Embedded Wealth: Could your future investment portfolio be with your supermarket?
In the age of fintech innovation, banking outside of a bank branch is now the widespread norm, as we have all grown accustomed to accessing and managing our finances with the push of a few buttons. Thanks to integrated finance, we have seen fintech influence our lives even more in recent years, enabling non-financial providers to seamlessly integrate financial products into their customer journeys.
by Karan Shanmugarajah, CEO, WealthKernel
However, the success of embedded finance is now highlighting an untapped opportunity: embedded wealth. Just as integrated finance has enabled customers to access payment, lending and insurance products from non-traditional providers, integrated wealth will see businesses integrate wealth management and investment services for their customers. With built-in wealth technology now available, it might not be long before you can buy stocks and shares in addition to your meal of chips, a sandwich and a drink.
The rise of integrated finance
If you’re reading this article on a smartphone, chances are the next app you open will use in-app finance. Everything from ride-sharing app Uber to food delivery service Deliveroo now incorporates financial solutions to give customers more convenient payment options. This opportunity offered by integrated finance has been widely embraced, with Juniper research forecasting a value of $138 billion in 2026, a dramatic increase of $95 billion from 2021 (Juniper2021).
What makes integrated finance so attractive to businesses is the low costs and ease of integration compared to traditional banking offerings. All money management processes, from digital wallets like Apple Pay to the more than $4.07 billion BNPL industry (Grandview Search, 2021) fall within this competence of the financial products offered within the framework of integrated finance. Besides cost, integrating financial products into a company’s offering has other benefits, allowing for monetization based on their established brand. By integrating these third-party financial services, businesses can better understand customer spending and enable a data-driven approach to further improve the customer experience. Due to the relatively low costs, businesses can also experiment with a broader offering without heavily compromising their revenue or reputation; for example, Uber was able to quickly de-prioritize its financial service Uber money, a digital wallet allowing drivers instant payments.
By integrating finance, customers can also pay or access a financial product instantly without searching for their physical credit or debit cards. Popular coffee brands such as Costa and Starbucks now even offer in-app payments, allowing customers to collect rewards points or pay through the company’s app. Customers can also top up this card through Apple and GooglePay.
The Market Opportunity for Embedded Wealth
Embedded Wealth is essentially an extension of Embedded Finance – offering regulated wealth and investment products from a non-heritage body, usually through an API. This could see customers investing, trading and accessing various wealth products beyond payment and lending services.
Integrated finance has already added tremendous value to the customer journey. Plans for this, applied to wealth and investment, could make investing and saving more accessible to a wide range of consumers. For a company already offering its customers payment and lending services, wealth and investment could be a natural progression to improving experiences. Generally, “wealth management” refers to a service offered to people with large sums of money or assets to invest. However, integrated wealth could see investment products offered to clients with even smaller amounts to invest or grow or those who may not have even considered investing before. There is a real opportunity to expand access to investing through embedded wealth as customers become accustomed to using financial products offered by familiar brands. With API-based wealth technology now available, it can be offered at a lower cost and more accessible to many.
For consumers experiencing significant life changes, whether buying a home or planning for retirement, a familiar brand incorporating wealth management offerings could help provide security and confidence. This has become particularly relevant since the pandemic, where trust in financial services has changed dramatically, with fintechs overtaking banks in terms of trust levels, according to McKinsey (2021).
We should also consider customer loyalty to everyday brands like supermarkets or retailers where embedded wealth could add value. A recent study by Solarisbank found that 61% of respondents indicated a willingness to use financial products from trusted brands such as Amazon, Lidl and IKEA (Solaris Bank2021).
Embedded Wealth could help onboard clients who may have never considered investing with a financial institution, but are open to the idea of doing so with a company they are loyal to. A well-placed wealth offering could enable longer-term customer relationships, as customers would see this business not only as a supplier of their favorite products, but also as a place to grow and invest their money.
Add built-in wealth to your shopping list
So, with the potential for embedded wealth on the horizon, could our new supermarket list of milk, eggs, bread… include stocks and shares? With technology now making the possibilities for embedded wealth potentially endless, it wouldn’t be surprising if we soon saw this scenario become a reality.
Retailers already recognize the potential of integrating financial products into their platforms, so wealth management products could be a logical next step. Walmart, for example, recently announced its transition into the fintech space by partnering with fintech investment firm Ribbit Capital to provide technology-driven financial solutions to its customers (Business Wire, 2021).
For supermarkets that already offer banking and savings products, or even credit cards, an investment wallet may even already be on the to-do list – helping customers with money already saved to grow their finances even more. Additionally, most supermarkets today also offer loyalty or points programs, allowing customers to save points and spend them in-store. Could a potential entry-level integrated investment product see customers investing those points to grow their money in-store?
And so, while the appetite for wealth, investment and trading services has seen widespread growth in fintech in recent years, investment portfolios developed by retailers and supermarket chains could be at stake. ‘horizon. With a recent OpenPayd study revealing that 70% of brands are expected to launch integrated financing offers (OpenPayd2021), it may not be long before we see a level of embedded wealth usage by notable brands.
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