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OCTOBER 18, 2023
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Make no mistake about it: Embedded finance has jumped the snark... uh, shark. It’s a full blown gold rush, and everyone and their mother is jumping on the bandwagon.
“A new study, the Next-Gen Commercial Banking Tracker, reports that embedded finance will reach a $7 trillion value globally in the next 10 years.”
The report, however, contains no references to this $7 trillion estimate (there are 17 instances of the number 7, none of which is preceded by a dollar sign or followed by the word “trillion”). Sadly, people cite this number as if it was scientifically proven.
I found another article citing the $7.2 trillion number on Fintech Switzerland. It says the source of the number was a report published by Mambu, so I downloaded that report. It references the estimate with a link to one of my own articles. Only problem is, there’s no reference to a$7.2 trillion embedded finance “valuation” in my article.
The report, however, contains no references to this $7 trillion estimate (there are 17 instances of the number 7, none of which is preceded by a dollar sign or followed by the word “trillion”). Sadly, people cite this number as if it was scientifically proven.
I found another article citing the $7.2 trillion number on Fintech Switzerland. It says the source of the number was a report published by Mambu, so I downloaded that report. It references the estimate with a link to one of my own articles. Only problem is, there’s no reference to a$7.2 trillion embedded finance “valuation” in my article.
The Fintech Switzerland article has some interesting graphics, however. Finally! A source and breakout for the $7.2 trillion estimate. What a coincidence that the projected market value of embedded insurance, lending, and payments is nearly equal to the valuation of today’s fintech startups and the top 30 global banks and insurers.
But who exactly comprises the components of embedded finance on the 2030 side of that graphic? Wouldn’t it be the fintechs, banks, and insurers playing in the embedded finance space? And when was fintech valuation of “today’s” fintechs calculated? Bet it was before the recent decline in valuation.
Which leads us to another question: How do you forecast “valuation” eight years into the future? I can see forecasting transaction value and volume, but not market value.
But who exactly comprises the components of embedded finance on the 2030 side of that graphic? Wouldn’t it be the fintechs, banks, and insurers playing in the embedded finance space? And when was fintech valuation of “today’s” fintechs calculated? Bet it was before the recent decline in valuation.
Which leads us to another question: How do you forecast “valuation” eight years into the future? I can see forecasting transaction value and volume, but not market value.
Below is another graphic from the Swiss Fintech publication showing venture capital funding for fintech, and the year over year growth between 2020 and 2021. According to the chart, embedded lenders raised $300 million, and embedded insurers raised $800 million in 2021—orders of magnitude less than the $6.1 billion raised by embedded finance and BaaS players.
Like the gold rush of yore, the embedded finance gold rush is drawing it’s share of pick and shovel providers—they just have a fancier name: Banking as a Service (Baas) platform providers. As the number of players in this space grows, embedded finance-minded banks and brands evaluating BaaS platform providers should consider. That said, I don’t doubt that there’s a huge opportunity in embedded finance.
A new consumer survey from Cornerstone Advisors and Bond (who commissioned the study) asked gamers, gig workers, creators, small business owners, and other consumers about their involvement and interest in getting financial services from non-financial brands.
Logic and data isn’t going to dampen the embedded finance gold rush. Just as there were plenty of would-be miners panning for gold in all the wrong places—and doing all the wrong things—during the gold rush of the 1860s, plenty of brands, banks and fintechs will do the same during the embedded finance gold rush of the 2020s.
While some (and perhaps, many) brands, banks, and fintech pursuing an embedded finance strategy won’t strike gold, others will. Who will succeed?
A new consumer survey from Cornerstone Advisors and Bond (who commissioned the study) asked gamers, gig workers, creators, small business owners, and other consumers about their involvement and interest in getting financial services from non-financial brands.
Logic and data isn’t going to dampen the embedded finance gold rush. Just as there were plenty of would-be miners panning for gold in all the wrong places—and doing all the wrong things—during the gold rush of the 1860s, plenty of brands, banks and fintechs will do the same during the embedded finance gold rush of the 2020s.
While some (and perhaps, many) brands, banks, and fintech pursuing an embedded finance strategy won’t strike gold, others will. Who will succeed?
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