#BeyondFintech: How Technology is Leading a Purpose-driven Business Revolution

By Sophie Guibaud, Chief Growth Officer at OpenPayd ✨ BAAS & Embedded Finance

In the latest #BeyondFintech discussion for the Fintech and Payments Club on Clubhouse, I was able to speak to two great thought leaders about the topic of purpose-driven businesses and how this important trend is affecting banking and finance.

Theodora and Brad Leimer are the authors of ‘Beyond Good: How Technology is Leading a Purpose-Driven Business Revolution’ and the Founders of Unconventional Ventures. I was joined in this discussion by my co-moderator Darren Franks, the Founder and CEO of TalentintheCloud International. 

If you weren’t able to join the conversation, here are the main topics we covered and the key learnings I took from it.

How banking needs to change

While energy companies have accepted they are the worst offenders when it comes to climate change and have turned to renewables in response, banking hasn’t had the same Aha moment about resolving financial inclusion. As a result, it can seem from the outside like only profit matters to these businesses. Current profits look obscene to many people and this needs to be talked about, with banks asking themselves “how much is enough?”

Big banks also need to address the fact that they no longer seem interested in wealth generation for most individuals. Already, around 15-20% of financial services have been ceded from large global banks to fintech, with the banks turning their focus to niches they view as profitable.

What is needed is more community banks, building societies and credit unions that are solving a fundamental local problem and have ‘doing good’ for the community embedded into their structures. Sunrise banks in the US are good examples of this because their employees reflect the people they serve, with half being female, 30% coming from communities of colour and 30% from a low or middle income background.

Embedded finance and fintech disruption

Embedded finance is all about bringing the core value of finance into another business model so it can empower the community. For example, purpose-driven businesses can bring the store of value service that banking provides to a community that needs it most. The banking and finance elements disappear almost entirely so that what is left is the value being delivered. 

In this way, embedded finance can help to bring financial management tools to the mass market. This seems like a real missed opportunity right now even though it can be done profitably. If finance providers are willing to help individuals grow over the long-term, they can also grow their profits alongside the people they serve. 

The key enabler in achieving this is how financial institutions embrace ‘empathy as a service’. This will lead to real disruption, rather than the type that many fintech startups claim to champion. After all, what is disruptive about offering a new credit card if the structures at the back-end are exactly the same?

Purpose-driven businesses to follow

Companies like Patagonia and Ben & Jerry’s were founded on the principles of ‘doing good’ and have this embedded into their structures. As a result, it doesn’t require a PR disaster or investigation to occur for it to take the spotlight. 

Right now, the technology giants who leverage personal data for their advertising businesses demonstrate the models to avoid if you want to be purpose-driven. In finance though, there are already examples of companies and individuals who are showing the way forward.

These include organisations like Mojaloop, the open source software foundation creating financial inclusion through interoperable payment systems, which is clearly dedicated to who it serves and why it serves them. The foundation’s Chairperson, Konstantin Peric, is a great example of someone who has moved up through the financial system but always focused on broadening who is served by finance how this is achieved. 

What leaders can do to help

Over the past year, when many economies have experienced a recession and many people have lost their jobs, the image of CEOs receiving record pay is not a good one. Therefore leaders who want to start a purpose-driven revolution in their businesses need to look at the people who are making the decisions. They should ask if these decision makers represent the people a business serves and whether they really know how to serve their community.

The truth is that everyone has leadership qualities in them but it requires strength of character to question an existing paradigm. The past year’s events have driven some to challenge the status quo but the onus should not be on individuals to fight their corner. It takes a village to change and it’s something that everyone is responsible for. 

A leader’s mindset should be to set a course with a purpose and keep moving forward in that direction. If they don’t, they should be aware that their employees can and will move to make sure the changes they want to see do occur.

Want to follow more discussions like those?

1.Visit the Fintech & Payments club website to be informed of daily events. The Fintech & Payments club comprises 30,000 members and followers on Clubhouse, growing every day. We run events every day on a variety of Fintech topics!

2. Follow me on Linkedin for new updates and live session write-ups.

3. Subscribe to my substack to follow my new series Beyond Fintech, exploring how Brands leverage Fintech to unlock new growth opportunities.

