September 2021

Embedded wealth management:

a $100 billion market opportunity hiding in plain sight
Table of contents

3 Foreword

4 Executive summary

8 Making financial services more accessible to everyone

14 Business case for embedded wealth management –

for financial firms and brands

18 Size of the market opportunity for embedded wealth

management

20 Use cases for embedded wealth management

33 Looking ahead

2
Foreword
The term ‘embedded finance’ seems to have become ubiquitous of late. It refers to the busi-
ness model whereby financial services, now digitized, can be offered through any distribution
channel.

Embedded finance has become possible, and an imperative, thanks to the confluence of various
market trends:
– Open banking legislation that has encouraged data sharing among an ecosystem of players.
– New technology, such as APIs, that make it easier to interact across platforms.
– Non-financial competitors, such as Amazon, who are offering their own financial services,
forcing financial institutions to choose between either partnering or going into head-to-head
competition with them.
– Customers who are becoming harder to reach via finance-specific channels, making it more
difficult to up-sell and cross-sell, and increasing attrition.

In short, the distribution of financial services is reaching an inflexion point.

What’s so exciting about embedded finance is that financial products become integral parts of
existing services and are offered at the most relevant point in the user journey. This is trans-
formational, because it removes friction and the cost of shopping around, which dramatically
increase adoption.

Examples we’ve seen so far include buy-now-pay-later loans embedded into online checkouts,
payments embedded into food ordering or mobility apps, and travel insurance offered at the
time you book a holiday. But we’ve barely scratched the surface of what embedded finance can do.

In this report, we focus on one of the more unexplored and potentially significant areas for em-
bedded finance: wealth management. This is a $100 billion revenue opportunity for providers,
and we outline what we consider to be some of its most promising use cases.

Our long-held conviction is that eventually everything will become a service. Or, put another
way, everything will be embedded.

I hope you enjoy this report and look forward to hearing your thoughts.

All the best,

Michael Stemmle
Founder and CEO, additiv

3
 Executive summary

F
intech evolution has been coming in waves. Embedded finance is the latest, and
most significant, so far.

The first phase of the fintech evolution was about making banking more accessible,
and the second was about improving banking services.

The third and latest phase takes things even further. It’s about unbundling distribution
and manufacturing so that financial services can be embedded into third-party chan-
nels and into existing user journeys.

Embedded finance has several benefits:

– It reduces friction by putting relevant services in front of customers when and
where they need them, on the platforms where they live their digital lives, instead of
forcing customers to look for an offering.
– It creates greater personalization by leveraging what companies already know about
their customers.
– It helps to grow the market for financial services by allowing firms to cater to spe-
cific customer needs, instead of developing products first and only then figuring out
the market fit.

In short, embedded finance benefits both customers and brands.

Putting financial services into channels with higher engagement

Media

Mobility Where the customer is (where

Level of engagement

Retail/
E-commerce Health they spend their online lives)
and wellness

When it’s relevant

(context-driven)

What they need

financial
services (adapting the form)

Source: additiv Size of addressable market

4
 For the firms that team up to offer consumers embedded finance, the economic incen-
tives are powerful.

For financial services firms, the Banking-as-a-Service (BaaS) players, embedded

finance promises to open up a larger addressable market with lower costs of customer
acquisition.

For companies (brands) looking to embed finance into their existing offering, embed-
ded finance promises to generate additional customer loyalty that can be translated
into lower customer attrition and higher customer lifetime value.
Consumers
Embedded finance

Consumer and other brands

API layer
Banking-as-a-Service

Technology solutions

Regulated firms providing banking services, capabilities and settlement

Source: additiv

5
 In this report, we’ve identified six channels where wealth management could be
embedded, capturing $100 billion in revenue that wealth managers and their brand
partners are currently missing out:

1. Retail and challenger banks, who are ideally placed to increase customer lifetime
value by becoming the bridge to embedded saving and investment services.
2. Employee financial well-being platforms, who can steer employees towards even
better financial decisions by helping them manage their money more smartly while
positioning themselves as the gateway to embedded wealth management services.
3. Asset managers, who can reach customers directly through online channels and
bundle asset management with embedded wealth management.
4. Health insurers, who have unique insights into their customers’ lifestyles, are ide-
ally placed to help them save for a more comfortable retirement.
5. Pensions providers and life insurers, who can bring siloed retirement and wealth
decumulation services together into one unified, transparent process.
6. Consumer platforms, whose strong customer engagement, rich data sets, and
appeal with younger demographics, ensure that they are ideally placed to embed
wealth management services into their existing offerings.

Regardless of which route you choose, the embedded wealth management

market is both large and largely untapped – an opportunity not to be missed
by fast movers.

6
Inserting financial products into contextual user journeys

Customer Life Health Asset Financial Retail

Pension Retail
context insurance insurance management health banking

Provide for my family Provide for a Get on top of Turn my savings

Embedded Plan my
in the event of an early comfortable my spending into investments
journeys retirement
death retirement and cash out with returns

Intelligent Automate my Personalized Rebalance Draw down my savings Accumulate my savings

services investing advice my portfolio in a sustainable way in a sustainable way

Financial Structured Tax-free Model Target Active Passive

products products savings portfolios date funds funds funds

Know Your Identification and Payment

Capabilities Custody Trading
Customer authentication processing

Transactional Domestic International Bond Equity

Derivatives
rails payments payments markets markets

Source: additiv, adapted from 11:FS

7
Making financial services more
accessible to everyone

T
he problem of financial inclusion persists. The headline number of 1.7 billion
unbanked people has improved materially (from 2.5 billion in 2014), but it re-
mains high. Furthermore, it masks the significant pockets of underbanked demograph-
ics, such as SMEs who are short of $1.5 trillion in funding according to the World Bank
or – more pertinent to this report – the millions of people with investable assets who
do not receive professional investment advice.

