Name: Embedded finance and the role of banks in its future
Uploaded: 2024-04-04T13:52:58.750Z
Duration: 531.4
Description: Janine Hirt, CEO, Innovate Finance, joins us at FinovateEurope to discuss the evolution of embedded finance in the UK. Hirt discusses the importance of partnerships and proactiveness in this space, and the role of regulation in fostering this change.

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Janine Hirt.vtt

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{{00:00:03}}
FEU.INT.002: Hi, I'm David Penn,
Research Analyst with Finovate.

{{00:00:05}}
Joining me now is Janine Hirt.

{{00:00:07}}
She is CEO of Innovate Finance.

{{00:00:09}}
Nice to see you.

{{00:00:10}}
Hi, David.

{{00:00:10}}
Thanks so much for having me.

{{00:00:11}}
Great.

{{00:00:11}}
And thanks for joining us
here at FinovateEurope.

{{00:00:13}}
I thought we could start off by
maybe having you tell folks a

{{00:00:15}}
little bit about Innovate Finance
for those who aren't familiar.

{{00:00:17}}
Yeah, absolutely.

{{00:00:17}}
Innovate Finance is the
industry body for UK fintech.

{{00:00:20}}
We bring together the
full innovation ecosystem.

{{00:00:22}}
So your early stage startups,
your late stage startups, like the

{{00:00:25}}
Revolut, Klarna, Stripe, et cetera.

{{00:00:27}}
And then we also bring the large
incumbents to the table, such

{{00:00:30}}
as JP Morgan, Lloyds, et cetera,
and some of the big techs.

{{00:00:34}}
So ultimately we are trying to
transform financial services

{{00:00:37}}
and make it more inclusive, more
democratic and better for everyone.

{{00:00:40}}
Fantastic.

{{00:00:41}}
Quite a bit of ground there.

{{00:00:42}}
One of the things I wanted to talk
about with you today, we've talked

{{00:00:44}}
about it with some of our folks as
well, is the idea of embedded finance

{{00:00:46}}
and making as a service, particularly
how it's happening here in Europe.

{{00:00:50}}
From your perspective, and it's quite
a perspective, what is the future

{{00:00:53}}
of embedded finance and banking as a
service in Europe, as far as you see it?

{{00:00:56}}
Listen, I think the future of
embedded finance and banking as a

{{00:00:59}}
service in Europe, and particularly
in the UK, is incredibly positive.

{{00:01:03}}
Yeah.

{{00:01:03}}
So I think there is a lot of opportunity,
and I would really pull out the

{{00:01:06}}
opportunity that embedded banking
and embedded finance has to create a

{{00:01:10}}
better experience for the consumer.

{{00:01:11}}
I think looking at London in particular,
wider UK, we have so much happening here.

{{00:01:16}}
The focus on embedded finance is moving
from beyond just embedded payments,

{{00:01:20}}
from beyond just embedded banking.

{{00:01:21}}
We're looking at embedded insurance,
embedded lending, embedded investment,

{{00:01:25}}
and all of these have a real impact on
the end consumer at the end of the day

{{00:01:30}}
and giving them that seamless experience.

{{00:01:32}}
It's really something else.

{{00:01:33}}
I was talking with someone else about the
idea of folks who might not have a full

{{00:01:35}}
understanding of just how liberating in
some respects embedded finance can be.

{{00:01:39}}
And he says it like an Uber.

{{00:01:41}}
And all of a sudden it's, oh, all
of that's the embedded experience.

{{00:01:43}}
Now you just, one of the things I
like that you mentioned is, that's

{{00:01:45}}
your embedded payments experience.

{{00:01:47}}
But as you mentioned, we're talking
about lending and a whole lot of other

{{00:01:49}}
aspects that go involved as well.

{{00:01:51}}
And on the lending side, for example,
if you think about some of the

{{00:01:54}}
players in the buy now, pay later
space that are truly transparent.

{{00:01:57}}
Transforming payments
at the point of sale.

{{00:01:59}}
You're looking at things
like embedded investments.

{{00:02:01}}
So your Robin hoods, for example,
that are making investments so much

{{00:02:04}}
easier and so much more accessible.

{{00:02:06}}
And then on the insurance side as
well, which is impacting different

{{00:02:09}}
segments beyond just financial services,
beyond retail, but looking at health.

{{00:02:13}}
Insurance is such an interesting one
because it's gotta be one of those

{{00:02:15}}
aspects of finance for obvious reasons
that you tend not to think about.

{{00:02:18}}
It feels like this necessary
evil type of thing.

{{00:02:20}}
And if you could find a way.

{{00:02:21}}
To make that less friction to make
that more seamless than the opportunity

{{00:02:25}}
of people to have something that they
really do need, which is that coverage

{{00:02:27}}
is that much greater, it seems.

