EXCLUSIVE: Fintech here, fintech there: Interview with Alviere CEO Yuval Brisker
The term embedded finance was first coined by Angela Strange, a venture capitalist at Andreessen Horowitz, who in 2019 at the a16z Summit, claimed that in the future, businesses would derive a significant amount of their revenue through financial services. She proclaimed that “every company will be a fintech company.”
That future is here, embedded finance has atomically expanded into all corners of eCommerce, from big retailers like Kohl’s to tech giants like Amazon. Embedding financial services into non-bank companies comes with a myriad of features, which include: credit cards, currency exchange, bank accounts, and most recently crypto. More and more we are seeing FS becoming a more pronounced part of our consumer lives, whether it is using a rewards card from our favourite supermarket, or having an exclusive account at M&S. Extrapolating from Strange’s vision, every company will become a fintech company, – because every company wants to be.
With the dominance of eCommerce and online usage today, embedding financial services into traditional non-banking platforms was imminent.
“What embedded financial services mean is that we can enable any brand, any company, any organisation to become a financial service provider, offering an array of services, without having to do any of the heavy lifting,” said Yuval Brisker, the Co-Founder, CEO, and President of Alviere.
Brisker is a serial entrepreneur in the tech space, having previously founded big players Mezu and TOA Technologies, the latter of which Brisker sold to Oracle in 2014. With Alviere, the goal is to partner with businesses and provide a full suite of financial services and products, from card-issuing to crypto investing, allowing brands to do more for their customers.
“The idea is that any company can provide financial services to its customers, its employees, and fans. So football teams and sports clubs can launch a bank account or debit card.”
In a recent study by Vodeno, among 753 European retail and eCommerce businesses, 64% have a strategy of adopting embedded financial solutions in the coming year. Businesses from the UK, Germany, and Belgium have seen a spike in growth in new revenue streams (41%) and customer loyalty (40%), providing key incentives to start offering embedded financial products.
Tom Bentley, the Chief Commercial Officer of Vodeno said, “Our research suggests that the motivations behind embedding banking products into the customer journey vary, but are all underpinned by a desire to remain competitive in the digital-first landscape.”
Increasing competition to cement customer loyalty has been an ongoing battle, international shoppers have already extended the gift or reward cards and vouchers. Embedded finance takes these add-ons a step further by specialising in payments, instead of banking with a third party, the brand itself acts as an issuing bank.
What embedded finance fintechs have managed to succeed in is being able to deliver consolidated payments. Businesses now have the ability to issue their own cards to customers.
“We’re seeing that everyone wants to generate cards. Whether it is debit or credit cards, that is the number one thing people are interested in,” notes Brisker, when naming the most popular types of services businesses want. Alviere, an enterprise software solution gives companies the ability to issue cards, in tandem with launching banks, effectively evolving them into banking-as-a-service providers.
The next trend, says Brisker, is for businesses to be able to wire money across the globe and exchange currencies, something which popular high street brands have been doing i.e. Marks and Spencers, but not on a large-scale, BaaS-orientated, way.
The card issuing market is huge, the global credit card market is valued at US$ 477.63 billion in 2021.
Mastercard is famous for partnering with brands like Amazon, John Lewis and Post Office to launch their own credit/debit cards. The card issuance by MasterCard is a vessel used by brands to then also offer exclusive rewards and perks. Echoing back to customer loyalty, all of this is in an effort to stay competitive among neighbouring brands.
Amazon provides a range of financial services products, they reported that as of January this year they would stop accepting payments from Visa credit cards due to high transaction fees. This decision was put on hold so that the two could negotiate a better deal, with UK Visa payments currently being allowed on the site. The decision represented an understandable move from the eCommerce giant, as high fees are a deterrent for customers who could otherwise shop elsewhere.
According to CustomerThink, nearly 50% of customers will cancel a purchase if they aren’t able to use their preferred method of payment. When given the option of services, customers are more open to considering other offers from the company, heightening competition.
People want specialised financial services, with a plethora of options and perks to keep them interested. Hence BaaS should be a serious expansion for businesses
“The primary challenge is of course just doing it,” Brisker notes, companies may be apprehensive when adopting financial services because of the perceived journey it would take to offer them. “We’re not targeting fintechs as customers. We’re targeting traditional name brands and companies that are well known to the consumer. Most of our customers, and customers in our pipeline, already have a name in the global marketplace.”
What sets apart brands from the popular neobanks of the last decade is consumer recognition, the former possess the bargaining power in the payments market because they are companies consumers who most likely have the most experience and pre-existing relationships with.
“(You have) Revolut, Monzo, or Chime in the United States, or N26 in Germany, these are companies who have had an enormous amount of investment, but they haven’t taken off – maybe from an investments point of view they have – but from a market share point of view they haven’t, they still don’t own a significant part of the market. Our thesis is that part of the reason why they don’t is that most consumers do not recognise them as a trusted provider.
“Our concept is to go to where the customers already are,” said Brisker.
The precedent has been set by fintech companies about the massive wealth brought about by delivering financial services, and this has not gone unnoticed by non-financial companies. There has been an expansive migration occurring with traditional tech companies not only losing their talent to fintech but adopting their capabilities.
From bankers to data analysts, professionals from Goldman Sachs and HSBC, have been migrating to disruptors Coinbase and Revolut. The reasons listed range from better pay to a better work/life balance, the big sell comes from fintechs growing fixation on the crypto economy.
Seeing the success of Buy Now Pay Later services like Klarna and Affirm, Apple has launched Apple Pay Later, a BNPL where Apple customers can split purchases into four instalments over a six-week period.
Finance companies are the frontrunners of digital innovation and crypto, and brands are beginning to take notice.
Tech companies and brands are clamouring to integrate financial services into their platforms because they see the inherent profit afforded by the offering.
This is not to say that these non-traditional companies have nothing to gain from embedded finance, banks benefit too.
“Banks can go back to their more condensed and confined, traditional role, less customer-facing, to a more structural role, [sic] acting as a storing and saving mechanism.” Brisker believes this is an advantage as it lets banks focus on the core goal of storing deposits and lending them out.
Embedded finance has a simple goal, to meet customers at every possible digital transaction. Fintechs and BaaS companies are invested because of the possibility of new distribution channels, and brands are invested because of the promise of new profit. EF has the opportunity to change up the way we do banking on a fundamental and structural level because customers will be interacting with companies like M&S and John Lewis, throughout the whole transaction process, not once having to interact with a traditional bank, going in and out before they know it.
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