?EF Espresso issue #1: an EF espresso sized-roundup

#EFespresso newsletter issue #1

? Fiona Henderson and I caught up over an espresso on all things embedded finance and due to popular demand (??) we are launching our #EFespresso posts into a newsletter (*hits subscribe*)

So, for our first ever #EFespresso newsletter edition, get ready for an EF espresso sized post as we collate all of our past #EFespresso posts into one place

??Subscribe to our newsletter and like / comments on our posts - exciting, new #EFespresso content landing next week in edition #2

#EFespresso #fintech #embeddedfinance #platformlending

w/c 27 March #EFespresso

??In numbers: ￡27bn, which is Revolut’s valuation (52x its 2021 revenues in its (long anticipated) annual report)

??Espresso thoughts: How did Revolut get to this number? It doesn’t have a UK banking licence (it’s currently an e-money institution) and predominantly handles smaller payment volumes (due to its consumer focus). We think this valuation demonstrates the value in providing customers products at the point of need - Revolut has various product offerings (incl. EF products - Revolut Pay Later (B2C BNPL) in Ireland and On-Demand Pay (withdrawal of half of a customer’s earned salary up to a month prior to scheduled payday) and a myriad of FCA licences. In the UK, the provider can push into “on demand” markets relatively seamlessly and quickly. It can respond fast. In the current economic climate, we expect to see EF providers and platform lenders review their product offerings and regulatory licences to respond at speed

??Quote of the week: The AltFi BNPL conference provided an interesting forum for all things EF. We really enjoyed the comment made by Philip Belamart (CEO and co-founder of Zilch) – “all credit is BNPL”

??Espresso thoughts: Do traditional financial institutions want to see themselves as providers of BNPL products? Whilst once it was thought that EF providers posed a risk to traditional financial institutions, the theme of partnership now resonates within the industry. We’re seeing increasingly more partnerships between banks and EF providers. We think this is a positive move – banks traditionally have large customer bases and they can capitalise on the technological capabilities of their fintech partners. We expect to see more partnerships in the coming months and years as consumer demand continues to increase - Bain & Co anticipates that EF will be a ￡7.3tr. industry by 2030

??Pause for thought: The funding available to women in the industry – on Saturday, This Week in Fintech reported on the findings in the Unconventional VC report (link in the comments below). The report found that, in 2022, only 3% of available funding was received by women-led startups

?? Espresso thoughts: Topically for Women’s History Month, there are many female leaders within the EF space to be celebrated but there is still an obvious gap between the number of women and their male counterparts, as well as how the funding is apportioned between female and male led startups. How do we fix this? We think education is key – girls and young women need to see strong female role-models to know that there are opportunities for them in the fintech and EF sphere. This was discussed by Fiona and Alexis Alexander (GC of embedded finance company Liberis) in a really interesting podcast (linked here – worth a listen)

w/c 10 April #EFespresso

??Quote of the week: “Embedded Finance is about to disrupt the B2B space” AltFi

???Espresso thoughts: AltFi included this statement in their recently released “Embedded Finance: The New Frontier of Lending” report (linked below). Lots of interesting points to digest. On regulation, the regulatory focus in the UK has been on B2C embedded finance products. How will the new FCA Consumer Duty and anticipated BNPL legislation, both impacting B2C, impact the B2B space? We expect key market players in the B2B embedded finance sphere are aligning or amending their policies and governance to take into account these changes (e.g. reviewing KYC and underwriting policies). The incoming changes to the B2C market promote the financial health of customers. Embedded finance – across the B2B and B2C spheres – is a customer-centric industry, so developments in the B2C market have a wider impact

??Pause for thought: the FCA’s March 2023 Dear CEO letter (linked below)

??Espresso thoughts: many embedded finance providers will fall within the ambit of the FCA’s March 2023 Dear CEO letter. In the letter, the FCA praised fintechs for the competition and innovation within the sector, improving choice, convenience, and value for consumers. It’s not all good news though. The FCA have flagged its concerns over payment providers compromising the integrity of the financial system. Embedded finance providers should be considering steps they can take in this area, updating their on-boarding/KYC processes (e.g. using improved AI capabilities) and underwriting policies

??EF in numbers: Apple’s recently launched Apple Pay Later product in numbers: 4, 6, and 0

??Espresso thoughts: the service allows customers to split purchases into 4 payments, spread over 6 weeks, with zero interest. Zero interest and ‘late fees’ or similar are now well established markers of BNPL products. 4 and 6 may have been introduced to reflect the current economic climate / cost of living crisis. The Apple product is currently available in its pre-release form to ‘randomly selected users’

w/c 24 April #EFespresso

??Quote of the week: “Are you THE Nik Milanovi??” as heard at the This Week in Fintech x Fintech Brain Food London Happy Hour, presented by Element Ventures?

??Espresso thoughts: We didn’t really know what to expect walking into the London Happy Hour. What would it be like, would we be the first ones there… and does Nik Milanovic look like his LinkedIn picture?! We had a great night meeting founders and funders and new and old fellow fintech and EF enthusiasts. Our takeaway was the sheer number of individuals involved in the EF industry. EF is a big player in finance. We think that further education about the industry and an increased demand in digitalisation of traditional finance products will undoubtedly increase this

??Weekly headline: Visa partners with financial service and payment companies to offer new P2P payment offering – unveil Visa+

?? Espresso thoughts: Visa is tapping into a traditionally saturated market, where the number of payment apps available has hindered the ability to make P2P payments. We think this is interesting because it demonstrates two big industry points. First, power in partnership. Together, financial institutions, fintechs and consumers can help pave the way to new and innovative products, seeking to embed payment mechanics into day-to-day ecosystems. Second, working towards a chapter of frictionless payments.?As technology develops, we think that there will inherently be a desire to improve upon this and digitalise previously non-digitalised tasks. This is all with the aim of increasing ease of use

??EF in numbers: $4million seed extension raised by CurbWaste

??Espresso thoughts: CurbWaste is a SaaS software and payments company, providing services to the waste management industry. They advertise themselves as a ‘software for haulers by haulers’, integrating online ordering, invoicing, payments and asset management and have plans to expand to RevShare lending. We think CurbWaste’s fundraising and anticipated EF product expansion is interesting as it proves that EF is, quite literally, everywhere. EF is infiltrating numerous industries and as a product headline demonstrates the adaptability of digitalisation. We expect further industries, not currently in the digital space, will look to expand using such technology. The rise of the digitalisation through EF products, in traditional non-digital industries, is upon us!?