{{00:02:28}}
Absolutely and beyond the retail beyond
the health, we're even seeing changes

{{00:02:32}}
happening and transforming education.

{{00:02:34}}
So looking at students financing, loan
financing, tuition financing, all of these

{{00:02:38}}
are areas where you're seeing the power of
technology really come to the forefront.

{{00:02:42}}
Sure.

{{00:02:42}}
Now, one of the questions I wanted to ask
you is about the competitive landscape

{{00:02:45}}
and how the rise in embedded finance
is going to change that for service

{{00:02:47}}
providers, things like that, beyond the
big tech folks who are doing it, your

{{00:02:50}}
Apples and Amazon, that kind of thing.

{{00:02:52}}
For some of the other folks, how is
that going to shift things for them?

{{00:02:54}}
I think we already are looking
at a pretty diverse ecosystem,

{{00:02:58}}
and I would expect in the future.

{{00:02:59}}
We expect that ecosystem to only
diversify further over the coming years.

{{00:03:02}}
So you mentioned the big techs, they are
huge players within this space looking

{{00:03:05}}
at their technology, their capacity.

{{00:03:08}}
But also I think it points to
the importance of important

{{00:03:10}}
partnerships in this arena as well.

{{00:03:12}}
When we talk about embedded financing, so
much of that conversation is around how

{{00:03:15}}
can the large institutions start working
with the banking as a service providers

{{00:03:19}}
with the fintech community and how can
we really deliver on those partnerships

{{00:03:23}}
to create that better experience.

{{00:03:25}}
One of the questions that people
have with embedded finance

{{00:03:27}}
is what happens to the banks?

{{00:03:29}}
Is there a role for them?

{{00:03:29}}
What role can they play in
this in this new environment?

{{00:03:32}}
How would you say that you think
banks should or could respond to

{{00:03:35}}
some of these trends, particularly
trends with embedded finance?

{{00:03:37}}
Yeah, it's a great question.

{{00:03:38}}
And I think banks have an
incredibly important role to play.

{{00:03:41}}
There is a trust that's been
associated, especially with the

{{00:03:43}}
larger, the more established banks,
and ultimately they have information.

{{00:03:47}}
They have the data.

{{00:03:47}}
So it is critical that they
start work with different

{{00:03:50}}
players across the ecosystem to
really focus on that consumer.

{{00:03:53}}
What I would say for the banks that
are out there looking at how they can

{{00:03:56}}
bring in banking as a service providers,
how they can start thinking about

{{00:04:00}}
embedded finance is firstly, make sure
that you are putting the consumer at

{{00:04:03}}
the heart of all of your initiatives
and the heart of your proposition, but

{{00:04:06}}
also think about how you're engaging
with those external stakeholders.

{{00:04:10}}
Look at your risk profile, look at
your risk appetite and really do

{{00:04:13}}
that assessment internally of how
you're providing that structure.

{{00:04:16}}
Do you say, or would you say, given,
again, the reach that you have,

{{00:04:19}}
that financial institutions, banks
in particular, are aware of, are

{{00:04:22}}
they on the move in this direction,
or is it something that's still

{{00:04:24}}
trying to get their hands around?

{{00:04:25}}
So I would say it's a mix of both, and I
think it's a really important component

{{00:04:29}}
there around competitive advantage,
because those players in the industry that

{{00:04:32}}
are on the move, that are recognizing the
importance of embedded finance, and really

{{00:04:36}}
recognizing the importance of giving that
seamless experience to the customer, those

{{00:04:40}}
are the ones that will come out on top.

{{00:04:42}}
And I think it's also important
when we talk about banks, you've

{{00:04:44}}
got those institutional players that
have been around a long time, but

{{00:04:47}}
actually look at the challenger banks.

{{00:04:49}}
Let's make sure that we are approaching
things with this challenger bank

{{00:04:52}}
first mindset, because some of these
banks are already so far ahead when

{{00:04:56}}
it comes to embedded finance that
they're giving that experience already.

{{00:04:59}}
Yeah, that's one of the things I would
have to imagine that, that again, there

{{00:05:02}}
are a lot of banks that have established
this trust over a long period of

{{00:05:04}}
time, making them a certain advantage.

{{00:05:05}}
But then you've got these, if not
first movers, these early movers that

{{00:05:08}}
maybe don't have those relationships,
but they've got the offerings.

{{00:05:11}}
And it's almost like this race
between the offering and the loyalty.

{{00:05:14}}
And you're seeing that.

{{00:05:15}}
So increasingly, particularly in the UK,
when you look at banks like Monzo and

{{00:05:19}}
Starlink, they are consistently, time and
again, year after year, topping the list

{{00:05:24}}
of a consumer engagement and consumer
satisfaction, and I think that's a real

{{00:05:27}}
testament to how they're approaching
technology to give that better experience.