The answer to The answer to the problem of financial inclusion still lies in technology. Advances in
the problem cloud computing and mobile banking are lowering costs. All else being equal, this
of financial should make financial services more affordable and more accessible to a greater num-
inclusion
ber of people.
still lies in
technology.
However, lower costs by themselves won’t solve the issue. The way financial services
are sourced and distributed must also change. It’s not enough for them to be more
available overall. There must also be greater personalization and convenience of use.
This requires business model change.

Business model change is needed

The key to improving customer outcomes lies in coming together with other parties
to form ecosystems. In an ecosystem set-up, various parties combine their strengths
and core competencies and pool their data to create network effects that make the
service better for every additional customer.

Practically speaking, in an ecosystem model, ecosystem partners can focus on what

they do best, which might be distribution, manufacturing specialized products and ser-
vices, or operating the network by providing the platform that facilitates the interaction
between these different parties.

For the customer, it brings more choice, lower transactional costs, more personalized
services (given the data sharing) and greater convenience. Ecosystem-based models
are powering the evolution of fintech.

8
Digital business
model innovation

Servicing Model Consumers / Users Supply / Producers

Digital Platforms Operating Model

Sourcing Model

Ecosystem

Source: additiv

“Platform ecosystems consist of two basic components: One is the platform itself.
Secondly, it consists of an ecosystem that develops and centres around this platform.
The platform is thus the basis for this ecosystem and responsible for its development.”
Business Ecosystems – Partnership of equals for corporates, SMEs and startups (2019) by Lingens, B., Böger, M.,
Gackstatter, S. and Lemaire, A.

9
 Embedded finance: the next phase of fintech evolution
The digitalization of financial services is entering a new phase.

The first phase was about improving access. Banks made it possible for customers to
access their services any time they liked through an online portal and, later, through a
mobile app. But their services remained largely the same.

The second phase was about enhancing those services. We saw peer-to-peer and
marketplace lending emerge, for example, which brought individual lenders and individ-
ual borrowers together. We also saw the emergence of automated investment servic-
es, which use algorithms to invest people’s money into ETFs and other instruments
without the need for human advisors. But these services are still provided by specialist
firms.

The third phase, powered by business model change, is about embedded finance. This
entails making financial services available to customers over non-financial channels
as part of existing user journeys.

Embedded finance is the third phase of fintech disruption

2000 - 2010 2010 - 2020 2020 - 2030

New services, offered as part

of existing, context-aware,
embedded user journeys
Convenience + value-add

Enhanced services,
leveraging
networked technologies

Same services, from

Phase 1 – internet banking
same institutions, but
Phase 2 – digital banking
using digital channels
Phase 3 – embedded finance

Business model evolution

Source: additiv

10
 Embedded finance: advantages that can address financial
inclusion
Embedded finance has four advantages over the traditional model:
1. It reduces friction, because the customer doesn’t have to switch channels.
2. It introduces more context, because the channel where the service will be pro-
vided already has a lot of data about the customer. The service will also be more
personalized and relevant.
3. It’s proactive, in that it can anticipate customers’ needs instead of forcing them to
seek solutions to those needs themselves.
4. It’s adaptive. The customer’s need determines the solution. For example, instead
of creating a store card and having to figure out how to market it, a customer’s
desire to pay by installments can drive product design.

Embedded finance promises to significantly boost financial inclusion.

Because it matches financial services to context and provides them when
they’re relevant over existing channels, it addresses many of the distribution,
discovery, and information asymmetry challenges that have plagued
traditional financial services in their quest to reach everyone.

With embedded finance, we look set to get much closer to having supply meet de-
mand for the first time.

11
Selling products becomes addressing customer needs

Customer comes Financial services firm matches against

to financial existing products (e.g. stocks and shares
services channel Individual Savings Account)

research research
needed needed

Today’s
user journey

Customer Customer provides

self-determines (incomplete)
financial need context

These services understand The purchase is fulfilled on

customers’ needs and proactively the same channel, as part
recommend relevant solutions of the same user journey

Future
user journey

Customer continues using Solutions are adapted to

their everyday services context (e.g. a comfortable
retirement)

Lowering friction, improving conversion, growing addressable market

Source: additiv

12
Improve the quality of your advice with the right investment
suitability solution
In order to avoid the many complexities, legal, and compliance issues faced, fintechs and financial com-
panies are partnering with banks providing Banking-as-a-Service. This is to obtain banking capabilities
(regulatory solutions, originate loans, hold deposits, receive direct deposits, etc.).

Regulatory pressures also affect wealth management offerings, and in particular, the advisory process
of banks. Product risk classification can be used in a client-friendly and transparent way for the suit-
ability assessment from a product to a portfolio view. The methodology is adapted to private banking
(or wealth management) clients, resulting in a comprehensive risk indicator enabling a consistent and
coherent comparison between different asset classes. Credit Suisses’ Product Risk Classification (PRC)
provides valuable support for the fulfillment of regulatory requirements (MiFID, Fidleg, HKMA) in a cost-ef-
ficient way.

