wealth. But then the next one that they’re highlighting is ESG. And so I think this is a nice segue into, into impact and your work, because I want to ask you a two-part question here, which is Is, we obviously see a massive increase in the [00:14:00] demand for ESG investments.

[00:14:01] Can we, can we attribute that also to demographics and maybe also to the sort of, you know, the increase in investible assets that young people hold. And then what effect do you think the pandemic is having on ESG investing? If any.

[00:14:15] Bertrand: [00:14:15] Well, yeah. Hi everyone. All of these trends are to the interconnected and we definitely see a very strong generation shift when it goes to increasing demand for ESG assets or impact investing or sustainable investment, you know, whatever you call it. [00:14:30]

[00:14:30] I’m sure many of us are around this panel today, have a, of teenagers as, as skeets or or close contact with teenagers. And you, you can see by yourself, how important does the environmental and social topics to that generation. And they’re just not, not important to them. You know, philosophically, they want to take action.

[00:14:48] I think that’s the, one of the main differences with the privileged in average. And it’s not that they, they might be more concerned with the environment that they’re more willing to actually take action. They might also be less cynical than we are, or that all parents are. [00:15:00] And one of the ways for them to easily take action is to actually transform their investment portfolio.

[00:15:05] They’re very aware of the power of capital in terms of transforming the broader economy. And we’ve been talking a lot about the digital revolution in a way that is taking place in the wealth management industry, like in any other sectors or maybe in a bit different way than in the other sectors, but it’s still happening in the wealth management industry.

[00:15:23] But there’s, to me there’s another as important triple addition that is taking place as we speak. And that is the sustainable revolution. [00:15:30] So you know, it’s I I’ve been myself working in the sustainable finance was the last 15 years. I can tell you that 15 years ago it was like A very niche market was only a handful of banks, you know, claiming that they were doing anything about environmental and social.

[00:15:44] Now, today you will struggle to find any, once you go to bank that says that they do not integrate any environmental or social consideration. And so it has become very mainstream of course, with a very diverse, I would say, level of, of Robustness. And [00:16:00] how serious is that really being integrated across the board in the investment process, but for sure, this is the, this is a huge shift in the, in the demand.

[00:16:08] And it is, it is largely fueled by the by the dinner generation shifts and youngest clients. They would probably put that on top of their demand to their web managers. And very often even before financial performance, this is something that we also realized it’s sometime for, for the youngest generation.

[00:16:25]The positive impact of the investment is the number one demand [00:16:30] before the financial performance of their portfolios. So-so so, yeah, that’s a, that’s a major change and this is a change that he’s now in itself leading to another wave. Of a differentiation and sophistication in the market because as ESG data becomes integrated by most every single bank, there’s no longer a differentiation available there.

[00:16:51] So now wealth managers are looking for what’s the next way. And the next wave is really about impact data. And the difference between ESG data and impact [00:17:00] data is that ESG is very much looking at the. I would say the responsibility of business, whether they, you know, they treat their employees well, whether they are to the right practices and the right policies.

[00:17:11] But the real question is really what is their, their, their, their value to society in a way. What is their core business model is bringing as as positive or negative effects. Yeah, and that is a very different question and much more complex. And this is where now the market is moving is to try to to to figure [00:17:30] out how to answer those questions and not stop just by saying, if you treat your employee well, and if you limit your CO2 emissions, that’s okay.

[00:17:37] You can still, you know, manufacture shoes or sell cigarettes, or we don’t care. Now, this is not, I think he’s over now. The market is ready to really answer that much broader question about what is your. Your net consolidated impact to towards the environment and society. And this is the, this is the, the, the new change that is taking place now.

[00:17:57] Ben: [00:17:57] Okay. So we’re going to come back to that because [00:18:00] that’s, you know, th there’s a lot to unpack in what you just said. So I think we’ll come back to that and we’ll address it through the subsequent sections. Right? So in terms of some of the sort of technology and business model challenges around getting that impact data so I just remind our audience, they can ask questions at any point and I’ll put them to the, to the panel, but what I’m going to do now is I’m gonna move on in the interest of time.

[00:18:22] We’re going to move on to the next section around technology. And Christina wants to come to you first. And I want to ask you in your [00:18:30] experience, do you think that wealth managers are starting to look at technology decisions and evaluations a bit more through the prism of business model evolution? Or do you think that’s, do you think they’re still looking at it through some sort of more traditional or more traditional lens?

[00:18:47] Christine: [00:18:47] Hmm, it’s a very good question, Ben. If, if you can split the business model approach down into three layers. So the operating model, the sourcing model and the servicing model, then I [00:19:00] think they’re looking into it increasingly from a holistic point of view. Let’s, let’s, let’s start with the business model per se, and then the operating model.

[00:19:09] So. In the past, the operating model was mostly focused on pricing. I bringing the costs down and efficiency up. This has changed. And I think the clear, clear trend there is as well, that banks are increasingly aware of that. They’re part of that becoming part of the technology and [00:19:30] the solution. The term they’re to use is the banking as a service.

[00:19:33]Not only can they position themselves, that’s, that’s, that’s a business model decision they have to take. But also can they use and build up on existing technology with their teams? On on the sourcing model side, I think we’ve, we’ve we’ve payment. We all have learned that we need, we need, we didn’t know, Pence’s dumb open banking.

[00:19:54] We need to integrate the best solutions that are out there and, and fast and in an efficient [00:20:00] way. So. There clearly some, some trends, trends are visible on the sourcing model side, which is cybersecurity, which is anything that has to do with data analytics, personal advised advice is a big trend.

[00:20:15] And there you need the best partners to do the data analytics as well into wealth management and the servicing model, which is as well part of the business model decision. Clearly. It’s it’s w you’ve asked me before it’s about [00:20:30] hybrid or assisted robot. It’s about serving the client seamless bead remote, as we trust now, discuss, or be it in, on client meeting.

[00:20:40]The second trend there, and the banks have, have to make up their mind in terms of how they’re positioning in terms of omni-channel. So it’s not only e-banking, it is increasingly mobile or parallel and the clients want to see the same one to do the same actions. I think [00:21:00] yes, banks are targeting the business model approach really focused these days and are very supportive of doing the changes, honestly.

[00:21:11] Ben: [00:21:11] Dimitrio I want to ask you a follow up question on that, which is so first of all, I want to ask you, so what are the, some of the technology challenges that you face in your business? You know, is it around data analytics or is it just more around scaling the platform to meet the demands of, you know, millions of customers?

[00:21:30] [00:21:29] And then the second question I want to ask you in relation to what Christine just said is how do you at Tinkoff bank decide what you will provide? No sales versus what you will partner for. Where do you draw the line in terms of your, you know, your core competencies?

[00:21:45] Dmitry: [00:21:45] So let’s start from the first question.

[00:21:47] It’s, it’s a challenge and difficult question because yes, we are growing a really fast to be attracted to more than 2 million new customers surgery. Here and the editor [00:22:00] only 5 million clients at all. So our part is more than 40% during the last year. And we have about a 1 million active for customers and of course that’s a challenging problem for them.

