As embedded finance (EmFi) enablers navigate new opportunities in the corporate and enterprise world, there is a dilemma regarding focusing solely on large clients at the expense of startups. European early-stage fintech startups are finding it increasingly challenging to find a Bank as a Service (BaaS) or EmFi partner. This has raised questions about whether EmFi enablers should prioritize winning over corporate and enterprise clients or continue supporting startups. Alex Mifsud, Co-founder and CEO of Weavr.io, and Paul Staples, Group Head of Embedded Banking at ClearBank, provide their insights on how EmFi enablers can navigate this dilemma and cater to both market segments effectively.
Both Mifsud and Staples believe that EmFi enablers can target both startups and corporate clients, but a framework for assessing the risk-reward tradeoff is crucial. While startups may move quickly and have embedded finance at their core, they lack an established customer base. On the other hand, corporates bring in a substantial customer base with the resources to scale delivery. However, pursuing a corporate or enterprise client also comes with its own set of challenges, including technical adaptation, complex sales cycles, and competing priorities within the organization.
Weavr uses the concept of Realisable Annualised Revenue (RAR) to evaluate opportunities for embedders, comparing the revenue potential of enterprise embedders versus startups. Staples emphasizes the importance of tailoring products and services to meet the distinct needs of startup and corporate clients. While startups may require more innovative, customer-centric solutions, enterprises look for services that meet stringent compliance standards and provide operational efficiencies. Crafting a tailored product offer that addresses the unique needs of each client segment is essential for success in the EmFi space.
Enterprise clients are adopting embedded finance for various reasons, including delivering more value to customers, increasing revenue per user, and catching up with the competition. Mifsud highlights the opportunity for enterprises to increase revenue and customer retention through embedded finance offerings. Staples suggests that multinational corporations can leverage EmFi to build their banking solutions, providing operational efficiencies and de-risking cash flow. By understanding the motivations driving enterprise clients to adopt embedded finance, EmFi enablers can tailor their offerings to meet these needs effectively.
Specialization plays a significant role in an enabler’s product and sales strategy, with a focus on offering custom solutions tailored to specific use cases. Mifsud advocates for a specialization approach rather than a one-size-fits-all model, ensuring that enablers can deliver innovative and compliant embedded finance solutions. Understanding customer nuances and perfecting risk management are key components to thriving in the EmFi space. By balancing agility with robustness and specialization with scalability, EmFi enablers can continue supporting the fintech revolution while capitalizing on opportunities in the corporate and enterprise sectors.
In conclusion, the future of embedded finance relies on EmFi enablers effectively balancing the needs of startups and enterprises. While startups may present exciting opportunities, enterprises offer stability and significant revenue potential. By understanding customer nuances, perfecting risk management, and tailoring products to meet specific client needs, EmFi enablers can navigate the evolving landscape of the fintech industry successfully. Staples and Mifsud emphasize the importance of thinking like a corporate and focusing on compliance and risk management to thrive in the competitive EmFi market.
