Wealth management has traditionally been a game for the well-off. It often requires large sums of money just to get started. For decades, the idea of “investing” conjured up images of Wall Street brokers managing hefty portfolios for a small group of elite individuals. But, thanks to Embedded Finance, times are changing and the barriers to investing are coming down. The technology is reshaping how people handle their money. Here’s what it can do for you.
Tackling the investment problem
Historically, investing hasn’t been easy. Most brokers require a significant minimum deposit to open an account, often in the thousands. Fees and commissions on trades can add up quickly, and if you don’t have a large amount of capital, these costs can erode your profits. For many, these hurdles were enough to keep them from even thinking about investing. It simply didn’t feel like something for “ordinary” people with average incomes.
Even with the rise of online brokers, the stock market has remained intimidating to a lot of people, many of whom felt like they lacked the knowledge or resources to get involved.
On top of the classical challenges we must also discuss the upcoming wealth transfer. The next generation of users have no interest in sitting with wealth managers; at the same time they don’t have the knowhow to trade or invest.
Imagine being able to not only excite your customers but empower them as well. That’s what embedded finance solutions promise. As companies strive towards more inclusive messaging, adopting embedded finance tools has never been more valuable. One of the great perks is that it doesn’t require a complete overhaul of IT infrastructure, instead, it involves a seamless experience that even junior employees can understand and implement.
Embracing the solution with Embedded Finance
I’ve said it’s easy – but how easy? Embedded finance works by bridging the gap between traditional financial systems and the average consumer. By integrating financial services directly into everyday apps and platforms, it makes it possible for people to start investing without even realising they’re doing it. Monzo is an example of it in action. They used embedded finance solutions to enable customers to invest directly in the bank during its fundraising rounds. They raised millions by allowing users of the app to seamlessly invest and become shareholders, a great example of how “the customer becomes the investor”.
Think about how your business manages its money. You most likely use an app to track accounts and make payments. This is no different to customer budgeting, and it’s a window of opportunity for you to tap into. That app can offer you the ability to automatically invest any leftover money at the end of the month into a diversified portfolio. Customers don’t need to download a separate app or set up an account with a brokerage firm. Everything is integrated into the website they’re shopping on. This is the beauty of embedded finance – it makes financial services a natural part of your daily life.
For younger people just starting out on lower salaries and learning how to invest sensibly, there has never been a greater time to be innovative and branch out into financial services.
The second vector for investment is to centre it around a new social frame. Investment’s can be around supporting your ideals, for the environment, or for technologies sake. This means that there are apps/club/activities that can become another home for investment. The same way country clubs aren’t just for food, golf and banter. Embedded finance opens the door for classically aligned companies and charities to think about expanding their business model. I could imagine Greenpeace offering embedded investing. So, could the country club co-invest in art that is displayed (but also invested) in.
Equalising opportunity with Embedded Finance
Embedded finance allows financial services to be delivered in a more personalised, user-friendly way. Apps can now provide personalised investment recommendations based on a user’s spending habits, savings goals, and risk tolerance. And thanks to automation, these services are becoming more affordable and scalable. Instead of paying for an expensive financial advisor, users can rely on AI-driven tools to offer similar advice for a fraction of the cost, or even for free. Wealthfront does this by offering automated financial planning and investment management with AI-driven recommendations and tax optimisation strategies.
GoHenry is another example of a company taking the initiative and embracing its solutions. They allow customers to invest in the company using the Crowdcube platform. People can invest in as little as they want and become shareholders with ease. As a result, loyalty is enhanced and capital surges.
Another example is fractional investing. In the past, buying a single share of a company like Amazon or Tesla might have been out of reach for someone with limited funds. However, this no longer has to be the case as companies like Robinhood allow customers to invest in big stocks like Tesla for as little as £1, making it possible for anyone to grow their wealth without having to stretch themselves and get into debt.
What does the future hold?
As embedded finance continues to evolve, we can anticipate even more innovations in the world of micro-investing and wealth management. The lines between financial services and everyday life will continue to blur, making it easier than ever for people to manage their money, invest, and build wealth – all without needing a financial background or a large amount of capital.
Philipp Buschmann is co-Founder and CEO at AAZZUR, a one-stop-shop for smart embedded finance experience. Recognised as a rising star in the FinTech space, AAZZUR’s mission is to build profitable banking whilst at the same time empowering consumers to have access to better informed financial choices.
Philipp is a serial entrepreneur with extensive experience of working in Challenger Banking, Financial Services, IT and Energy across the world. He took one of his business’s public – Ignis Petroleum was publicly listed in the US and Germany.
Having started as a developer in Financial Services, Philipp has first-hand experience of the banking revolution from both a technology and financial perspective. His interest in behavioural economics helped inspire AAZZUR’s revolutionary work on customer centricity in banking.
Philipp holds an MBA from the London Business School. He is passionate about entrepreneurship and loves exchanging ideas, insights and discussing FinTech’s future. He has spoken at major Fintech events including Money 20/20, MoneyLive, Finovate, Fintech Matters, and the Future of Retail Banking.
- Embedded Finance
