In a second article from this author, he examines what is called "embedded finance" – integrating banking and other financial services into nonfinancial apps and services.

The following article on “embedded finance” comes from Philipp Buschmann, the co-founder and CEO of AAZZUR. This is a Berlin-based business which helps businesses build financial services. (See a previous article from the same author here.) The editors are pleased to share this content and we hope it stimulates debate. Jump into the conversation! Email tom.burroughes@wealthbriefing.com

When you run a company wealth management is a prized possession. After all, that’s what keeps the business brewing and helps you make decisions so that you can achieve your financial goals. Traditionally, a wealth manager would be there to guide you, whether it’s on investment management, financial planning, insurance sales, tax advice, and estate planning. However, they don’t come cheap and may not be necessary depending on the goals you have set for yourself. Technology has become more intelligent and adaptable; it presents a lucrative opportunity for businesses to grab on to, in the form of embedded finance, the silent disruptor of financial institutions. This article will stop the spin and explain how embedded finance has turned the tables on wealth management and how businesses can reap the rewards.

Enabling free and fair access
Investment opportunities are bouncing back after a bout of decline back in 2020. While global events continue to rock the boat, uncertainty is nothing new in business, and thanks to embedded finance solutions, the streams of revenue for businesses are multiplying. Traditionally, accessing investment products and services required navigating complex financial systems and dealing with intermediaries.

However, with embedded finance, businesses can now offer investment options directly within their platforms, empowering users to invest with ease and become the master of their own wealth creation.

This presents exciting opportunities and free access to investment for everyone. Embedded finance is democratising wealth. Whether it's offering fractional shares of stocks, access to alternative investments such as real estate or commodities, or providing automated investment advice through robo-advisors, embedded finance has made investing more accessible and inclusive. Startups struggle with profitability in the early stages, so embedded solutions are welcomed by founders who want to target their next investor or next profit.

It provides fair access because embedded finance has revolutionised cash management for businesses, offering sophisticated treasury solutions that were once only available to large corporations. Through APIs [application programming interfaces] and integrations, businesses can now seamlessly manage their cash flows, optimise liquidity, and automate tasks such as payroll, invoicing, and expense management. This level of automation not only saves time and resources but also minimises the risk of human error, ensuring greater accuracy and efficiency in financial operations. Shopify’s Balance platform is a notable example that encourages startups and small businesses to open a business account rather than only using personal accounts. Users can manage their store's payments and transactions from one place and add another account to allocate funds towards expenses such as payroll.

Ultimately, with asset managers focused on investment products and asset growth, embedding their capabilities into wealth services makes perfect sense. This opportunity was recently recognised by Vanguard (US) and Ant Group (China) in a joint venture. By accessing Vanguard’s automated service, individual Chinese investors with at least ¥800 ($113) to place in mutual funds can now access Ant Group’s wealth platform. The versatility of embedded finance is what makes it an attractive investment and wealth management is just one element of its success.

Getting personal
Embedded finance isn’t just there to provide, it’s there to understand. By leveraging data analytics and machine learning algorithms, businesses can now gain deep insights into their financial health and access personalised recommendations for optimising their wealth management strategies.

Whether it is dynamically adjusting investment portfolios based on risk tolerance and financial goals or optimising cash flow management based on historical trends and future projections, embedded finance enables businesses to make data-driven decisions with confidence. JP Morgan Chase & Co uses self-service analytics to keep up with rapid industry changes and therefore improve optimisation for business success. Small companies can do similarly, by embracing embedded solutions, the outlook can look much brighter.

Championing the underdog
What we can also celebrate is its role in fostering financial inclusion and empowering underserved businesses. Historically, small and medium-sized enterprises (SMEs) have faced significant barriers when it comes to accessing financial services, with traditional lenders often overlooking them in favour of larger, more established corporations. However, embedded finance platforms are levelling the playing field by providing SMEs with access to a wide range of financial products and services tailored to their specific needs. From small business loans and lines of credit to invoice financing and supply chain finance, embedded finance is unlocking opportunities for SMEs to thrive and grow. 

Inviting collaboration
Additionally, embedded finance is driving innovation in wealth management through the proliferation of open banking and API ecosystems. By opening their platforms and data to third-party developers, financial institutions are fostering a culture of collaboration and innovation, allowing businesses to access a diverse array of financial products and services through a single integration. This interconnectedness enables businesses to build custom-tailored financial solutions that seamlessly integrate with their existing workflows and systems, empowering them to create value-added experiences for their customers.

It is undeniable that embedded finance has fundamentally reshaped wealth management for businesses. By democratising access to financial services and driving innovation, it has empowered businesses to thrive in an increasingly digital and interconnected world. 

By embedding financial solutions directly into non-financial platforms, products, and services, businesses can offer tailored financial solutions that meet the unique needs of their customers, driving growth, and unlocking new opportunities for prosperity. 

As we look ahead, open investment infrastructure will become mainstream as firms like Drivewealth are already shaping the investment landscape with their B2B wealth platform offerings that are being used by millions worldwide, and wealth management will, as a result, become more accessible to the average consumer and business owner.

The author
Philipp Buschmann is co-founder and CEO at AAZZUR, a firm providing a “one-stop-shop” for “smart embedded finance experience.”  
 
A serial entrepreneur, Buschmann has worked in fields such as challenger banking, financial services, IT and energy. One of his firms, Ignis Petroleum, has been publicly listed in the US and Germany.  
 
He holds an MBA from the London Business School. He is also a speaker at major events around fintech.