How would you describe the wealthtech landscape in 2023? For me, it’s a case of massive unrealised potential.
Here in the UK, we have a couple of UK-based investing apps that could credibly claim to be on track to reach mass-market scale – but there are still no household wealthtech names.
Despite all the talk about robo-advice, DIY investing, and zero-commission trading, many new market entrants haven’t managed to turn that noise and apparent consumer interest into a sustainable, profitable business model.
At Seccl, we exist to help more people invest – and invest well – by supporting ambitious founders and innovative companies on a mission to launch the wealth propositions of the future.
As Seccl’s fintech growth lead, I have the unique opportunity to meet and chat with dozens of these firms on a regular basis – and get a feel for the challenges they face. And the biggest challenge for most businesses I talk to is somewhat unsurprisingly, customer acquisition.
Don’t get me wrong, many of our clients have mastered the art of growing a successful business from a standing start. Circa5000, for example, has made waves in the sustainable investments space, while Penfold continues to scale their personal and workplace pension offering at a remarkably rapid pace and you can read about the others here.
But it is no mean feat. From our experience, it’s much easier to launch a successful investment proposition if you have an existing customer base that loves your brand and mission, and genuinely believes you have their best interests at heart… It’s what we call ‘embedded investments’.
Embedded investments: what’s it all about?
Embedded investments refers to the art of seamlessly integrating an investment journey within an existing user experience. There are plenty of applications and potential use cases – some closer to the world of investing than others.
For a more obvious example, think of the growing number of digital challenger banks (or ‘neobanks’). With millions of customers who trust them for their easy-to-use budgeting and saving tools, it’s easy to imagine why these businesses might want to enrich their user experience, by allowing customers to invest a portion of their savings directly through their app.
As well as enabling users to access returns on their money – which is, after all, the very reason these businesses exist – there’s an obvious commercial benefit, too. It gives them a means of growing sticky revenue, by monetising their millions-strong customer base – driving additional loyalty and engagement for them in the process. In other words, it gives fast-growing but still not uniformly profitable businesses a path to profitability.
Further afield, I think we’ll start to see non-financial services brands look to embed investment propositions within their offerings, too.
Why wouldn’t a ride-sharing app want to allow its drivers to invest tips or a portion of their salaries directly into a pension through their app? Or why shouldn’t retailers offer fractional shares to customers at checkout?
Who knows, some of the biggest investment platforms of the next few decades might not even operate in financial services today…
A ‘$100 billion global opportunity’
We live in a world where apathy and anxiety still define so many people’s relationship with their money.
According to Boring Money, only 15% of UK adults have a stock and shares Individual Savings Account (ISA). Meanwhile, money is the leading cause of stress for employed adults in the UK and 20 million Britons feel they would benefit from financial advice but aren’t sure how to access it.
I strongly believe that embedded investments can provide a compelling solution. With the right journey, customers who remain too nervous to download a new and potentially unproven wealthtech app – or to consider investing at all – can be met at their point of need and guided by a brand they already know, trust, and love.
It has the potential to be completely transformational. No surprise, then, that Additiv refers to embedded wealth management as a ‘$100 billion global opportunity’!
How does embedded investing work?
‘If it makes so much sense’, you might ask, ‘then why aren’t more firms doing it?’ The short answer? Until now, it’s been too difficult and expensive.
The slightly longer one? Wealth management has proven woefully lacking in its provision of APIs (‘application programming interfaces’).
Brands have been able to integrate other adjacent services and experiences into their apps for many years, thanks to affordable and easy-to-use APIs. That same ride-sharing app I mentioned earlier, for example, didn’t need to build their mapping functionality from scratch – they could just integrate with Google Maps. And instead of building an entire payments infrastructure in-house, they could just use Stripe.
Well, just as Stripe has allowed millions of businesses to quickly, easily, and affordably integrate a payments journey, Seccl will help them to integrate an investment journey, too.
Firms can build directly onto our investment API, rely on us for the provision of custody, tax wrappers, and investment operations, and launch a new investment proposition in record quick time.
How quick? Well, we recently worked with GoHenry – the much-loved kids’ financial literacy app with over 2 million customers – onboard their Junior ISA (JISA) investment solution, launching in as little as four months after our very first conversation.
Here at Seccl we’re convinced of the enormous and exciting opportunity that embedded investing holds and are thrilled about the many conversations we get to have with businesses who also agree that embedded investments will drive the next era of wealthtech.
If this has piqued your interest, feel free to connect and find us at the Innovate Finance Global Summit (IFGS) next Monday 17th and Tuesday 18th April 2023 to chat further – and tune in to the ‘Next era of wealthtech’ on a panel at 2.50pm, where I’ll be talking about embedded investing, the advice gap, finfluencers and more!