#BeyondFintech Episode 3: Where Does Insurtech Fit into Embedded Finance?

By Sophie Guibaud, Chief Growth Officer at OpenPayd ✨ BAAS & Embedded Finance

Last week, it was my pleasure to speak to Jonathan Larsen, the Chief Innovation Officer at Ping An Group, about where insurtech fits into the embedded finance stack and how insurance providers can remain relevant in a digital customer experience. 

I was joined in this Clubhouse discussion for the Fintech and Payments Club by Florian Graillot, Founding Partner at astoryaVC, and we were able to cover a wide range of topics affecting global insurtech innovation.

If you weren’t able to join the conversation, here are the main topics we covered and the key learnings I took from it.

China shows the way once again

Insurance in China operates against the backdrop of a leading digital finance economy where cash has more or less disappeared. AliPay and WeChat Pay account for over 90% of eCommerce and peer-to-peer payments, with the country as a whole having used digital, mobile and cloud technologies to leapfrog modes of commerce seen elsewhere.

Chinese consumers live their lives through digital platforms like nowhere else and embedded insurance must live within these experiences. At the same time though, Ping An’s business existed long before these customer trends appeared and it has had to navigate the changes they produced. 

The company has gone about merging and integrating traditional products with digital models while also innovating from scratch in a digital-first way. As a result, Ping An Group includes brands like Good Doctor, the largest telemedicine provider in the world with a market cap of $15bn, and Lufax, a personal wealth management and lending platform that started out with 900 branches but is now totally digital. 

It will be interesting to see how things develop as the Chinese regulatory landscape evolves too. The light touch approach of ‘letting all flowers bloom’ has been useful up to now but, as various digital services become more structurally important to the economy, the government is less likely to take a hands off approach.

A cloud strategy that enables innovation

As mentioned, Ping An was around long before the digitisation of eCommerce and payments that Alibaba and Tencent led, and it knew it had to plan for the future as it saw these trends emerge. 

The key decision Ping An made early on was to embrace cloud technology. It was a long and costly process to digitise its core businesses and is one that never stops. It may also make Ping An the largest financial institution in the world to have embraced a full cloud transformation.

It was a fundamental move though, as it allowed the company to re-engineer its processes and technology within its legacy businesses. Now, it is a tech-first company that is thoughtful in the way it applies technology. DevOps is a key part of the company culture, with teams building microservices in a modular way so they can be reused via APIs in a ‘plug and play’ fashion across the Group.

It has been able to build an ecosystem of services around customer activity, while leveraging traditional business models to ensure they also benefit from digital. As a result, Ping An now has 600 million digital users overall.

Innovation that is driven by bold leaders

Incumbent insurers and financial service providers that want to drive digital innovation need bold leaders who have a vision of the customer experience they want to create and the user problems they want to solve.

Peter Ma, the iconic entrepreneur who is the Group’s founder, saw that the digital revolution Alibaba and Tencent were leading represented a revolution in how consumers would run their lives and that it would be a huge challenge for traditional finance. In particular, he saw that digital would transform distribution channels that had been used to categorise finance and insurance products up to that point.

His approach contrasts with that of many leaders within financial services, who often have too much of an administration mindset and not enough of an innovation mindset. Conservative boards with too much focus on regulation or shareholders who only focus on earnings will never be able to react to the potentially existential threats brought about by major shifts in customer behaviour. 

Therefore, these businesses need courageous leaders who are able to react and make changes that fuel sustainable innovation.

Next-gen commitments must be meaningful

As a result of its cloud transformation and tech-first strategy, Ping An has been able to navigate the tension caused when a traditional insurer approaches building new digital business models. 

Typically, this sort of business will see open, digital distribution channels as a threat. Digital can rapidly commotise their business models, reduce the margins they are used to in traditional channels and relegate product providers to the bottom. However, Ping An has been able to set up new digital businesses in parallel to its existing ones without cannibalising what they do. 

If you look across the top 50 largest financial institutions in the world, the number of successful new businesses that have been created is close to zero. That means an entire industry is not reinventing itself successfully. In contrast, Ping An is creating unicorns like ZhongAn, which has a market cap of $10billion, because it is putting capital and effort towards them. 