PRC is used to evaluate the financial risks of individual investment products and assigns each invest-
ment product a specific risk category. It is used to assess whether the client can bear the financial risks
associated with the investment product and to identify suitable products from a large product universe –
thus it addresses the appropriateness and suitability needs in advice.

The method of risk assessment developed takes into account the three key financial risks of an invest-
ment product: market risk, credit risk and liquidity risk. All three aspects are examined monthly, based
on the historical data, before being combined in a PRC value on a scale of 1 (very low) to 5 (very high).
Using a sound, independently validated procedure, this enables a straightforward risk classification to be
derived.

We offer comprehensive support for the investment suitability process in wealth management. With over
150,000 investment instruments already classified, Product Risk Classification (PRC) enables wealth
management providers to improve the quality of their advice while addressing regulatory issues in a
cost-efficient way. PRC can be also calculated ad hoc for all investment products of the client universe.

Mauro Bizzarri
Head Regulatory Products, Credit Suisse

13
Business case for embedded wealth management
– for financial firms and brands

E
mbedded finance’s benefits for consumers – greater access to more person-
alized, more convenient, and more intuitive financial services – are clear.

But what about the benefits for financial services firms and non-financial brands?
To understand the compelling logic for them to work together to make embedded
finance possible, we must look at how digitalization has changed the dynamics of
demand and supply.

As supply has In the past, it was hard for financial services firms to scale. There were large upfront
increased, investments needed in computer hardware and software, one-size-fits-all licenses that
customers required large amounts of capital to be set aside, and physical distribution costs.
have become Since then, as in many other industries, digitalization has lowered costs and, in turn,
more time
the barriers to entry. Now, scarcity has moved from supply to demand – or, more pre-
and attention-
cisely, attention.
poor and,
therefore,
harder to One of the more serious consequences of this is that customer acquisition costs (CAC)
reach. have increased. ARK Invest believes these stand at $1,500 per customer, on average.
This has created a significant hurdle to profitability for new entrants, such as challeng-
er banks or robo-advisors, who must derive enough lifetime value from customers to
recoup these costs.

Furthermore, these new entrants also need to build brands. This should not be under-
estimated. It’s increasingly not enough to just reach time-poor consumers. Consumers
want an engaging experience and to feel something for the brand. Many of the most
successful fintech companies over recent years, such as Square, have built strong
brand loyalty (Square customers now even wear Square apparel). This raises the profit-
ability bar even higher.

In this context, the possibility of distributing through high volume third-party channels
to existing, engaged customers is highly appealing, because:
– It dramatically cuts CAC, improving unit economics.
– It gives access to much larger volumes of business, spreading fixed costs and
boosting overall profitability.
– It saves on branding costs.

14
A proven BaaS model to complement traditional offerings
Banking-as-a-Service (BaaS) isn’t a new concept for us at Saxo Bank. We’ve been offering financial
institutions the opportunity to embed our broker and custodian services alongside their existing prod-
ucts since 2008. Our BaaS model complements our financial services offering and supports our aim to
democratise trading and investing.

When looking at the value BaaS brings, it’s evident in that this model now represents around 40% of our
business! Financial institutions (FIs) saw us building our brand and our market presence and wanted
to do the same quickly without having to build the capabilities themselves. It meant that FIs who didn’t
offer broker or custodian services could now offer these. For those who already operated in this space,
they could expand into new geographies or offer additional functionality without the need for an expen-
sive, time-consuming project. With BaaS, FI’s don’t have any capex or upfront opex costs and our ser-
vices can be fully incorporated within six months. Even though it is out-of-the-box, the FIs can still fully
configure and tailor the solution according to their individual needs such as making it relevant to their
market. And of course we provide the scale, so our FI partners don’t need to.

Our model gives our FI partners access to our broker and custodian services by seamlessly embedding
our UIs and portal into their infrastructure. Every aspect of our Saxo mainstream service can be offered
to the end customer, however, the customer believes that they are still in their FIs platform because the
UI is completely FI branded. We can also use their authentication and security so there is no need to go
through the identification and verification (ID & V) process more than once in an online session. Howev-
er, at Saxo we don’t have access to the customer or their data – the FI maintains full control. They own
the customer and manage all elements such as the fees, risk, margin etc. Ultimately, it means that the FI
can focus on what they do best: servicing the customer.

The benefit to our FI partners is clear, and, aside from the obvious opportunity for us to broaden our
product reach and trading volumes with minimal customer acquisition costs, it also helps to drive
our innovation. Our FI partners bring insight into every aspect, including delivery mechanism, product
enhancements etc. Much of our development has been driven by partners asking for specific tools and
functionality. This is then incorporated into Saxo Bank’s mainstream proposition and then offered back
to our FI partners who are embedding our services.

Nicholas Wright
Director of Institutional Sales, Saxo Bank

15
 As a result of embedded finance, fintechs that are little-known to consumers and only
have one or a few products lines, can get access through brand partners to sufficient
volumes to make their businesses highly profitable.

Take Klarna, a Swedish lender specializing in buy-now-pay-later credit, for instance. In

2020, it generated over $1 billion in revenue and reached a market cap of $45 billion.