{{00:05:31}}
Yeah, absolutely.

{{00:05:32}}
If we were to have you back in a year,
which I hope we do, what would you say

{{00:05:36}}
is some of the positive changes you
would have liked to have seen, say, in

{{00:05:39}}
that year time on some of these fronts?

{{00:05:40}}
We talked about a different
couple of different areas.

{{00:05:41}}
What are some of the things
you'd love to be able to say?

{{00:05:43}}
Last year we were hoping this
happened, and here it is.

{{00:05:45}}
Yeah, so I think on embedded
finance in particular, we would

{{00:05:49}}
love to see some more partnerships.

{{00:05:50}}
And some more engagement and particularly
in terms of what we're hopeful for

{{00:05:55}}
is just making sure that these types
of engagements are leading to more

{{00:05:58}}
inclusion within financial services.

{{00:06:00}}
So offering access to products to
different segments of the consumer

{{00:06:04}}
population that may not have had
that access or have struggled with

{{00:06:06}}
that type of access previously.

{{00:06:08}}
So I love in a year from now
to say that we're seeing that

{{00:06:11}}
positive impact actually happen.

{{00:06:12}}
Yeah, I wanted to follow up on that idea.

{{00:06:14}}
I know that one of the problems that
technology sometimes has, I know It's in

{{00:06:17}}
the past has been a lot of these things
that are come up these products and so

{{00:06:21}}
forth are not necessarily then with that
inclusion in mind, it's a great product.

{{00:06:25}}
They put it out there without thinking.

{{00:06:26}}
Wait a minute.

{{00:06:27}}
Who all does this serve?

{{00:06:28}}
And is this serve as broadly as
you all who created it think?

{{00:06:31}}
Is that a danger here?

{{00:06:32}}
Do you think?

{{00:06:32}}
So I think as long as you're
looking at things with the mindset

{{00:06:36}}
of how does this impact the
customer, you're in a good space.

{{00:06:39}}
And I would also argue that's one of
the reasons that fintech has become

{{00:06:43}}
so popular and that so many fintech
firms are becoming so successful.

{{00:06:47}}
We put out a report in the autumn in
collaboration with our partner Accenture,

{{00:06:50}}
and it actually looked at quantifying the
impact that UK fintech has had on society.

{{00:06:55}}
We found that we actually measured
the impact against the United Nations

{{00:06:59}}
Sustainable Development Goals.

{{00:07:00}}
We found that 98 percent of UK fintech
had a positive impact, more than a

{{00:07:04}}
quarter directly addressing the issues
of inclusion, and more than one third

{{00:07:08}}
strengthening social institutions and
bringing more justice into the ecosystem.

{{00:07:12}}
I would say looking at that engagement
between the institutions that have

{{00:07:16}}
been established with the fintech
community is really critical to this.

{{00:07:19}}
Yeah, that's interesting to know.

{{00:07:20}}
Maybe lastly, by way of wrapping
up one thing that always has to be

{{00:07:24}}
brought up is the idea of regulation.

{{00:07:25}}
Yeah.

{{00:07:25}}
And these sorts of things.

{{00:07:27}}
In terms of the regulatory landscape
for making embedded finance thrive at a

{{00:07:30}}
pace you think would be the appropriate
pace are there things that concern you,

{{00:07:34}}
are there things that that make you feel
confident that the regulators have an

{{00:07:37}}
understanding of the opportunity here?

{{00:07:39}}
Or how do you see that?

{{00:07:40}}
I would say we always think
regulation can move faster.

{{00:07:43}}
One of the reasons the UK is a global
leader in fintech, and we are receiving

{{00:07:46}}
more investment than anywhere in
the world, bar the United States.

{{00:07:49}}
One of those reasons is because we've
always had such a proactive regulator.

{{00:07:53}}
But what we have to make sure is
that we continue that momentum and

{{00:07:56}}
that we continue moving forward.

{{00:07:57}}
And that is in areas like
embedded finance, but that's open.

{{00:08:00}}
So open banking, looking at things like
crypto, AI, etc, making sure we're pushing

{{00:08:05}}
that envelope and keep moving ahead.

{{00:08:07}}
We consistently call to ensure that
the regulator is fit for purpose

{{00:08:10}}
and also fit for the future.

{{00:08:12}}
So making sure they have the capacity
and the capability to look at new

{{00:08:16}}
technologies and not just put them
into a box of how old ones have been

{{00:08:20}}
regulated, but really approach it
in a different mindset is critical.

{{00:08:23}}
But that also means you've got to have
regulators working with government,

{{00:08:26}}
working with industry in order to do that.

{{00:08:28}}
So the collaborative
piece is really important.