It is not afraid to go into competition with itself if it sees a 10x opportunity in a market that could grow substantially in the future. It does this by incentivising managers who will be rewarded as stock owners and who are willing to put meaningful amounts of their own money into the business. 

It also accesses third party capital, which in ZhongAn’s case comes from it being a partnership between Ping An, Alibaba and Tencent. Finally, Ping An supports the business without constraining it but is more than willing to take tough action to correct its course or close it entirely, if necessary.

Health insurance provides a big opportunity

As mentioned, Ping An already owns the world’s biggest telemedicine provider in the shape of Good Doctor and health insurance is seen as a huge opportunity.

China has a large ageing population and there is a big focus on health for this reason. The population is experiencing the same issues with chronic diseases related to diabetes, heart issues and obesity as the West. It will not be able to support these growing needs through the traditional offline health system alone.

China currently spends around $700 per capita on health, compared to between $3,000 and $5,000 across Europe and as much as $12,000 in the USA. Building a system that would support this increased need would be unaffordable without technology. Good Doctor is Ping An’s solution, which has been built without reimbursement from the state. 

Health insurance for individuals and corporates also provides one of the biggest opportunities for insurance businesses outside China and is likely to be an area where we see more and more embedded insurance. One example of a successful implementation in the US that gives us a taste of what may come in the future is Amwell, which is allowing corporations to pay for their employees’ by delivering doctor visits at 75% of the usual costs. 

Life insurance remains a challenge

How to sell life insurance digitally, at scale and as a natural extension of other consumer services remains one of the biggest problems the industry is yet to solve. 

For Ping An, this is part of a bigger discussion about how it refocuses all of its financial advisory services to fit into the right context and be more intuitive for customers. It wants to help them think more holistically about life insurance and financial security and to solve these problems within a mobile and digital experience. It is a challenge that all life insurers around the world face, mainly because customers don’t really understand the products. Embedding it within other products, so that it is a service customers can understand in the right context, is one obvious way of doing this. 

At the same time though, life insurers have generally been slow to digitise and this may also be holding them back. Tackling their underlying infrastructure issues is long overdue and also very necessary if they want to be able to deliver attractive customer propositions that ensure they are not displaced by newcomers.

Want to follow more discussions like those?

1.Visit the Fintech & Payments club website to be informed of daily events. The Fintech & Payments club comprises 30,000 members and followers on Clubhouse, growing every day. We run events every day on a variety of Fintech topics!

2. Follow me on Linkedin for new updates and live session write-ups.

3. Subscribe to my substack to follow my new series Beyond Fintech, exploring how Brands leverage Fintech to unlock new growth opportunities.

#BeyondFintech Episode 2: The Embedded Future of eCommerce

By Sophie Guibaud, Chief Growth Officer at OpenPayd ✨ BAAS & Embedded Finance

There are so many interesting ways in which finance is being embedded into commerce experiences right now. It was therefore a great privilege to cover this subject in our latest #BeyondFintech discussion on Clubhouse for the Fintech and Payments Club. 

I was joined in this discussion by Tui Allen, Senior Product Lead at Shopify, and by my fellow moderator Scarlett Sieber, Managing Director at CCG Catalyst. Tui was the perfect person to talk us through the embedded future of commerce because of the market leading position that Shopify holds.

If you weren’t able to join the conversation, here are the main topics we covered and the key learnings I took from it.

Product development is ‘merchant obsessed’

Embedding finance into commerce is all about being ‘merchant obsessed’. This means trying to find ways to empower merchants with business finance tools and developing these tools by engaging with merchants throughout the product life cycle.

The product development process should define a problem to be solved, build prototype solutions and put them in front of merchants to test. At Shopify, low-fidelity and high-fidelity designs are used to gather feedback from merchants, so that product teams can iterate, improve and test them again. In this way, Shopify is acting like a startup by shipping quickly, moving boldly and engaging with customers throughout.

It is an approach that many banks should be looking to emulate too. While there are always regulations to be aware of, financial service providers need to evolve their product development processes so they engage their customer base and do not get stuck within their own headspace.

Partnerships should be win win

Shopify has partnered with Affirm for its ‘buy now, pay later’ offer. It has also partnered extensively with Stripe, including using the financial service provider’s Treasury service for Shopify Balance, their money management solution, currently in beta with select merchants and launching later this year.