[00:22:12] That’s a challenge. Question four. Taking the decision what should be first to, so the provider reliability or the silvers, or to run very quickly to the new products, new decisions. And of course we try to keep the balance and we try [00:22:30] to provide the providers at the same time, the scalability for.

[00:22:34] New customers for new activities. Brokerage businesses are really difficult by the fact that you should be ready for incredible for, from credible client customers activity. And you cannot predict it. So if you can predict that you’ll be Warren Buffett or something like, or, or even higher. So in this aspect, we should provide incredible reliabilities.

[00:22:56] So which can be more reliable than, [00:23:00] for example, it’s a common time, maybe 10 or 20 or 50 times. And that’s a problem because for example, as the start of as a moment of. When the American stock market starts, let’s just say it could be yeah. 1 million customer at the same moment. And they’d like to start trading and we should succeeded and they should provide a service.

[00:23:23]We shouldn’t, they shouldn’t give any delays something like that. So we don’t have the ability to, [00:23:30] to be mistaken. And then the other one points that at the same time I should think about the products, the product development, and of course for our small team, it’s a serious issue. But I think that we succeed, succeeded visits.

[00:23:43] So we try to find balance and we the I think we provide the speed is number one in Russia by the product development. So we release new features may be at least one time per month. And we. [00:24:00] Seriously keeps this speeds of the space in order to satisfy our customers. And I forgot the second one question.

[00:24:09] What should be in the center of a

[00:24:13] Ben: [00:24:13] bank, a broad offering in your super app? And the question is where do you partner, where do you think you need to do it yourself? Or is it, do you think it’s about data? Is it about owning critical datasets? Where do you, where do you sort of think about your core competence and what strategic.

[00:24:28] And if I’m provisional [00:24:30] is Bazzi provision

[00:24:31]Dmitry: [00:24:31] Maybe it seems to be strange, but the customer is the customer’s needs. The customer seizures is in the central. So it’s the first, so everything we do which should be should be the war to there’s increasing all the level of customer satisfied.

[00:24:46] And so he’s happiness and so we don’t think about, Oh, we should add some data smart data decision or sounds like that. So the reason is to improve the the customer’s life to give him some new [00:25:00] features to increase the speed of decision of his problem and And of course from this follows our data and smart decisions and which we widely implement in our everyday VOC.

[00:25:13] So if, if, if you need can share some samples, but. So, so, so the customer is the first time that he’s in the center and we take all the resources to solve his issue, data, smart, search, official intelligence machine learning [00:25:30] or, or sometimes it’s not really good to admit it, but I, we, we can hire more.

[00:25:37] Then more, more hundred to 200 supports the guys to solve the problem in this exact

[00:25:43] Ben: [00:25:43] moment. Great. Thank you. And then Chris,

[00:25:48] Dmitry: [00:25:48] of course we don’t like Sosa such decisions, but we have to do it sometimes.

[00:25:54] Ben: [00:25:54] And thanks, Chris question for you, which is so, so I’m not the only time. I’m sure I plug it, but we just did.

[00:26:00] [00:25:59] We just published a big report and wealth management. And as you know, Alan VAR is one of the, one of the systems that we looked at. And one of the things that we thought was pretty, something unique about your business model is the extent to which you allow data sharing amongst the tenants of the system.

[00:26:14] And the question I wanted to ask you is. You know, while that’s obviously incredibly value in terms of so turbocharging data network effects, how do you get rounds, data privacy concerns, and with that kind of setup,

[00:26:29] Chris: [00:26:29] I [00:26:30] mean, first of all, I think we all should acknowledge that it’s completely normal and absolutely part of every industry and also increasing the finance industry that not one single player is providing our services, but rather speaking about the value chain and then the extra quality and the delivery for the final user.

[00:26:47] Comes together by the company combination of competencies. And this is typically in the like most high end service. So for example, if you’ll think about the family office, you have DPMs managing a certain part of [00:27:00] the walls, and then you have a family office, or it has a, which has a complete overview, but still the DPM has certain part, the parts he or she is managing.

[00:27:08]And they are, they have the full transparency about everything they need to make their job. And it would be, and that’s basically also the way we look at it. So it’s important for us on the one end that we have all the security limits in place. And we are that’s untypical for a tech company, but from our perspective, very valuable, we are fully regulated financial institution, even though we’ll be focused on the technical [00:27:30] side of things.

[00:27:30] So we are 40 bathroom license, which. Requires that we Inforce and make sure that we have all the same security limits than a traditional bank. Starting with GDPR and ending with a bat. Second thing, this we use the most modern technology for that. So for example, we have something which is called roll level security.

[00:27:49] So for every data set, we have. We can define on the data sets, which use off the platform has access to this data set. And this is something dynamics, or if we can add basically [00:28:00] user rights and did it use the rights to a certain data point. And we ensure transparency. So for example, if it’s if a DPM, as well as someone else should have access to the same set of data, so easy, easy age the most simple example would be you have an independent discretion of portfolio manager and you have a custodian bank and both have an overlap of a client data access, or for example, the asset information is visible post, but certain information around the investment strategy is only visible.

[00:28:30] [00:28:29] Discretion of portfolio manager and then, but there’s at the same time, there is information which is only visible to the custodian bank. So for example, if the same, see client has multiple mandates with motor B DPMs, all the English, the same custodian bank, then the custodian bank has a full access. Of all this kind of information and each thing a DPM only sees the information from his perspective, individually perspective, and that is something we manage based on basically what the seek science defines as what is the [00:29:00] goal through target and what is his desire to access?

[00:29:03]So we have the combination of the technology. We have a combination of transparency and the last thing is then process. And there are there are also situations where we are actually the neutral third party. So one example for that, and that’s something we are now very much looking into in the context of extending our platform to even more partners on the provide side is traditionally, for example, you are a benchmark provider, or let’s assume you a pothole and you are now contributing a certain [00:29:30] information to the portfolio.

[00:29:31] Your price models were very much limited to the set of information available for you. So you could in the end, go for a license fee, one of the, but that’s pretty much it, but your service might actually be very valuable to increase assets. So with us as a neutral party, we could also support system logics where we say, okay we price based on assets, but that does not necessarily need to know all the information, but you can trust us as a third party who is able to facilitate this because we, as a [00:30:00] neutral instance, have the information from both sides.

[00:30:02]And then both sides can trust us. And we think that’s very valuable in a world where it’s more about. More and more about the ecosystem and not one single player providing everything, but in the end, it’s always about the value chain and the ecosystem where everybody focused on core competencies. And we try to bring these together solving topics

[00:30:19] Ben: [00:30:19] like this.

[00:30:20] And just one more question, one more. Follow-up do you, do you also use the sub collective data to train. Collective models, you know, which might be on, you know, understanding, [00:30:30] pricing across all your different customers or I don’t know, fraud threats, or, you know, I don’t know what those models might be, but do you also sort of try and common models?