But the opportunity hasn’t been lost on large incumbent banks either. Universal banks
such as Standard Chartered and Goldman Sachs have also launched BaaS platforms,
Nexus and Marcus respectively, in order to capture this nascent opportunity and gen-
erate greater economies of scale.

Embedded finance vs Banking-as-a-Service

Embedded finance
The consumer or financial brand
embeds regulated financial services
into context-relevant user journeys

The platform partner orchestrates

demand and supply interactions, and
sources and integrates third party
services

The underlying financial services

provider grows its customer base by BaaS
offering its regulated services over
third-party distribution channels

For the brands that choose to embed financial services into their existing offerings,
there is also significant appeal.

For some, it’s about capitalizing on customer attention to grow profits, helping finan-
cial services firms reach their customers in exchange for a revenue share.
But for most, it’s more indirect: creating a more convenient customer experience by
providing access to valuable products at the right time. This increases
customer loyalty and lifetime value.

16
Embedded finance: a game-changing opportunity
Embedded finance is about abstracting banking and insurance functionality into technology. It enables
any brand or merchant to integrate innovative financial services into their offerings and customer experi-
ences, rapidly and at low cost.

Put simply, embedded finance is about enabling any business to manage and sell innovative financial
services, seamlessly integrating creative forms of payment, debit, credit, insurance or even investment
into their end user experiences.

The new business model archetype needed is based on platform thinking and platform economics, and
highly suited to an increasingly platform driven digital economy.

Platform thinking means leveraging the creativity and resources of third parties to create greater value
for your customers and markets, rather than trying to serve customers only with your own products.
In practice, this means exploiting advanced digital technologies and different ways of capturing value.
Platform-based business models dominate in an increasingly hyperconnected digital world, due to their
powerful underlying economics. They focus on exploiting and monetising ‘intellectual capital’ (encapsu-
lated in software) and ‘relational capital’ (connections between multiple parties), which have near zero
marginal costs, rather than asset-heavy ‘human capital’ (people) or ‘financial capital’ (money).

While these concepts and principles are second nature to Venture Capitalists (VCs), big tech and tech
entrepreneurs, they are new to most leaders at banks and insurance companies (and to most traditional
sectors).

Addressing the recurring financial business today – embedded payments and beyond
The simplest example of embedded finance in action is paying for an Uber ride. You don’t get out your
credit card at the end of the journey. Uber product designers have enabled payments to be embedded
into your experience of getting a lift and, for the driver, into their experience of getting paid the right
amount at the right time.

Payment facilitation companies like Stripe and Square have grown rapidly over the last ten years by ena-
bling this sort of capability for digital companies.

Complexity increases as you move from payments to debit, credit, insurance and investments, thus from
a simple transaction to a recurring business. But if you are a merchant or brand in any sector, you want
to make your propositions to customers as attractive as possible.

17
Klarna has grown into a $45 billion company – $20 billion more than Deutsche Bank – by enabling
brands to offer innovative credit solutions at the point of purchase, for example by paying in instalments.

Klarna: worth more than Deutsche Bank because it is better embedded

into modern commerce activity

$45bn*

$25bn

*Private valuation based

on latest raise, July 2021

Source: Simon Torrance, 2021 Established 1870 Established 2005

Embedded insurance is now fast emerging too, enabling your car share service, for example, to come au-
tomatically with mobility insurance, or your new camera to come with theft and damage protection right
out-of-the-box as part of the overall price. Embedded wealth services will be next.

New revenue opportunities at very low marginal cost

Embedded finance – as opposed to reselling financial services – is attractive to digital brands and mer-
chants because it creates new revenue opportunities at very low marginal cost (the brand already has a
customer base). It enables new customer experiences that drive loyalty and repeat purchase and allows
merchants to capture more of the economics of the relationship.

For many software and platform businesses, financial services are, and will increasingly be, a very
lucrative addition to their core business. As the Chinese proverb says: “The best time to plant a tree was
twenty years ago. The second best time is now”.

Simon Torrance
Helping companies transform their business models with digital
platforms, ecosystems and ventures. www.embedded-finance.io

18
Size of the market opportunity for embedded
wealth management

E
mbedded wealth management is an untapped opportunity which, in our view,
could increase the size of the wealth management market by up to
c.$33 trillion in assets.

In this section, we explain how we arrive at our market size estimates. We created a
bottom-up model by country and by customer demographic, based on underlying data
from the World Bank and the most recent Credit Suisse Wealth Report. This gave us
a global market of up to $33 trillion of investable assets which are not professionally
managed.

The embedded wealth opportunity in numbers

An addressable market of $33 trilion in assets

$1 trillion
rest of North America

$11.9 trillion
Europe

$5.9 trillion
$5.6 China
trillion US
$0.65 trillion
ME
$1.2 trillion
India $5.6
$1.15 trillion trillion
Africa rest of
$0.53 trillion APAC
LatAm

To translate assets into a market size by revenues, we assumed that, on average,

wealth managers (and their partners) could earn 30 basis points for managing those
assets – resulting in a revenue potential of $100 billion in fees.

For completeness, we also estimated – in line with many projections for embedded
finance markets – what the uplift to valuations could be. For this, we put revenues on a
10x multiple, which gave us a potential value creation of $1 trillion.