Embedded finance partnerships within commerce need to offer mutual benefits for both parties if they are to be successful and companies should work with firms that share a similar DNA. Financial services is a complicated industry made up of many different layers, so the best finance partners are those with great reach who can minimise the number of layers an ecommerce provider needs to operate at.

Shopify has partnered with Stripe for a long time. The partnership works because Shopify wants to reinvent the banking experience for merchants. Therefore Stripe’s API-first strategy, as well as its innovative approach and willingness to ship products quickly, make it the perfect partner.

Embedded finance works in context

Making payments seamless for merchants was the starting point for Shopify but now it is providing a range of financial services to help its customers sell more, grow more and generally be more efficient and effective. 

It does this by embedding these financial services within the context of the overall commerce experience. For example, it has Shop Pay to make the checkout process more efficient and to make it faster, easier and safer for consumers to manage delivery details, payment options and account settings all in one place.. It has also introduced Installments, its ‘buy now, pay later’ product, which allows customers to split payments at checkout. Installments is currently available to select merchants in beta and will launch later this year.

All of these developments tie in with the company’s aim of bringing commerce to where consumers spend their time. With main street becoming more and more digital, Shopify has partnered with Facebook, Instagram and TikTok to help sellers across North America, Europe and Asia  develop their infeed shopping experiences.

Help to run a business, not just a shop

Part of being ‘merchant obsessed’ is understanding that the average entrepreneur or small business owner can struggle to manage their businesses finances. This is why Shopify is developing tools to help its merchants to understand their cash flow, access funding for growth and iron out any issues caused by delayed payments.

Shopify Balance, a money management tool, will include a Balance Account, fast access to funds, a Shopify Card, and a rewards program that is uniquely built for merchants and their business essential spending. This is also just one example of how data enables Shopify to help its merchants to make smart decisions about their money and rewards them for doing so.

Because a small business owner may be a creator, builder or seller before they are a finance specialist, Shopify is trying to help them with this important area of business. Therefore it uses data to highlight when it might be a good time for a merchant to access some extra cash through its funding solution, Shopify Capital, and then reduces the barriers that might stop them from accessing this funding, such as lengthy applications or credit review processes.

Financial services that meet business needs

As mentioned, data is what enables Shopify to help its merchants with the specific financial services they need and to do so in the context of the ecommerce experience. 

Shopify Capital enables merchants to access funding for growth and uses data to help suggest the right solution for a business’s specific circumstances. This might involve highlighting seasonality in sales or cash flow, such as when a fashion brand could access funding to buy fabric and prepare for its main sales period. In 2020, it involved extending the product to businesses in Canada and the UK for the first time and providing an additional $200 million in funding, to help merchants deal with the effects of the pandemic. As of February 2021,, Shopify Capital has provided $1.7 billion in funding to merchants since its launch in 2016. 

Shopify Balance has also been designed around merchant needs rather than to compete with what existing financial service providers offer. Traditional banking products are often designed for big institutions but Shopify wants to help small business owners gain control of their money and manage it in a way that helps boost growth.

Social shopping is a major global trend

Global expansion is a major priority for Shopify and the social shopping trend is likely to play a big part in how that occurs. The partnerships with Facebook, Instagram and TikTok are all examples of this and they will result in fintech being provided in the context of where customers are engaged. 

Achieving this will look different in different parts of the world because of the different audiences involved and because the world is still siloed when it comes to financial regulation. For this reason, moving into a highly regulated region could mean that partnering with a financial service provider is a better option than building a solution organically.

Regulation will always dominate how financial services work around the world and it’s something that commerce providers must always consider. Even though global payments and cross border selling have become easier in recent years, the finance industry as a whole still has work to do to make embedded finance possible on a global scale.

Want to follow more discussions like those?

1.Visit the Fintech & Payments club website to be informed of daily events. The Fintech & Payments club comprises 30,000 members and followers on Clubhouse, growing every day. We run events every day on a variety of Fintech topics!

2. Follow me on Linkedin for new updates and live session write-ups.

3. Subscribe to my substrack to follow my new series Beyond Fintech, exploring how Brands leverage Fintech to unlock new growth opportunities.