[00:30:39] Chris: [00:30:39] Only in very, very limited ways. So to be very explicit to our model is not. So I always try to, I always compare there’s like the Google  and then therefore the service is cheaper and there’s the, where the user have to pay. But on the other hand and everything is optimized for protection. We ended up at the side of things.

[00:30:59] So we [00:31:00] really focus on, yes, we charge our users, but on the other end, we really protect whatever they share with us. So therefore for example, when it comes to pricing investments for the juice out of loss, we don’t do any analysis there because we think that’s in the interest of our partners, that their data is really protected when they shared with us.

[00:31:18] And we want to be a neutral, trusted instance. Yeah. Where we use information as, for example, when it comes to it security. So we do maintain the security for the whole platform, and we do make sure that a threat [00:31:30] analysis is used in a way that we really protect everyone using our platform.  But there is something where we don’t need to use any confidential data, but more general flaws, excess behavior and stuff like this to really make sure that the security is maximized for every user, but our trusted, confidential, confidential information is.

[00:31:48]Protected and only used in a way that it’s transparent to the respective user, which includes all patrons.

[00:31:55] Ben: [00:31:55] Fantastic. Good. So I remind the audience that they can ask questions and I will put [00:32:00] those to the panelists, but in the absence of those questions, I’m going to move on to you better. And I’m going to move us into the section where we want to spend most of our, what is know a good proportion of our time, which is new business models and betterment.

[00:32:12] I think if you don’t mind, if you wouldn’t mind just explaining a bit your business model, because it is very, very unique, right? So if you’ve known, explaining the business model and then. You know, it relies on user generated content, which is not a model we often see in banking. Right. And particularly one on which people are placing heavy reliance on that data to build portfolios and that kind of [00:32:30] stuff.

[00:32:30] So so if you would mind just explaining a bit the business model and then kind of talking about some of the challenges with user generated content and how you get it to the right level of accuracy and timeliness and all the kinds of things that a, a regulated financial institution would expect.

[00:32:48] Well, you were muted federal.

[00:32:52] Bertrand: [00:32:52] Sorry about that. Yeah, so I was seeing just so the, the easiest way around to, to guide you through that is just to let you know why we created the impact of the first place [00:33:00] and this, it was because we were. I’ll serve clients of of traditional ESG data providers and not very satisfied with the type of data we have, partly when the, you know, this, this move that I mentioned going from moving away from easy data into impact data, which is a very complex question.

[00:33:17] And and I think one of the reasons why we’re frustrated is that the the, the normal model that is Dominant in the financial industry is the single expert model. So you know, you want to have an information and you ask the, the expert of [00:33:30] the, I don’t know of the car industry, what they think about the impact of Renault and they will produce a report and you buy the Freeport, but impact.

[00:33:39] Is, is a far more complex question than financial performance. And we know that punishing performance is not so easy already, but impact is, you know, is way beyond that and you need to aggregate at the type of information. And and that, that, that is very hard to find in, in the mind of one single experts, you know regardless of how knowledgeable is that expert.

[00:33:58] And so. We thought it [00:34:00] was only two ways of being able to really measure the impact of companies and to, to, to get to manage that that level of complexity. One was a pure AI models that can really, you know gather a huge amount of information and try to make sense out of that. Or the other way is collective intelligence.

[00:34:16] So picking the brains of a, not just one single expert, but silence and silence of contributors, who you know, each of them having a, a small part of the information and having a way where you can gather all that information in a structured, [00:34:30] vetted, organized, documented way so that you can build the collective knowledge about the impact of the company.

[00:34:35] And that, that is really the the bases on which we created impact. So it’s a collaborative platform. It’s not a Wiki, but it’s very similar in a way to the processes that you could see in Wikipedia. There are many levels of, of quality control and, and vetting information because of course the power of collective engine intelligence is huge, but the, the risks are also very important, right?

[00:34:57] In terms of fake news and distortion of [00:35:00] information and, and you name it, right? So you need to have a very strict and very robbers control. Quality control mechanisms. If you want to make sure that the end results, the research and the scores that you produce are actually of a very high quality. So I’m not going to detail all of those mechanisms that are in place, but the, the, the answer is that it took us some time, but we now have a very robust and gene to produce that research in a very high quality and with a with a power, with a bandwidth [00:35:30] studies, you know, as no equivalent in terms of scale to any other single expert model, because, you know, we just added more contributors.

[00:35:35] And so the sky’s the limit in terms of all of the capacity to produce that content that’s skate. Now, once this is done, the other benefit of collective intelligence is that. There’s not one single person that decides that a plastic pollution for Nestle is more important than feeding the planet or vice versa or how much one should be weighted against the other one.

[00:35:55] Right? It’s a collective rating in a way it’s collective assessment. So you basically reflect [00:36:00] what is the common consensus from, from global civil society, which, which in itself has a lot more value than just asking Beckham what he thinks about Nestle or asking Ben, what it thinks about Toyota.

[00:36:10] Right. Yeah. And so that, that, that the model, we also use artificial intelligence, but not as a way to directly calculate those scores really more the way to assist with the research process. Making sure that analysts you know, get access to the writing permission in a quick way and in a structured way, and then can process that information [00:36:30] using the human brain for what it does best and using the artificial indigenous for what it does best.

[00:36:34] And I’m not trying to. Use one to do you know what the other ones should be doing and that’s, that’s the model we have. We we’ve been developing.

[00:36:40] Ben: [00:36:40] And then just, just one more question for you, which is what’s the hardest thing about scaling. Impact because, you know, I’m one level, you know, insurance you’ve talked about, right.

[00:36:50] That’s critical. Another level is getting sufficient coverage of topics. And that seems to be where you’re using AI. What about actually attracting the two sides, right? Because you’ve got the classic chicken and [00:37:00] egg problem, right? You need to have a lot of researchers in order to attract a lot of asset managers.

[00:37:05] And with the asset managers, you won’t get the researchers. How have you overcome the chicken and egg challenge? Well, I’m

[00:37:10] Bertrand: [00:37:10] not sure we have we’ve we’ve all I mean, it’s just a part of the solution is just to have a, you know, a do to get your investment capacity, right. And to have the right backers in terms of investors so that you can have the time to build that knowledge before you can actually sell it.

[00:37:26] And you have access to accept that, you know, it takes some investment and some time [00:37:30] before you can gather all of that research and produce it at scale, then only you’re able to sell it to two clients, which is what we do. Now. We have, we have reached that, that point where we can, when we start studying that research to decline, it took us some time before we could actually gather, you know, research on Southern’s of companies.

[00:37:47]Yeah, and I think the the other challenge is probably the fact that for that to work, you need to attract a very large community of contributors who might not have a complete alignment of [00:38:00] interest with your clients. And just give you a very concrete example, like in terms of coverage. Of course, and investors would like to have this kind of information for the largest companies in the world.

[00:38:10] Some of them being completely unknown from, you know, from the average Joe because the B to B companies or, you know, so, so get gathering information and gathering data and gathering greeting on Amazon or or alphabet or Toyota. That’s easy. But when you do move to some of the companies that are interesting for investors, because they [00:38:30] big companies in terms of market cap, but they do not.

