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01.11 / Embedded Finance & more.

Embedded Finance

I love ‘Embedded Finance’. Not just as a concept, but also as a business topic in Startup space. I wrote about it in my open ebook - back in 2019.
Basically it’s about offering financial services/products (lending, payments, etc.) via embedding them in non-financial apps (think - Uber, Shopify, etc.). This has massive repercussions for any startup. Many have been quick to realise this and have started offering ‘Embedded Finance’ services. New revenue streams, controlling the user journey, etc. - are some of the aspects pushing startups in doing so.
Bain has written an excellent report on the topic. Few snippets and pointers from the report that caught my eye.
The market is large and growing – We found that embedded finance already accounted for $21B in revenue on $2.6 trillion in total transaction volume in 2021, and we expect it to exceed $51B in revenue on $7 trillion in volume by 2026.
The new value chain favors platforms – Software companies (think of Shopify, or your favorite food delivery or vertical SaaS platform) that offer financial services through their native customer journey will be the main benefactors of the market’s expansion.

Writeup on Microsoft

The ‘Big Tech’ is a massive block of stock market which at the height of it’s prime moved around 25% of the S&P500. Thats BIG by any historical standards.
So any write-up on the these companies garners a lot of attention, because it becomes a sort of path for other smaller tech companies to follow.
I liked few aspects/lines in one such recent article on Microsoft.
The specific impact of those macro headwinds, in combination with some COVID pull-forward over the past few years, will largely be felt in the Consumer businesses, most notably due to weakening advertising spend and PC demand. On the other hand, the Commercial businesses appear set for ongoing strength, with management guiding to ~20% constant currency revenue growth in FY23.

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