{{00:08:30}}
Yeah, absolutely.

{{00:08:31}}
If you've got that, you really do have
the capacity to make great strides

{{00:08:35}}
in a really short period of time.

{{00:08:36}}
It seems fantastic.

{{00:08:37}}
Fantastic meeting you.

{{00:08:38}}
Fantastic.

{{00:08:38}}
Can you talk about some of
these incredible things that are

{{00:08:40}}
happening in Europe and in the UK.

{{00:08:41}}
And again, hopefully we'll have
you back in a year and we'll

{{00:08:43}}
see some fantastic progress.

{{00:08:44}}
Great.

{{00:08:45}}
Thank you so much, David, for having me.

{{00:08:46}}
Thank you.

{{00:08:46}}
And thank you very much as well.

FEU.INT.002: Hi, I'm David Penn,
Research Analyst with Finovate.

And thanks for joining us
here at FinovateEurope.

I thought we could start off by
maybe having you tell folks a

little bit about Innovate Finance
for those who aren't familiar.

Innovate Finance is the
industry body for UK fintech.

We bring together the
full innovation ecosystem.

So your early stage startups,
your late stage startups, like the

And then we also bring the large
incumbents to the table, such

as JP Morgan, Lloyds, et cetera,
and some of the big techs.

So ultimately we are trying to
transform financial services

and make it more inclusive, more
democratic and better for everyone.

One of the things I wanted to talk
about with you today, we've talked

about it with some of our folks as
well, is the idea of embedded finance

and making as a service, particularly
how it's happening here in Europe.

From your perspective, and it's quite
a perspective, what is the future

of embedded finance and banking as a
service in Europe, as far as you see it?

Listen, I think the future of
embedded finance and banking as a

service in Europe, and particularly
in the UK, is incredibly positive.

So I think there is a lot of opportunity,
and I would really pull out the

opportunity that embedded banking
and embedded finance has to create a

I think looking at London in particular,
wider UK, we have so much happening here.

The focus on embedded finance is moving
from beyond just embedded payments,

We're looking at embedded insurance,
embedded lending, embedded investment,

and all of these have a real impact on
the end consumer at the end of the day

and giving them that seamless experience.

I was talking with someone else about the
idea of folks who might not have a full

understanding of just how liberating in
some respects embedded finance can be.

And all of a sudden it's, oh, all
of that's the embedded experience.

Now you just, one of the things I
like that you mentioned is, that's

But as you mentioned, we're talking
about lending and a whole lot of other

And on the lending side, for example,
if you think about some of the

players in the buy now, pay later
space that are truly transparent.

Transforming payments
at the point of sale.

You're looking at things
like embedded investments.

So your Robin hoods, for example,
that are making investments so much

And then on the insurance side as
well, which is impacting different

segments beyond just financial services,
beyond retail, but looking at health.

Insurance is such an interesting one
because it's gotta be one of those

aspects of finance for obvious reasons
that you tend not to think about.

It feels like this necessary
evil type of thing.

To make that less friction to make
that more seamless than the opportunity

of people to have something that they
really do need, which is that coverage

Absolutely and beyond the retail beyond
the health, we're even seeing changes

So looking at students financing, loan
financing, tuition financing, all of these

are areas where you're seeing the power of
technology really come to the forefront.

Now, one of the questions I wanted to ask
you is about the competitive landscape

and how the rise in embedded finance
is going to change that for service

providers, things like that, beyond the
big tech folks who are doing it, your

For some of the other folks, how is
that going to shift things for them?

I think we already are looking
at a pretty diverse ecosystem,

We expect that ecosystem to only
diversify further over the coming years.

So you mentioned the big techs, they are
huge players within this space looking

But also I think it points to
the importance of important

When we talk about embedded financing, so
much of that conversation is around how

can the large institutions start working
with the banking as a service providers

with the fintech community and how can
we really deliver on those partnerships

One of the questions that people
have with embedded finance

What role can they play in
this in this new environment?

How would you say that you think
banks should or could respond to

some of these trends, particularly
trends with embedded finance?

And I think banks have an
incredibly important role to play.

There is a trust that's been
associated, especially with the

larger, the more established banks,
and ultimately they have information.

So it is critical that they
start work with different

players across the ecosystem to
really focus on that consumer.

What I would say for the banks that
are out there looking at how they can

bring in banking as a service providers,
how they can start thinking about

embedded finance is firstly, make sure
that you are putting the consumer at

the heart of all of your initiatives
and the heart of your proposition, but

FinovateEurope

Trend

Janine Hirt, CEO, Innovate Finance, joins us at FinovateEurope to discuss the evolution of embedded finance in the UK. Hirt discusses the importance of partnerships and proactiveness in this space, and the role of regulation in fostering this change.