[00:38:33] They’re not consumer goods company then of course, it’s a bit more of a challenge. So you have to, to find ways of actually making sure that your contributors on the platform can get interested into those. And the main way of doing that is, is just to make sure that they come to the platform for the right reason, which is an alignment around impact measurement.

[00:38:51] Most of the players, we have, they come here because they want to understand, they want to contribute to measure that impact. And if you can explain why this big company is important in terms of [00:39:00] impact and why they should contribute to the rating, then the job

[00:39:04] is

[00:39:04] Ben: [00:39:04] on. Perfect. Thank you very much. So to meet you, I’m coming to you next and I’m sorry to do this, but this has, this is a three part question.

[00:39:12] Okay. I can remind you about the parts later, but the first question I wanted to ask you is yours is a business model that also has also had to overcome the chicken and egg problem, right? Because you needed to have millions of customers in order to be aggregate services for those customers. So how did you overcome the chicken and egg problem?

[00:39:28] Question number one. [00:39:30] Question number two, I can remind you later. Question number two, why don’t we see more super apps in Europe? You know, there are, there are, you know, there are many, many super apps in Asia, but you’re the only one sort of really successful super app in Europe. And then the third question has been put by the audience, which is how do you manage kind of all the data aggregation.

[00:39:49]We’re in this world where we’ve got GDPR. PSD two. I mean, how do you, how do you solve, you know, piece together and amalgamate data sets in a world where you know, that you’ve got sort of fragmented regulation [00:40:00] and more, more, you know, more regulation around data privacy. So, yeah. So first of all, how did you overcome the chicken and egg challenge with, with Tinkoff bank?

[00:40:13] You’re you’re you’re muted. I think Dimitri,

[00:40:18] Dimitri

[00:40:20] Bertrand: [00:40:20] you’re you’re on mute.

[00:40:23] Ben: [00:40:23] Sorry,

[00:40:27] Dmitry: [00:40:27] let me elaborate a little how [00:40:30] I struggled with this problem.

[00:40:31]You know momentum today we realize it and that means that we don’t have any time for her relax, so we don’t have any time to gather resources. So we encourage shout team. We. Try to get more sources for, from the, our ecosystem.

[00:40:49] So there are big, we call it the whole Holy war. So it’s a big, huge discussion of we discuss there was the main targets for us and the Alec system [00:41:00] and now there is a decision that it’s Incofin investments is accelerating a lot. It’s succeeded in a lot and in our culture, in our DNA to, to help us all, all the bank now, sports it’s income from investments because it’s good moment.

[00:41:13]It’s a good time. And We really need we don’t, we don’t have any time to just think about it. We should deliver, deliver, deliver, or so we should keep the same space and we should scale our reliability. So we scale our infrastructure and I think [00:41:30] that’s is, is the issue not about solving the problem of chicken neck.

[00:41:35] We just widen, widen it and widen it. And Try to in reach our capacity to, to, to be able to do a lot at the same moment. And so we scale our business maybe twice this year so on as the staff our it team. And we are trying to do it very fast. We try to attract as a staff from not only [00:42:00] from, from different regions from our countries and maybe even more so the decision on his own disease.

[00:42:06] And so I think that is the challenge, which we are managed to solve it. And I think that we. We changed a lot, so three months ago, and now it’s the security difference. Believe me. So the sleep, not really much, but it’s a good time for

[00:42:25] Ben: [00:42:25] us now. And then, and then why don’t you think there are more super apps? [00:42:30]


[00:42:30] Dmitry: [00:42:30] Hmm. I was thinking about this question and my first idea was that it’s the point for huge scientific researches because it’s not so simple question. I think yeah. There are several important points which played a huge role in this the level of, of, of competition. Maybe the concentration of big players and small players.

[00:42:53] So We saw that in Europe and United States this process took much [00:43:00] more time and maybe was a behavior and habits of the customers have already formed and that’s important. And but after all we all don’t know what will be the next, because I think that Amazon, which is now seems to be only.

[00:43:14] E-commerce for a common customer. So Google, which seems to be only a search for common customers, all or, or Facebook all these super apps have more ambitions and our X system will have a lot of ambitions [00:43:30] and we would like to be more fuchsia would like to provide more services. And so.

[00:43:36] Ben: [00:43:36] And then Demetrius one more question. That’s come in from the audience here, right? This is good. We’re getting lots of questions from the audience now, which is it’s about your, your international presence. So I understand that Tinkoff only operates in, in Russia. What’s the plans to take tink off internationally, particularly in light of the fact that it’s kind of the only European super app.

[00:43:56] So why not go to the UK or Germany or one of the other [00:44:00] countries with thought populations in Europe?

[00:44:04]Dmitry: [00:44:04] I I’m not sure that I can count I can disclose in our our plants and our ambitions. I, I just can say that we recession actually everything, every abilities and possibilities. So we are interested in.

[00:44:20] In, in, in increasing the old business, but I’m not sure that I have what Sarah right now at the moment. And there is a well known Startup which is called [00:44:30] vivid money. So it’s well known story. It’s already presented in our in a, several regions of Europe. And so there is a connection between our companies, but it’s a well known story.

[00:44:43] Okay. Okay. So it’s a FinTech, it’s a FinTech

[00:44:46] Ben: [00:44:46] story. Okay. So, so in other words, is your answers kind of a bit, watch this space and a bit, we’re not doing it necessarily through the Tinkoff vehicle. We’re making investments and using capital to expand. Okay, good. [00:45:00] Chris coming to you next, which is, you know, how like banking as a service has become like this really big trend or at least a much hype trend, right?

[00:45:08] This idea that, that you can embed. Banking into any distribution channel and maybe, maybe a bit like with, with Tinkoff right. You, you embed into channels that already have lots and lots of customer engagement. And we see this a lot in payments. We see this a lot in, in lending. W why haven’t we seen it more, do you think, in wealth management, and do you [00:45:30] think that’s about to change.

[00:45:34] Chris: [00:45:34] So, I mean, starting with the last question, obviously, I think it’s going to be it’s about to change because otherwise it would not make much sense. But when we look at the overall or the underlying trends, I think. The reason why it started in payment and in other areas is because they are, we are very much speaking about economies of scale and we already speak about very, very high price pressure, whereas in wealth management for example, [00:46:00] in Switzerland, but also in other areas for quite some time, we had very high unit economics.

[00:46:05] And so it was actually possible to pay a lot of people, a lot of money for very menu work. And you still see team structures like one assistant supporting for advisors to serve clients. So basically you always had the option to go for some menu, a big opt ins that are going for a technical solution.

[00:46:24] That’s one reason. And the second reason from my perspective is that okay. And when we think about wealth management, [00:46:30] we are actually talking about a very, very fragmented industry. So you have private banks, you have DPMs, you have family offices, you have a lot of players in this industry. And therefore you had less parties who were able to really support huge investments in tech infrastructure.

[00:46:47]And so from my perspective we have now the interesting situation that exactly the last part is the fragmentation of the market. We’d be the driver for Ross tech as a service. And so the [00:47:00] technical side. Because all these players are interested in upgrading the idea, but they cannot do the investment themselves.