19
Leveraging BaaS to reach a broader demographic
At Kidbrooke, we believe the biggest appeal of Banking-as-a-Service (BaaS) for wealth management is in
achieving a significantly shorter time-to-market for digital or hybrid wealth services to be offered to end
customers.

Essentially, products provided through BaaS enable financial institutions (FIs) to easily and quickly gain
access to sophisticated and extensive analytical capabilities often not possible to develop in-house –
without sacrificing flexibility. This argument becomes more evident when BaaS tools and services are
compared to more classic white-labelled solutions, where use cases and customer experience elements
would come pre-configured. This way, the embedded nature of BaaS empowers banks, insurers and
wealth managers to retain ownership of the customer experience itself, with API-based delivery mecha-
nisms making all the difference.

The value of BaaS is further compounded when you review the opportunity to reach a broader demo-
graphic. BaaS allows for greater cost efficiency, which in turn empowers wealth managers to target a
wider audience outside the classic affluents and high networth indviduals (HNWIs). It enables wealth
managers to reach segments which they previously could not service due to high production costs and,
in turn, allows players to embed wealth management services into their offerings to gain a wider reach.

In addition, BaaS can enable a broader set of products if seamless analytics comes pre-integrated.
These analytical tools consider the entire end-customer balance sheet to allow wealth managers to offer
both guidance and advice around a broader set of products than what would typically be possible.

Overall, we see an accelerating trend in HNWIs both embracing and quickly converting to digital chan-
nels. Given this, skipping the next generation of PDF reports and going straight into providing interactive
and visually intuitive solutions may be a smart choice.

Fredrik Davéus
Chief Executive Officer, Kidbrooke

20
Use cases for embedded wealth management

T
here are many examples where wealth management could be embedded into
financial and non-financial services. In this report, we’ll discuss the six use
cases we believe present the most compelling opportunities.

Six key use cases for embedded wealth

Pension Super
Retail & Employee IFAs/ Health
& life apps &
challenger financial asset insurance
insurance consumer
banks well-being managers providers
providers platforms

Embedded Wealth

Source: additiv

Retail and challenger banks

One of the biggest challenges faced by retail and challenger banks is high cost of cus-
tomer acquisition, which is estimated to be as high as $1,500.

This high customer acquisition cost (CAC) is compounded by the fact that these
banks – especially challengers – tend to offer a limited set of products. First of all, this
makes it hard to generate a high lifetime value to compensate for the high CAC. Worse,
it puts customers at risk as they become more affluent and their needs become more
complex.

21
 A clear solution to these problems – high CAC and higher churn – is to embed wealth
management services.

First of all, this would provide an additional revenue stream. Secondly, it would enable
these banks to retain customers as they move through the lifecycle from earning to
saving to wealth creation. There may also be additional benefits by partnering with
large wealth managers, as these will confer security and stability that will also help
with customer retention.

We estimate that offering investment products doubles lifetime value within the sec-
ond year of acquiring a new customer.

The reason for embedding wealth services instead of building them is manifold and
includes speed to market and leveraging the skills and expertise of specialists.

Customer lifetime value: net margin contribution per new

customer over time
60%

40%

20%

0%
year 2 year 3 year 4 year 5 year 6 year 7
onwards
-20%

-40%

-60%

-80%

-100%
year 1

-120%

now with savings and investments

Source: aperture, 2021

22
Supporting wealth preservation and growth through
embedded finance
TNEX is Vietnam’s first digital-only bank and Vietnam’s first platform to offer free everyday banking for
life. Our initial target segments are Generation Z consumers with a Total Available Market (TAM) of 20
million consumers and micro merchants with a TAM of four million. From a wealth management per-
spective, our segment isn’t what you’d call a typical target customer, they aren’t high net worth individu-
als (HNWIs) or fall near a mass affluent criterion.

But that doesn’t mean that offering products to support their wealth preservation and growth isn’t impor-
tant or that it won’t be mutually beneficial. In TNEX we believe that it makes it even more important. It
is our responsibility and part of our stated mission to help our customers through the journey to a more
sustainable financial life. To make this happen, the platform is ecosystem based, it integrates with partners
to ensure that we can support and improve as many aspects of our customers’ lives as we possibly can.

We believe to deepen and broaden any ecosystem, it’s so important to focus on what you do best and
for everything else, partner with specialists that are the best. Our platform has zero technical debt, it is
digitally native, allowing us to quickly leverage partner and fintech APIs to assemble the experiences our
customers need. Since we launched TNEX at the start of 2021 we have made over four million external
API calls, and counting!

Right now, we are using partnerships to offer motor insurance and in the next three months we will be of-
fering life assurance, mobile phone insurance and health insurance. We also provide Banking-a-a-Service
(BaaS) and are in the process of integrating with an ecommerce provider and two universities to provide
smarter payment rails.

From an infrastructure perspective, we don’t have a physical data center: we are an AWS first cloud plat-
form. From a software stack we are modular and real-time, using open-source or SaaS only, and we are
powered from front to back by advanced data science.

Embracing the super app ecosystem concept, we’d love TNEX to be the only app our customers would
ever need. The TNEX ecosystem is made up of four integrated customer platforms: Financial/Banking,
Emotional & Physical Wellness, Social Interaction and Merchant Marketplace.

