The embedded finance market hit a global value of $54.3 billion in 2022, and indicators suggest it will likely reach $248.4 billion by 2032. The key drivers of this market’s growth are increased digitization, growing comfort with open banking solutions, and increased consumer lending.
Another driver is “customer demand for integrated experiences” – the ability to do everything needed within a single app. The majority of companies with the highest market cap are “tech companies that generate much of their revenue from the digital ecosystems they created.”
Embedding finance allows companies to include financial services within their own ecosystem instead of sending a customer over to a third party, possibly alienating that customer.
In the world of banking and FinTech, this breaks down further into embedded investing – the practice of integrating a FinTech investment platform directly into the bank or FinTech company’s application through the use of APIs or other Investing-as-a-Service paradigms.
What is embedded investing?
Embedded investing is when companies offer investment services directly from within their own apps.
The investment market is largely untapped. Two out of three people in Europe do not have investing experience. And the biggest barrier to entering the world of investment is that products are too complicated for new investors, according to the Boston Consulting Group Global Wealth Report for 2021.
Embedded investing platforms solve both of the above problems.
- They open the door to adoption by being included in apps that potential investors are already using, so they don’t need to specifically go out and hunt for investing apps.
- They remove barriers to adoption because providers can implement the embedded.
Why nascent investors avoid trading platforms
Existing trading platforms typically bombard new users with so many trading options that they feel overwhelmed and give up. Forty-nine percent of investors would pay for more personalised products, but opening an account on a trading platform often feels like walking into a fairground. The choices are too many to focus on, and users will often leave.
Many platforms also operate on B-Book execution and so actively bet against the user.
Because the majority of users on these platforms are retail investors, the confusion and lack of return results in a high churn rate. Information overload leaves users confused.
Evidence of this is that 58% of millennials say that they would switch to a new financial advisor if the advisor had better technology. Forty-two percent of all investors chose their particular financial advisor because of the advisor’s “tech offerings.”
Smooth, easy-to-use technology is what users are screaming for in a FinTech investment platform.
How embedded investing helps users get started
An Accenture Wealth Management Study published in 2022 reported that 36% of investors chose their financial advisor because of the advisor’s brand.
By offering an embedded investing solution – such as a FinTech investment platform that runs directly from an incumbent bank’s mobile banking app – users are immediately past the first barrier to investing: Lack of trust.
But it isn’t only trust that gets in the way, it is also extreme complexity to simply get started. Choosing a brokerage firm, then opening an account at one, transferring funds into it, picking stocks – each of these steps slowly erodes that level of trust until the first-time investor ultimately gives up.
And, once all those hurdles have been surpassed, the trader must then also understand what they are investing in. Bombarded by terminology and complexity, many simply leave.
How to enable embedded investing in your business
Various choices exist for any company wanting to implement an embedded investing solution as part of their app or services.
The simplest implementation of a FinTech investment platform inside your app is to integrate it with a B2B investment API. By using the API, it is possible to keep the investment features simple, including only the core functions that you wish to include, such as Forex services.
Using the Velexa investing API, a company could implement embedded investing within a matter of weeks.
With Investing as a Service, all core functionality has already been built. The provider can focus on User Experience instead of getting into the nitty-gritty of development. Velexa’s Investing-as-a-Service platform can fully integrate with any CRM, and a mobile app already exists which can be fully branded.
Time-to-market with Velexa’s Investing-as-a-Service platform is usually about a month.
Full-fledged investing platform
The final option is to take a full-blown investing platform and offer it to your clients under your own brand name. The platform can be fully customised according to your brand’s needs.
Use Velexa to easily implement embedded investing
Velexa is a B2B FinTech API platform and FinTech Investment Platform that lets any business integrate investment features into their business. This essentially turns every business into a FinTech. Consumer adoption is higher because of brand loyalty and trust.
And implementing embedded investing is by no means limited only to FinTechs and banks. Even companies like McDonald’s are now offering “fractional shares” through a third-party FinTech provider.
By choosing Velexa’s API option, companies can get started immediately with just the features they need, and switching to the fully-fledged investing platform means that companies can offer the full gamut of a FinTech Investment Platform’s features to its users, without abandoning them over to a third party.
To learn more about implementing embedded investing through Velexa’s FinTech Investment Platform, click here.