[00:47:06] They know a few of the pressure due to expectations or organization knowledge. One of the points we talked about earlier due to pressure on the margins due to increases in rigorous so that there are no manufacturers that actually force everyone to invest in technology. The split of the value chain.

[00:47:24] We discussed new trends like Bhutan is working on when it comes to impact. [00:47:30] So all of this in the end needs to be translated into Intel technology. Most of the players lack the resources to do the investments themselves. And therefore we see, do expect that there will be an increased demand for whilst tech provided as a service.

[00:47:45] And this then comes together and that’s, from my perspective, a very interesting dynamic with much more evolved regulation about the usage of services as a service. So for example, when we think about the various, the most fundamental thing of the infrastructure as a [00:48:00] service of meaning cloud service, cloud infrastructure Actually only in the last years, at least in Europe, we really see regulation taking off there a much better view by the regulator, much more consistent view.

[00:48:12] And they’ll basically everyone has a clear framework how to use cloud services that can still be improved, but which already allows us to use it in a secure way. And from my perspective, this like increased demand increased pressure in combination with a better regulatory framework. As a very good [00:48:30] moment.

[00:48:30]And I do expect that over the next year, as we were seeing significant increase in usage of Wells take as a

[00:48:36] Ben: [00:48:36] service. And where do you think, well, we’ll be into which channels do you think it will be embedded? Do you think it will be, do you have a sense of that? Would it be like lawyers, probate lawyers, for example, will it be accountants?

[00:48:48] You know, what channels do you think w w will be used to offer up wealth services that aren’t directly proprietary wealth channels?

[00:48:57] Chris: [00:48:57] I would I would expect that we see [00:49:00] this basically as the things we already see today done manually, we will see them executed in a better Dignitas supported way.

[00:49:09] So for example, I was responsible for the product management and the complete offering of a private bank based in Bowden. The maturity of the client acquisition was done through networks. And we were working together with lawyers, working together with techs, advisors, working together with all different kinds of [00:49:30] parties who also have the same client group, because in the end, from the perspective of the client, especially your client, it’s always about the holistic view.

[00:49:39] And I would expect that this is now being more and more supported so that you have in the end, again, an ecosystem of parties serving a client, but they are all supported in a better way so that the client has a better overall experience. And then the client can decide for himself. What does he want to discuss with whom but the level [00:50:00] of available information and the the possibilities to share data in order to improve service was significantly increased.

[00:50:07] Ben: [00:50:07] So you think it’s kind of a shared cost of customer acquisition and then across many plants. In other words,

[00:50:14] Chris: [00:50:14] I would say it’s like it’s a network of people working together and doing strategic partnerships. And one thing I usually discuss with partners of ours, when they think about that target operating model in the past, the core assumption was I’m a wealth manager.

[00:50:29] I [00:50:30] view what I’m doing. Tomorrow it’s much more about, okay, what is really my unique core competency and what are the things that better do with partnerships? And that can include things like I’m not actually managing the complete portfolio of a client, but I’m focusing on your certain part. And I it’s, for example, it’s G strategies or impacts for the juice buyer by another provider then extends to one of the things about real estate.

[00:50:52] For example, burden in Berlin. Most whilst management clients have a significant share of their portfolio in real estate. Then who are the parties supporting [00:51:00] this part? Then it goes further to the tech side of things. And so far for that perspective I think everybody in this industry needs to have a much clearer view about what is the, what are the individual core competencies?

[00:51:12] What are complimentary services to this, and how do I execute on these combined business models? And therefore we will see many more business models executed. From an ecosystem for supported with strategic partnerships. And then the question is how do you [00:51:30] support this technically, but also how do you support this from the legal point of view and how to really strengthen the strategic partnerships?

[00:51:38] But I think we are definitely far, far away from the times where one single institution was able to support everything. And we will definitely now going into directions where it’s much, much more about ecosystems by the way that also offers opportunities the other way round. So we just mentioned PST to PhD is much is a lot about sharing Ben, bangs, sharing [00:52:00] certain account information with other parties.

[00:52:02] I can also imagine going forward that whilst managers can establish themselves as a trusted party. To advise clients on other things. So Christina pointed out the the as one example and I think that’s completely right from my perspective. The question really is, okay, which information does the client wants to share with whom?

[00:52:22] And in the past we already saw in the individual levels that clients shared, for example, information about their business and their family died with their [00:52:30] advisor. I would expect that going forward there’s opportunity for more data to be shared with the wealth manager who then advising on this holistically.

[00:52:37] Together with parties and we’re supportive.

[00:52:40] Ben: [00:52:40] Fantastic. So Christine to you next. So a common theme of this section has been, you know, the growth in ecosystem based business models. So my first question to you is what other examples do you see of ECOS ecosystem based business models in wealth management, but they also want to put to you a couple of questions that we’ve had from the audience there.

[00:52:58] One is to what [00:53:00] extent do you think the pandemic has accelerated. Digital transformation in wealth and wealth for wealth managers. And then we also had one about data sharing, right? Which is how do you create a sort of quid pro quo, you know, for the suppliers that share data with you to make it worth their while to do so.

[00:53:18] So, sorry to put, so a bit like the Patriot three-part question to you though. So let me know if you need to be reminded of any of the parts. Okay. Let’s, let’s

[00:53:28] Christine: [00:53:28] start with the the [00:53:30] one that the pandemic accelerated desire for wealth managers. It clearly has accelerated the demand for tech, but in, in different ways But banks often used to build, to build their own and particularly the large ones.

[00:53:46] Now these days they can build an existing models. And I think there, there is a shift. Happening there in terms, in terms of speed in terms of no longer coding, but more on the configuration side, but still [00:54:00] having the, the end mile. So the, the client journey on full control The second one I would say is, is really the end-to-end.

[00:54:09] Okay. We want, we want an end to end solution UX. Just want to change my color and my logo and get it out fast. This is, this is a need for the ones that were not digital before before COVID hit us. And so. There is a full fledged solution in between the ones that really want customized built itself [00:54:30] and from an end to end.

[00:54:31] And I think as, as well as tech providers, all the T if you have, you have to play the full level between an end to end solution, but also providing just a means that the partners can build themselves, but it has definitely, definitely accelerated. And it has affected the business models. That’s with this cost before I think your second one Was on utterly consistent based business models.

[00:54:54] Am I right Ben? Yep. Okay. In terms of [00:55:00] ecosystem based business models, I think we can firstly, as well look across the financial industry. And w we spoke about financial planning before. The need to bring in impact sustainability data. So if we look into financial planning, it’s, it’s about, it’s about stability security, and there is a, it’s a combination of, of banking and insurance.

[00:55:24] So. I remember one of the studies looking into affluent opera, affluent clients and how [00:55:30] satisfied they were with we’ve kind of life protection offering provided with, with their wealth management side was around 9% that you don’t 9%. So there is a clear need for simple ecosystems and that provide services.