Our financial platform delivers everyday banking: current accounts, small ticket lending, payments,
deposits, physical and virtual cards, PFM, POS QR, etc. Our ecosystem also provides our customers with
a place where they can chat and message each other, digitally sell online to offline, apply for a job, find
accommodation, track and improve their physical and emotional health, earn money, win prizes. They
can even do their daily shopping cheaper through our merchant offers marketplace.

23
We are striving to be customer holistic. One of the first questions when you login is: “how do you feel?”
“Why do you feel good today?” “Did you eat well?” etc. Customers can answer with a TNEX emoji and
then track their happiness over time or against their friends. By having insight into our customers’ state
of mind we can support their financial well-being. So, for example, if a customer doesn’t have enough
money towards the end of the month to eat, we’ll send them a free TNEX-QR code for one of our mer-
chants, so they can afford to eat and we offer them advice on how to use TNEX-Personal Financial
Monitoring (PFM) to better manage their money going forward. In TNEX, I insist that the “how and when”
of our customer interactions always try to reflect our core values and help deepen our customer loyalty.

As well as providing tools to preserve wealth, we are also releasing products and features to generate
wealth. In August and September, we will begin to offer innovative products in the areas of inclusion driv-
en investment and behavioral saving.

In summary, our financial products are invisible and only appear when they are required to support our
customers’ lifestyles and future plans. And it doesn’t matter if it’s embedded wealth management or
embedded taxis, it’s about having an experience that cares about their needs. Accessing financial prod-
ucts when needed within a couple of clicks. The concept of embedding is not just about the product. It’s
about the whole willingness to change culturally, and to assess the value of innovation (and the willing-
ness to ‘test and learn’). For success you must create loyalty, not buy loyalty. You must support custom-
ers’ lifes, their dreams and their future, and make this a reality.

Bryan Carroll
Chief Executive Officer & Co Founder, TNEX Bank

24
 Employee financial well-being
Employee financial health is becoming a major concern for employers. The reason is
that financial health carries over into the workplace, especially given the strong caus-
al link between financial health and mental health. And, this is not a low income-only
phenomenon: up to 30% of middle income earners have no money left at the end of
every month after mortgage and other outgoings. Here are a few statistics that under-
line the scale and pervasiveness of an issue that for many has worsened because of
the pandemic:
Job productivity:
78% of employees under financial stress experience lower productivity. (Source: MSA)
No emergency coverage:
51% of the Americans could not cover three months cost of living. 28% have no emer-
gency savings at all. (Source: bankrate )
High debt burden:
world debt reached a new all time high in 2021. (Source: UN)
Rising mental issues:
73% of US citizens quote worries about finance as their number one stress factor.
(Source: Capital One, CreditWire)

Solution and product components along the hierarchy of financial needs

Founder / Executives
– Estate planning
– Inheritanc planning
– Tax planning Legacy
– Succession planning

Executives / Staff Financial Freedom

– Retirement planning
– Children education
– Vacation
Nudging – behavioral finance

– Building investment portfolio Wealth Accumulation

Staff
– Emergency fund (3M) Financial Safety
– Insurance

Staff
– Daily expenses Cash Flow and Basic Needs
– Debt reduction

Source: additiv

25
 Employers are stepping in to help employees with their finan-
cial planning by embedding wealth management services into
their employee platforms.

By doing so, they help employees take control of their personal

finance, identifying problem areas and moving them gradu-
ally up the hierarchy of financial needs, from reducing debt
through to saving, investing, and ultimately thinking about their
legacy.

In return, employers not only benefit from having employees

who are less stressed and more productive, but their em-
ployees also reward them with higher loyalty at a time when
employee acquisition costs and time are rising.

Source: additiv

Health insurance platforms

Individuals tend to have a lot of touchpoints with health insurers. They need to provide
data about their health, pay invoices, and submit claims for reimbursement.

This has two implications.

Firstly, there are a lot of opportunities for health insurers to introduce wealth manage-
ment services into existing user journeys and processes.

Secondly, health insurance platforms have a lot of information about individuals’ health
and life expectancy which they can use to give relevant and proactive advice.
In effect, health insurers can provide the financial incentives their users need to live
longer, happier lives and invest in a manner that ensures a comfortable retirement.

26
 Life insurance and pensions providers
The shortfall in retirement assets is a ticking timebomb. In the 20 largest OECD coun-
tries alone, there is more than a $78 trillion deficit in pension assets. Furthermore, a
combination of rising life expectancy, low interest rates and conservative investment
strategies means that this gap is increasing. This leaves individuals needing to take
more responsibility for their retirement planning, and opens the opportunity for those
companies that can help them.

Embedding Life insurers and pension providers are both part of the process of preparing for retire-
wealth ment, but neither takes an active role in wealth management at present because the
management
process is siloed. Occupational pensions are considered independently of personal
into their
pensions, which are considered independently of life insurance, which is considered
offering
independently of wealth management.
creates a
compelling
opportunity Embedding wealth management into their offering creates a compelling opportunity to
to grow grow wallet share, but also to improve retention.
wallet share,
but also to Life insurance and pension providers can leverage their existing relationship and posi-
improve
tion of trust to supply additional services, breaking down the silos and bringing these
retention.
traditionally separate products together in one place.

In addition, instead of losing the assets when a customer retires, they can retain them
and generate more revenue by embedding a decumulation service that helps retirees
draw down their wealth sustainably and systematically, or even pass it on to the next
generation.

