OPEN BANKING: EMBEDDED FINANCE A neural financial network: And the possibilities from such an ecosystem are endless
An
invisibleforce The power of financial services will only be truly realised when they are distributed through the ecosystem, impacting people’s lives without them even realising it. Belvo, Chubb and HUBUC are three companies on that journey The bank of the future isn’t a bank at all… rather, it’s a neural network of financial providers that quietly exchange information so that we experience their services invisibly. The ecological equivalent would be Pandora’s sustaining forest in the epic Avatar – it’s aware of you, even if you’re not conscious of it. Variously called embedded finance, invisible finance, omniaccess, even headless banking – the term referring to the frontend or user interface (head) being effectively disembodied from the back end (body) of the bank that’s powering the underlying transaction – it is forecast to generate nearly $230billion in revenue by 2025, up from $22.5billion in 2020. And a whole category of fintechs is devoted to delivering it. Companies like HUBUC, whose single API enables any business to embed fintech features in their product. “We focus on non-fintech B2B companies, mostly software-as-a-service (SaaS), and help them enable the fintech
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features they want,” explains co-founder and CEO, Hasan Nawaz, who puts the global market opportunity for integrating financial services into non-banks somewhat higher… at $7trillion. So far, HUBUC has just scratched the surface of the UK and Europe. Meanwhile, in Latin America, Belvo, a newcomer that’s likened to open banking platform Plaid (including by co-founder and co-CEO Pablo Viguera himself) is handing out ‘the picks and shovels’ to developers to build the region’s future financial services, with or without the banks, connecting them over an open-finance API. And among the major institutions that might just feel threatened by all this disruption is Chubb, which, instead, has embraced it. Last September, it got ahead of the game by launching Chubb Studio, a platform that enables retail, e-commerce, banking, fintech, airline, telecommunications and other industries to integrate insurance products into their offer over multiple APIs. Two of Chubb’s recently announced white-label partnerships were both, interestingly, in South America – with superapp Rappi, to provide home and mobile phone insurance, and with Nubank, the largest independent digital bank in the world, taking it into life cover. Chubb’s initiative is part of a wider narrative that has seen the COVID-19 pandemic have a significant impact on traditional banking models, with embedded finance gaining more traction.
This isn’t surprising, given that non-financial companies have been redoubling efforts to offer more targeted products and services to customers in the financial services space by using the backend-as-a-service (BaaS), Cloud-based model, allowing developers to outsource all behind-the-scenes aspects of a web or mobile application, while only having to write and maintain the frontend. Sean Ringsted, chief digital officer at Chubb, sees that as an obvious opportunity for major providers like itself to diversify their business models. “Think about being able to make credit and other products and services, like insurance, available to people, in the right place, at the right time, in a way that is seamless, very contextual and enabled, because the underlying plumbing is making it all work,” he says. Ease of use and accessibility of financial services is key to financial inclusion. In countries where significant numbers of people are ‘unbanked’ – as is roughly half the population of Latin America – embedded finance, such as affordable credit and insurance, is a way to extend financial services to more people outside of the traditional banking channels, potentially improving their life outcomes in the process. Nowadays, pretty much any business can create a wallet, credit, investment or insurance offer off the back of banking- or backend-as-a-service. As Belvo’s Viguera points out: “BaaS has historically been used by challenger
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