[00:55:48] From pension to free savings and even on top, for example, a life insurance and in a simple way. In a very simple way. So their ecosystems there, and that’s where oddity for example [00:56:00] is with its health and wellness offering established. The second ecosystem, one is really breaking up in the past. The banks have sourced the investment products.

[00:56:11]Proper due diligence came on the recommendation list. These days there is an ecosystem of investment providers and other platforms. Growing examples are daily or other examples are chant too, and it’s, it’s a link into DS investment providers that is, that is [00:56:30] needed going forward increasingly, and you need to have the flexibility to bring them into your offering for the clients as well, that this is something that’s happening within the industry.

[00:56:40] And then maybe adding up to what Chris has elaborated on, on banking as a service. Yes, clearly we see, we see this trend and in terms of the channels, it can as well be that the bank themselves become the channel. I E that the banks provide their service in terms of a supplier [00:57:00] aggregation and provide.

[00:57:01] WealthTech wealth, wealth management services to other smaller banks, even to insurance companies. So it’s not only within the technology within the banking sector itself, but it could as well be a wealth tech provided verdict. Client has its traffic, his or her traffic. So typically what we use daily is on the consumption side where we use daily is on the mobility side.

[00:57:25] Once we’re free to be more mobile again, and. [00:57:30] To provide the financial service there where the client goes on on daily needs is certainly something which we would expect to grow going forward. And the last journal, the last channel is with with corporates.

[00:57:44] Ben: [00:57:44] Yeah. So employee wellness,

[00:57:49] Christine: [00:57:49] neglect that. So where we have your payslip, literally you have your savings.

[00:57:55] Okay,

[00:57:55] Ben: [00:57:55] great. That’s breaking up as well. Okay. Right. So we’re moving, we’re running out of time. So we’re going to [00:58:00] move quickly into the last section, which is kind of the outlook for wealth managers. You know, the fitness landscape, if you like. And Dimitri, I’m going to come to you first, which is how, yeah, they can, you can answer this in general or you can answer this from a Tinkoff effective, but how do you sort of change culture within an organization in order to adapt to the digital age?

[00:58:21] Because things are so different, right? I mean, we’ve been talking about how the business model is based on opening up to fair buck is not kind of, you know, building a wall around your [00:58:30] business. So. You know, how, how do we get organizations and the people within organizations to adapt culturally in order to be able to launch and run digital age, business models.

[00:58:40]Dmitry: [00:58:40] It’s a little bit of a strange question for, for us. And it’s understandable why because we, as the digital absolutely digital platform from the day one. And so I think that is the problem for us is a little bit opposite that we should attract some customers. We are not so digital digital radio, and there is a [00:59:00] sheriffs that such customers, but.

[00:59:01]So about, in the aspect of our personal digitalization channel culture I think that’s special culture, special people to describe how, how it was created. So, so it took a, it has taken several more than 10 years and as a special atmosphere, I admit it. And I stress it’s it’s it’s it’s incredible atmosphere. We try to. Hire a young guys for verse Monte guys from [00:59:30] the best two universities. We try to pull them into the Metro culture.

[00:59:35] We try to encourage them to share with them our main values. And so Well, we are really concerned about the happiness and so everyone is really interested in, interested in delivery in the results in developing new products. And for me as a, as a leader of All this thing which is called

[00:59:56]My target is to ma not to encourage [01:00:00] and not to rule them to to deliver products, but to maybe sometimes, sometimes stop someone in order to solve the problem of chicken neck. So It’s a special atmosphere is by a special team. And it’s absolutely creative. And the productivity is really, really high.

[01:00:15] The butter, the roots of this atmosphere lies maybe more than 10 years ago, how it was the creator, how it was created. And that’s why for us, it’s a serious [01:00:30] problem too. In doctor, the people specialists from some other financial institutions. So because when I have a trade-off as a leader to promote some young guy who is 24 to solve some really difficult issue or to hire specialist with 25 years over experiencing our from our arrival.

[01:00:56]I will choose the first option because so it’s our [01:01:00] DNA and it’s our method.

[01:01:02] Ben: [01:01:02] Great. Fantastic. Coming to you. Next spectral is I’m going to give you the opportunity to kind of get on your soapbox. Yeah. Right. Because W we all know, right. So I read a statistic that I think by next year I was on like 50% of all investments will be based on ESG criteria.

[01:01:16] Right. But as you yourself say, you know, like you get this, you get this, these weird situations where oil companies can, can have a better ESG score than in a wind turbine manufacturers or whatever, because, because of the [01:01:30] way these, these, these scores are calculated. So, so my question to you is, are we gonna move beyond just.

[01:01:35] Investments based on ESG investments based on much, much more accurate kind of reflections of what companies actually the impact actually have. And is that going to become a source of differentiation for asset managers?

[01:01:49] Bertrand: [01:01:49] Well, the, yeah, of course my answer would not be no. I mean, if, if I, if I believe the answer would be, no, I would not be in this business, but yes, definitely.

[01:01:55] We actually starting to see that. I mean, we have started to see that for already a number of months [01:02:00] You know, one of the limits of the ESG data that you just described is that it is fairly agnostic of the basically of the, of the sector of the industry, of the whole business model. So regardless of the fact you producing again, cigarettes or, or shoes, or or hamburgers, doesn’t really make a difference into your ESG score, which is quite, you know, Quite a shock for people that are starting to discovering what ESG is all about.

[01:02:23] But this has been my reality for the last 15 years. And now this is a reality that is now coming to an end because the market becomes a lot [01:02:30] more sophisticated. And when you talk to an clients, particularly wealth management and clients. So the younger generation that that we’ve been discussing at the beginning of that session, you know, you cannot tell to those guys that you’re creating a, a sustainable investment portfolio to them.

[01:02:44] And the first line is in the portfolio is a, is X on. And and that if more is right, so. So it, it doesn’t, it doesn’t work anymore. I mean, we’ve reached the limit of that model. I think empty now we were trying to figure out where, where the companies, where do we think is right. And [01:03:00] now the question is our company doing the right thing and that’s a fairly different.

[01:03:04] Question. Right. And and we are, you know, one of the reason that makes me think that we are going to move to that new dimension very quickly is actually financial performance. If you look at the incredible movement, you could see on some sectors on the last two years, like energy, right? If you look at the market caps, the global market caps off traditional.

[01:03:27]You know, oil and gas companies [01:03:30] compared to the new players in the renewable energy, you know, like five years ago, it was, it was still like the old world where the the old giant where like, you know, 20, 40, 50 times bigger than the than, than the renewable energy players. Now, if you look in terms of market cap, which again is, is not a direct reflection of their economic weight, but still sell you a lot about how investors think about that.

[01:03:54] There is just huge. Sectoral relocation. And this is what impact investing is all about. As [01:04:00] opposed to ESG investing, ESG investing, doesn’t make you change your sector allocation. It’s just that in you that if you want an all company, then maybe you, you, you, you should choose a, I dunno, total instead of Exxon, right?

[01:04:10] But impact investing is about thinking what is the core business and what are the value of each of those businesses to the word. And then, you know, rethinking that may be, we want to have less of a. Of energy providers coming from fossil fue, as opposed to energy providers coming from renewable energy.

