opening, a Geneva-based strategy consulting firm specializing in financial services, has just launched an integrated finance report that includes a market map of 45 providers.
Integrated finance differs from banking as a service (BaaS) in that it is offered through consumer-oriented businesses that offer access to financial services along with their core business, the consultancy said in its announcement.
For example, Insure the hedgeoffers currency hedging (FX) for small businesses.
“A lot of companies do FX payments as a service,” said Ben Robinson, co-founder of Opening. “This is nothing new. However, the area of coverage as a service has not been explored by anyone else.
Barry McCarthy, Founder and CEO of Insure the hedge, says he started it to solve the problem that small and medium-sized enterprises (SMEs) face in hedging their currency risk. Banks don’t want to offer a price below a million, he said, and the process would be too complicated for most SMEs.
Yet many of them need it. Yacht builders tend to price in USD; a buyer could use Assure Hedge to make payments in their local currency. Yacht brokers may want to cover their commissions, as it can take anywhere from six months to a year to get paid. A B2C business selling through Amazon might want to hedge its currency risk for a payment it doesn’t receive for two weeks.
“We’re already looking for relocation companies who want to integrate this into their own platform,” McCarthy added. An agency can be up and running on the service in two hours, he said. “It took a long time to create a seamless integration, but now we have 26 microservices on the platform. ”
Assure Hedge presents the hedges in plain English, rather than offering clients undeliverable futures, a banking term that might mean nothing to a retail trader.
“The products have been digitized and they are presented to the customer when they need them, in the form of the work they need. I think that’s what people sometimes lack with banking products – changing shape from a standard banking product to something much closer to a customer’s job.
Not the 50 pages of paperwork a bank handed him when he asked about currency hedging.
HUBUC, another company on the market map, specializes in providing integrated financing to companies offering software as a service (SaaS). This eliminates the headaches associated with compliance, Hasan Nawaz said.
“From a single API and a single contract, HUBUC covers compliance and provides access to financial and banking services to brands to create new sources of revenue, retain customers and improve the user experience,” said the company on its website. “The customer in this case obtains a contract, a business relationship with us and does not have to be regulated in any way.”
All they want is a nice debit or credit card and the infamous interchange fees, Nasan added, and how can that increase their income. They can also obtain transactional data to improve retention rates.
Wix.com , the online website builder, has 2.5 million marketers. Using HUBUC, it can offer Visa or Mastercard credit cards to individuals and businesses, as well as debit and prepaid cards in 19 nationalities in Europe.
“Wix gets one percent on transactions while their customers want monetization, retention, and easy onboarding.”
Several of the companies on the market map are at a very early stage – Assure Hedge and HUBUC are just lifting Series A, for example. In a rapidly changing market like integrated finance, openness believes it can deliver value by finding innovators before other fintech analysts. It means asking around, checking websites, and talking to customers.
“By the time a business hits the Magic Quadrant, it’s a legacy,” said Robinson. He thinks integrated finance is a huge market opportunity.
“Because integrated – or contextual – banking promises to provide consumers with banking services when and where they need it, it will increase conversion and the overall size of the market. Simon Torrance estimates that the integrated banking opportunity could add $ 3.7 trillion to the market capitalization of companies able to exploit it. the opening reportsaid.
“The market map is not meant to separate good from bad, but to help those responsible for system selection understand which platforms can help them achieve their strategic goals. ”
Pitchbook said integrated finance companies attracted $ 22 billion in funding in 2020.
“These are small and young companies that cannot afford to be included, or do not meet the criteria to be included, in most industry analyst reviews,” said Robinson. “But, despite their small size, they are Transformers, capable of radically changing the business model and technological capabilities of the companies they partner with.”
Openness evaluations favor modular models because they allow more specialization and flexibility. The report maps the companies as disruptors / transformers, amplifiers and accelerators. He says “an Enhancer has helped challenger banks get started faster, but without radically innovating the end customer experience or changing the business model beyond sourcing from a third party.”
Stripe is classified as an accelerator rather than an amplifier because it “offers strong intelligence, weak code integration, and microservices architecture.” Accelerators “are generally newer with a modern architecture and a clean UX.”
The use of APIs and microservices means that modern integrated finance companies offer a certain degree of portability.
“There’s still a lot of lockdown once you start developing on a BaaS platform and use it to aggregate other services,” Robinson said. “However, the level of foreclosure is much lower than it would have been in the past when your options for providing banking services as a non-bank were to either white label a monolithic tech stack or purchase a Bank.”
the far-right opening quadrant is for solutions that “provide best-in-class technology solutions as well as strong business model activation”. Several offer strong contextual intelligence and data sharing between tenants, so they can identify fraud as it occurs in multiple businesses.
“The market map assesses vendors based on their ability to enable business model innovation and technological innovation,” the opening said in its announcement.