4 x4 Virtual Salon – the Year Ahead for Embedded Finance

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

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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.

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