[01:04:26] And that that’s a much more fundamental [01:04:30] reallocation of portfolios, which, which did not really happen until now. This is also why sustainable finance and Tina as really. Largely fail in to that mission of changing the world for the better, because it didn’t change the asset allocation, but now this is what is happening.

[01:04:45] And to do that in a, in an organized olderly and robust way. You will need data. I mean, just like always in finance and investment data is King. And if you don’t have the right set of data to make those kinds of investment decision, [01:05:00] then you would just keep on, you know, making blind decisions that are not based on facts and you would keep replicating the same mistakes.

[01:05:08] So we need to put in the hands of the financial industry, a very rubber set of data. On the impact of companies so that when you decide that this company as overall a positive impact on society, this is you know, this is backed by facts and evidence and spouses. And again, it’s not easy, it’s complex because companies engage in a number of [01:05:30] operation.

[01:05:30] Then their, their impacts might be very positive for one community and very negative for another one. So it’s a very complex question, but it’s a very crucial question to answer if we really want to You know, to, to transform the economy and make sure it is actually benefiting the the common good and given the size of the challenges we all face with.

[01:05:48]Us or kids and everyone on that planet climate change is just as a small, a smaller, those challenges. I mean, there’s many more coming after that, the biodiversity, and we see, you know, we saw with the [01:06:00] pandemic, I think there’s, you had one question. I, I had an answer actually, whether the pandemic has accelerated that move.

[01:06:05] Yeah. Definitively because the pandemic is, has been in a way, you know, a way of rebuilding those, those fragilities in many business models, say it also a way of. Of immediately putting to the front, those businesses that bring a, a very high positive value to society. You know, when the societies is being under lockdown, then you get to see who are the guys around you, you know, [01:06:30] that’s T working because if it.

[01:06:31] Don’t work any more than the, the, the, the word stops. Right? So, so that’s a very good way of revealing, you know, what are the the positive value companies and business, and those ones are the ones that are going also to over perform. Economically and financially in the, in the years to come because they will they will, they will benefit from from that interest from investors, from consumers, from governments that we get more support.

[01:06:53] And the one that are not going to that direction are going to face, you know, increasingly you know, negative wins by being to [01:07:00] to to prevent them from growing, from being a good financial performance. So, so the correlation between impact. And risks and returns you’re going to increase. And my view is that You know, people of my generation, we were born and grown in the world of investment with a two dimension word, which was risk and return people of my parents’ generation, actually, when they went into the investment community, they were used to, to deal with only one, one dimension, but was returns, right?

[01:07:27] The risk dimension actually. [01:07:30] Was developed in the 1970s after the oil crisis, when the markets started to be a lot more volatiles and we developed, you know, many tools and, and data to measure the volatility and those risks and integrate that. Now it’s really about risk and return. That seems to be like the norm for people of my generation, but in five to 10 years, You know, if they will look at us and say, you know, how could you not just look at the impact as, as, as, as a major driver for performance.

[01:07:55] And and I think we have now already enter that, that new word where investment is [01:08:00] about risk return and impact and adjust returns around those three dimensions.

[01:08:05] Ben: [01:08:05] Nice. That was full of stuff. Sound bites as well. I love that. Yeah. Not just about doing things right, but about doing the right things, you know, that was great.

[01:08:12] Great stuff. Okay, Chris last question for you. So we’re gonna have two more questions. One is for you Chris, very quickly, which is so Dimitri talked about culture and he’s he’s also, you know, he’s also talked about the technology advantage that, that Tinkoff bank has, is it technology and culture that stops incumbents from being able to [01:08:30] adapt as quickly as new entrance?

[01:08:31] Or do you think there are other factors at play as well?


[01:08:37] Chris: [01:08:37] I think that I would not say that it was primarily technology and culture. I think indeed there are some other factors. So for me, one of the main differentiating factor when I look at who is acting and who is waiting. It’s basically the incentive model on the decision-making level, you can argue that this part of culture, but I would also argue that’s part of the incentive model.

[01:08:59] So [01:09:00] if you are there, for example, if you are. In a company where you are there for them as a decision maker for the next 10 to 15 years, then you are much more likely to act. Then you are. Then if you’re in a company where you actually start planning your retirement and we all know the technology shift comes with risk and I think.

[01:09:18] If someone tries to ignore that, that would actually not be a fear. So every change of a business model and every change of technology, which is part of the change of the business model comes with a certain risk. [01:09:30] And I, I do understand every decision maker who tries to evaluate this risk also from a personal perspective.

[01:09:36]And for that reason, I think that’s one key driver. The second key driver from my perspective is from, for the last 20 years or even longer, technology was not seen as a strategic component when it comes to financial business models. So for quite a while, for example, one, one very simple example.

[01:09:56] I’m also the chairman of the advisory board of the ministry of finance in Germany. [01:10:00] And one of the first things we actually did is we made it help, make it easier for us. People was a tech background to become a board member at a regulator company, because usually all the regulation is optimized in order to make sure that the decision-makers have the financial knowledge.

[01:10:17] And for example, I able to do the credit reassessment or do in the case of an asset manager, do the portfolio management. But there was basically no benefit of having a technical background, rather the opposite of what rather hard for you. [01:10:30] And so for that reason to pick up the technical techno point of yours were on in the second or third level of the organization, and usually only done after the bot already made the key business decisions.

[01:10:43] But if you look at something like the PCIs mandate I don’t know if all of you and or everyone in the audience is familiar with the end. The business mandate for is roughly 20 years old. Now it falls every developer at Amazon to make sure that every service is programmed in a way that it [01:11:00] can work with every other service.

[01:11:02] So today we call that microservice architecture in its core and also accessible for, for third parties. And I would argue that’s one of the reasons why AWS is as successful as they are. In the bank, typically the relations were of no interest and product complexity. Increasing technology complexity was not considered at all as a challenge or being able to update later on was not considered at all a [01:11:30] strategic question.

[01:11:31] And so from my perspective, I would more focus on what is the incentive model for the decision-maker. What is the core competencies on the decision level, body? Decision-making body and how it is regulator impact. Also things like this where I think we need to change that. Then a third level is driven by actually the first tool, understanding technology as an opportunity.

[01:11:56] So not only a, and this is something we discussed earlier already. Not only [01:12:00] think about it as something which helps me re reduce cost in my current model or help me increase efficiency in my current model, but rather opening up new opportunities. So how can I basically enable new things by, for example, being a trusted party across different business fields, or by working together easier in an ecosystem and having this view And then from my perspective, you end up with with actually a much more agile organization and taking [01:12:30] the right steps was more, much more high, much higher likeness.

[01:12:32] And we all know strategy, strategic decisions are always decisions on that uncertainty, but you improve the likeliness of being white.

[01:12:40] Ben: [01:12:40] Fantastic. Christine, last question comes to you and to some extent is to slightly redress the balance, right? Which is, we’ve talked about some of the challenges or obstacles that the incumbent organizations have when it comes to innovation.

