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In a previous blog we contemplated that integrating an investment product in your platform could be a strategic decision with positive impact to the company’s bottomline through diversification of revenue, increased customer LTV and enhanced customer engagement to name a few. More on that here: The Strategic Value of Embedding Investment Products in Your Platform. For this blog we explore which industries should consider adding an investment product in 2024 and why.
What are Embedded Investments?
Embedded Investments refer to the integration of investment products or financial instruments (like Money Market Fund, Treasury Bill, Fixed Income Securities, Equities etc) directly within other platforms, be them finance related or not. Instead of end users needing to visit a separate financial institution or platform to access investment opportunities, they can engage with these opportunities seamlessly within your platform in order to get access to better yield on their idle cash or better returns on their investment. Embedded Investment solutions typically also take care of all the burdens related to compliance, trading, optimizing, rebalancing as well as reporting. So it is a full turnkey solution.
What are some of the industries that should be considering adding an investment product in 2024?
The current market environment has put Investment Products at the top of the list of strategic investments for a lot of sub-industries related and adjacent to finance, especially in the B2B space. This is compounded by the high interest rate regime where end customers (being businesses or consumers) now want to have easy access to higher yield on their idle cash and savings. The following is a graphical representation of some key players in a number of sub industries that could see benefits from launching an investment product in 2024. Some of them like Brex and Mercury have already capitalized on the opportunity. How many more will? We will have to wait and see.
1. Payment Processors: Those platforms are great to help move funds. Embedded Investments could help them complement their product by enabling their customers to warehouse funds. Through this product payment processors could become the full operational backbone of a business.
2.Vertical Saas: Those platforms streamline the operating process of a lot of industries. Embedded Investments can help companies like Rippling extend their functionality suite and support their customers in a bigger array of tasks in terms of their cash management.
3. BaaS providers: Most BaaS providers already provide a bundle of financial services (KYC, Payment, Cards,..) to the banks and their Fintech customers. Embedded Investments can create new revenue streams for BaaS providers through partnerships, revenue sharing agreements, or subscription-based models. Embedded Investments can complement and amplify their suite of product offerings so they can generate additional revenue while delivering added value to their customers.
4. Fintech Players: Fintech players such as Airbase or Ramp going after the all in one strategy should look into adding an investment product to their suite of products. This product would enable their customers to make the most of their money and would allow the company to increase customer share of wallet.
5. Banking: Embedded Investments can help smaller community banks compete with larger banks by providing a broader suite of financial products and retain more of their customers in a time when they are actively switching banks and chasing higher yields.
6. Neobanks: Similar to fintechs looking to achieve an all in one solution, B2B or B2C Neobanks can reach new customer segments and enter new markets more effectively by adding an investment product to their mix.
7. E-commerce: Major e-commerce players like Shopify serve a major segment of the bloodline of the economy. Through an Embedded Investment product these companies could diversify their offering and empower their customers to make the most of their hard earned idle money.
8. Bank Tech: Similar to BaaS providers, integrating with Embedded Investments enhances the value proposition of banking technology providers. By offering a more comprehensive suite of solutions they can help their Bank clients offer better financial services to their end customers.
In conclusion, the real-world impact of Embedded Investments is reshaping industries and driving strategic innovation. As the fintech landscape continues to evolve, we will see Embedded Investment products become more and more mainstream.
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