IFAs and asset managers

In the face of increased costs (especially from compliance), as well as decreasing mar-
gins, asset managers and IFAs (Independent Financial Advisors) are looking for new
revenue opportunities and embedded wealth management provides a strong case.

However, for asset managers, the opportunity is a bit different than for others. Until
now, asset managers have operated a B2B2C model, distributing their funds and ser-
vices through other businesses such as private banks and brokers.

But as Vanguard has demonstrated, the internet offers the opportunity to reach cus-
tomers directly, cutting out intermediaries.

27
 How is this embedded wealth management, you might ask, if intermediaries are being
removed and not added? Well, because the direct-to-customer (D2C) model makes it
possible for the asset management services or IFAs to be extended with wealth man-
agement.

With a direct relationship – and all of the context and insight this brings – asset man-
agers and IFAs can go further than automated investment advisors, offering a broader
range of assets together with the wealth management advice customers need (and
increasingly desire) to make smart investment choices – all within the same relation-
ship or app.

Which of these growth and/or efficiency layers will provide

most benefits to firms in the asset management industry?

New revenue opportunities

Operating model changes

Winning market share

Investment performance

Outsourcing

Partnering with niche players

Consolidation/M&A

Internal cost cutting

0% 25% 50% 75%

Survey respondents

Source: Accenture/ICI operations study 2020

28
Enabling context driven embedded finance through APIs
To understand the real value that embedded wealth brings, it’s important to recognize how it services
market needs. At Bricknode, we mostly see financial assets as commodities, therefore, when conducting
self-directed investments, the only concern should be how to buy or sell in the cheapest possible man-
ner, as how self-directed investments are bought and sold does not create any added value for the cus-
tomer. The value that embedded wealth offers the customer however is in combining different financial
assets and the ability to enable them to be bought or sold at the most appropriate time.

The true benefit of embedded wealth can of course only be realized with powerful APIs. These form
a critical part of our Brokerage-as-a-Service offering to support embedding wealth services. Broker-
age-as-a-Service enables businesses to offer an automated investment product for funds, stocks, bonds,
currencies and more, while the back-office operations, reconciliation and reporting are all outsourced
to Bricknode. The APIs allow asset management companies to integrate such services to support their
customer journeys seamlessly and with plenty of scope for customization.

Investment in APIs has been key for us to provide the range of capabilities and add-ons that businesses
expect while also ensuring they are straightforward and easy to work with. Through our end customer
portal’s graphical user interfaces, financial institutions can seamlessly integrate their asset management
services into platforms to create context-relevant user journeys. Simplicity is key and we are continually
investing heavily into expanding and making our APIs even more user friendly.

Stefan Willebrand
Chief Executive Officer, Bricknode

29
 Super-apps and consumer platforms
The problem with any financial services channel is that, while trust may be strong,
engagement is not high. People use these channels to execute specific operations –
paying an invoice, for instance – but they don’t engage much beyond that. This means
there are fewer cross-selling and up-selling opportunities, which makes customer
acquisition costs higher for existing customers.

Consumer and super-app platforms tend to have the inverse problem: high engage-
ment, but relatively low trust. We’re happy to chat on WhatsApp or buy products from
Amazon, but we generally don’t want to have our checking account or wealth with them.

This is why embedded finance works so well for consumer platforms. It leverages
these platforms’ high engagement and combines it with the trust offered by a regulat-
ed financial services firm. In doing so, it leads to higher adoption of financial services
with much greater convenience and higher conversion.

There are also two other strong benefits that consumer platforms bring.

Relative to most channels, they have a lot of consumer data, which helps them to
make more relevant and contextual offers.

The other benefit is that they attract a broader demographic than some of the other
channels mentioned above. For example, they skew above average towards younger
people, where wealth management penetration tends to be lower.

Examples of consumer platforms with embedded finance

Source: additiv

30
Ant Group’s Venture Capital investment over time combining financial
services and e-commerce*
(*Includes subsidiaries)

30 2020 YTD

2019

2018
25
2017

2016

20 2015
Number of rounds

2014

15

10

0
Financial Services

E-Commerce

Enterprise Tech

Transport Services

Food Delivery/ Vending Machines

Touchless Interface

WiFi Provider

Government
IT Security

Logistics Tech

Source: Prequin Pro.Data as of October 2020

31
Delivering embedded wealth value through the public cloud
Public cloud technology now plays a crucial role to help financial institutions (FIs) target, acquire, man-
age and grow their customer base securely. They realize the cloud can help them achieve this in a ro-
bust, agile and scalable way while rapidly establishing partnerships. Specifically, providers are combining
cloud platform components – and especially data and analytics services – with Software-as-a-Service
(SaaS) offers from other providers. And cloud-based platforms are more frequently used to manage
APIs to integrate with third party partners and service providers, supporting embedded finance models.
In the new world of embedded finance (including embedded wealth), integration with external systems
and data from multiple service partners is very important. It requires handling large volumes of cus-
tomer data, deep analytics of a customer’s spend behaviour and preferences, as well as connecting and
sharing insights with partners. Adopting the public cloud to create ‘cross industry data exchanges’ brings
more customer insights and provides specific products and services as required. It also facilitates the
need for a robust API management capability to securely share data across systems and organizations.
And in the Asia Pacific (APAC) region, we are now seeing even non-traditional FI players offering similar
embedded (wealth) products using the power of the public cloud.