[01:12:51] So having the right skills on the board, you know, challenges around incentives, challenges around culture, technology, debt, all these things that we’ve been talking about, but [01:13:00] where are the big advantages where we’re doing? Cumbents have. Where can they bring sort of, you know some of the existing advantages into the new world to help them to be more successful.

[01:13:11] Great.

[01:13:12] Christine: [01:13:12] Thanks a lot, Ben. Fully agree with what Chris has said. First, we need a mindset. Change. Technology is strategic. It’s a strategic component and it’s an opportunity as well and opportunity for growth for an economy. Now on top the incumbents have the [01:13:30] clients at the moment. They have an existing client base often have a large existing client base and can serve them better.

[01:13:37]If they do the next generation, that’s an F if they do the next generation link successfully, they would have some Ella have, then the next client base, if they’re not already a banking somewhere else. So that that’s the first one. We all know that customer acquisition costs are very, very high for new entrance into, into the wealth management market.

[01:13:58]The second is [01:14:00] they have the existing customer acquisition channels. So they have established channels bead through advisor B through other channels and they can target either in person or hybrid on the existing clients side. Now with an omni-channel model, you as well can address prospects on top of your existing clients, but also simply interested in your company.

[01:14:25]People. And the third one is, and I never thought that we’ll [01:14:30] mention that, that way. Honestly, it’s, it’s the trust and the brand and the regulated for the next decade or century, you’re here to stay. So whenever it’s, it’s getting, it’s getting shaky in the markets and we had a fantastic, fantastic run retail investors are in the market and are trading.

[01:14:48]We will, at some point, see after that asset inflation, we have seen setbacks. So the banks, they have dull and boring brick and mortar. They have a balance sheet, they have a huge report. [01:15:00] They have equity, they have liquidity on the balance sheet. As I said, they’re regulated for the next century. Which, which is trust and brand.

[01:15:08] If they get the order two things, right. Which is the mindset change. No, it’s not the place to wait for your pension. It is the place where you need to change the company you’re running and make it fit for the next decades. And secondly, technology strategic. And I think then they’re nicely positioned, but

[01:15:30] [01:15:30] Ben: [01:15:30] I say, yes, No, sorry, sorry.

[01:15:35] I didn’t let you finish. Sorry, Christie.

[01:15:38] Christine: [01:15:38] I think if, if that, if they get that combination or that, then they can avoid the, the risk that they have, which is that the change is a gradual until it was sudden. So then need to act now.

[01:15:53] Ben: [01:15:53] Fantastic. Okay, bye. So fortunately we’ve we’ve run out of time. So I just would like to say thank you to our four [01:16:00] panelists.

[01:16:00] I think we’re very lucky to have four such interesting speakers from four such interesting companies. And thank you for the lively discussion. And thank you also for answering all the questions that we didn’t have time to, to, to put you life. So Dimitria in particular, thank you for answering all those questions you’ve been getting, and we’ve been getting loads of good feedback.

[01:16:17] So I don’t know if you’ve seen bear Tron, but you just had a kudos. For impacts Andrea. And and then lastly then just to thank you all, everybody who, who listened life, thank you for, for interacting with us, for your questions, for your [01:16:30] comments, for completing the polls. And for those of you listening after the fact, thank you to you too, for watching the recording and then look out for the next four by four.

[01:16:39] So we’re the next one we’re already pulling it together. It’s going to be on talking about crypto. Whatever it is now really a true investible asset. So look out for that and thank you again for attending and participate.

[01:16:52] Chris: [01:16:52] Thanks for the invite. Thank you.


Democratization of Wealth Management

4×4 Virtual Salon featuring: Sid Sahgal, Nikolai Hack, Qiaojia Li and Michael O’Sullivan.

Lively panel discussion featuring:

💭 Sid Sahgal (Product Manager, Hydrogen)
💭 Nikolai Hack (Head of Strategy & Partnerships, Nucoro)
💭 Michael O’Sullivan (author “The Levelling”, ex-CIO Credit Suisse)
💭 Qiaojia Li (CEO of Rosecut)

We discuss:

  • Changing consumer trends
  • Changing technology
  • New business models
  • New fitness landscape for wealth managers

This webinar was the first of two discussing some of the key trends from our upcoming report on “Digital Age Wealth Management“. For the next 4 x 4 Virtual Salon, we’ll be double-clicking on the topic of “New business models in wealth management“.

That will be on 18 Feb at 12 CET/11 UK/19 SGT and we’ll be joined by Chris Bartz, CEO of Elinvar, Christine Schmidt, Head of Strategy at additiv, Dmitri Panchenko, Head of Investments at Tinkoff Bank, and Bertrand Gacon, CEO of Impaakt. Sign up here. You won’t be disappointed.

Want to learn more about our enterprise software analysis methodology for the digital era?

Look out for the first report in our series, which will tell you everything you need to know about analyzing software for the wealth management industry. Coming out on February 16th, 2021. 

Register your interest by leaving your email address below.

Digital Age Banking Systems and Architectures

4×4 Virtual Salon featuring: Paul Taylor; Andra Sonea; Ron Kersic; Ryan Battles.

Lively panel discussion featuring:

  • Paul Taylor (CEO and founder, Thought Machine)
  • Andra Sonea (Head of Solution Architecture, FintechOS)
  • Ron Kersic (Enterprise Architect, Technology Strategy & Innovation, ING)
  • Ryan Battles (Banking & Capital Markets Technology Delivery Leader, EY)

We discuss:

  • New Banking Business Models
  • Digital Banking System Architecture
  • Digital Age Banking Systems
  • Enabling change

Cybercrime & Fraud in the Age of COVID-19

4×4 Virtual Salon featuring: Jordan Brandt (CEO, Inpher); Yuval Porat (CEO, Kazuar); Paddy McGuinness, CMG OBE (Senior Advisor at Brunswick, Former UK Deputy National Security Adviser); Mohamed Ourdane, (Head of Cybersecurity, POST Luxembourg)

Lively panel discussion featuring:

  • Jordan Brandt (CEO, Inpher)
  • Yuval Porat (CEO, Kazuar)
  • Paddy McGuinness, CMG OBE (Senior Advisor at Brunswick, Former UK Deputy National Security Adviser)
  • Mohamed Ourdane, (Head of Cybersecurity, POST Luxembourg)

We discuss:

  • How has the pandemic increased the vector for cybercrime and fraud?
  • How is the nature of cybercrime and fraud changing?
  • How can we quantify the risks?
  • How do firms manage the risks without introducing too much friction?

Post-pandemic Wealth Management

4×4 Virtual Salon featuring: Keith MacDonald (Partner, EY); Christine Schmid (Head Strategy, additiv); James Dunne (MD, Santander UK); Michael O’Sullivan (ex-CIO Credit Suisse)

Lively panel discussion featuring:

We discuss:

  • Are service offerings going to permanently change post pandemic?
  • Will customer risk and investment preferences change post-pandemic?
  • How, if it at all, does the competitive environment change post-pandemic?
  • Will sourcing and operating models change post-pandemic?