Using public cloud infrastructure, and the platform services it offers, it’s much easier to launch new
products and services. This is helping embedded wealth, and other financial product creators, quickly
design, build and launch products aligned to customer needs and make changes (based on customer
feedback and usage patterns). The traditional approach of sourcing monolithic solutions and creating
the required infrastructure cannot scale up to support new product launches at the speed that is needed.

Bringing in massive volumes of data for analysis, and then fine-tune the offering and expose it to first
and third party providers for end customer use is also not sustainable. The public cloud overcomes this,
providing all the necessary infrastructure, platforms and development toolkits to develop embedded and
new banking products (including wealth) and easily exposing them through third party financial service
providers. Furthermore, the cloud offers asset managers and their partners help to create opportuni-
ties for advanced new administrative platforms that enhance productivity and reduce cost. As more
Banking-as-a-Service (BaaS) and embedded finance models emerge, banking will become increasingly
‘eco-system’ centric, requiring scale, connectivity and interoperability plus data and information manage-
ment, with security as a core component. But it will only be successful through the adoption of emerging
cloud-based technologies to drive down unit costs and bring efficiency.

For more insights from Microsoft, see the recent additiv/Microsoft white paper:
“Embedded Wealth in APAC: how to access a $32billion opportunity”

Basudev Banerjee
Industry Leader – Financial Services, Microsoft APAC

32
ESG and its importance when embedding wealth
The pandemic and the impact that it has had on everyday life has increased interest in Environmental,
Social and Corporate Governance (ESG). Financial advisors along with private and institutional investors
are no exception. Global initiatives, including the United Nations Climate Change Conference (SOP26)
and European Green Deal, serve as constant reminders of the prevalence of sustainability topics, and as
a result, many investors now consider sustainable investment a key component of their portfolio.

However, including ESG in a portfolio is becoming more than a ‘nice to have’. New regulations, such as
the Sustainable Finance Disclosure Regulation (SFDR), already require investors to disclose sustainabil-
ity information. The EU Taxonomy, a transparency tool introducing mandatory disclosure obligations for
companies and investors according to a classification system, will come into force in January 2022. In
the medium term, several global initiatives are slowly taking shape, such as mandatory reporting accord-
ing to the Task Force on Climate-related Financial Disclosures (TCFD) for G7 countries and the Interna-
tional Financial Reporting Standards (IFRS) Foundation work to develop mandatory climate disclosures
standards. In the U.S., the Congress has just passed ESG company disclosure standards (consistent with
disclosure requirements).

Overall, any type of embedded wealth platform needs to incorporate sustainability solutions to serve
clients effectively. The growing requirements to report on the sustainability of investments make this a
must. At Clarity AI, we see a future in which any type of investment decision incorporates sustainability
criteria, through data that is reliable, methodologies that are transparent and easy to understand, and in
which all individuals and organizations have access to the tools and technology required to do so.

Daniel Gonzalez
Head of Distribution Platforms at Clarity AI

33
Looking ahead

T
he world of fintech is evolving. Up until now, we have seen companies employ-
ing digital technologies to make finance more convenient and smarter. But the
next wave is more exciting in that it embraces business model change which promises
much better customer outcomes.

Embedded finance is at the crest of the next wave. Embedded finance – made possi-
ble and now made urgent by changing customer behavior, regulation, competition and
technology – refers to the trend of putting financial services into channels and user
journeys that have a higher engagement.

A $100 billion Embedded finance, by making financial services available seamlessly at the time of
opportunity need, will grow the overall market for finance. Just when it comes to wealth manage-
that’s there ment, it’s a $100 billion revenue opportunity over time that’s here for the taking.
for the taking.

For consumers, it will make financial services more convenient, more relevant, and
easier to discover.

For financial services firms, it will grow their addressable market while lowering cus-
tomer acquisition costs, thus boosting profits.

And for companies and brands looking to embed financial products into their existing
services, it will increase customer value-add and lifetime value, while lowering churn.
In wealth management, we see the most promising immediate use cases for retail and
challenger banks, for employee financial well-being platforms, health insurance provid-
er, life insurers and pension providers, asset managers and IFAs, and for super apps
and consumer platforms.

As with any market shift, the opportunity will be greatest for those who seize it first.

If you want to get ahead of the rest, talk to us today about how we can help
you capitalize on this significant opportunity.

34
Established in 1998, additiv partners with leading companies across the world
to help them capitalize on the possibilities of digital wealth and investment
management.

additiv’s DFS® omnichannel orchestration platform is a system of intelligence

for wealth management. It supports wealth managers looking for best-in-class
Software-as-a-Service (SaaS) to deliver better engagement at greater scale.
It enables financial institutions to access new distribution channels through Contact us
a Banking-as-a-Service (BaaS) model. And it allows banking and non-banking
Europe/Switzerland APAC
providers to embed wealth services into their proposition.
+41 44 405 60 70 +65 8588 3373

Headquartered in Switzerland, with regional offices in Singapore, UAE, Germany

Africa Middle East
and Kenya, additiv is supported by a global ecosystem of partners.
+254 720 461 089 +971 54 430 51 66

www.additiv.com Follow us [email protected]