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GGV Capital is excited to unveil the inaugural Embedded Fintech 50, a list highlighting the rising stars in fintech innovation.
Congratulations to the companies that earned a spot!
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What is Embedded Fintech?
Merchants
Banks
HRIS
stockbrokers
lenders
insurance brokers
Why Embedded Fintech?
Financial services are fundamental enablers of commerce. The next phase of fintech innovation will be marked by financial services integrating closer to commercial activity, meeting end-users at the point of need. In other words, financial services will become embedded into the flow of commerce.
The first wave of commercial fintech innovation in the early 2010s was marked by companies going D2C to acquire customers. When the market was dominated by legacy incumbents, the D2C strategy worked effectively as incumbents were weighed down by technical debt and struggled to respond quickly to new digital offerings.
Consumer fintechs — such as Chime in the U.S., Nubank in LatAm, and Revolut in Europe — quickly established themselves around the world, successfully acquiring young, digital-native customers. Yet the success of D2C fintechs has motivated new entrants to crowd the space and for incumbents to upgrade their digital capabilities, heightening competition and costs of user acquisition.
How should new fintechs differentiate their product offering, access proprietary data for underwriting, and acquire customers profitably in today’s increasingly competitive environment?
We believe the answer is in “embedded fintech.”
Embedded Fintech in Action
enables small and medium-sized merchants to accept in-store card payments. but also serves as a financial platform embedding payments, checking accounts, lending, and more into one place.
enables any e-commerce retailer to set up digital payments instantly with seven lines of code, and leverages visibility of payments flow to provide payments orchestration, extend loans, issue cards, and offer banking services.
provides banking services to U.S. SMBs and is leveraging its visibility of customer accounts to build a financial operating system offering loans, AP / AR automation, among other products.
leverages payroll and equity compensation information from HRIS systems to provide financial advisory services to employees.
is powering DoorDash Capital and Amazon Cash Advance, leveraging the transactional data of marketplaces to underwrite and extend capital expenditure and working capital loans to merchants.
embeds BNPL offering directly into the e-commerce checkout flow to drive higher sales conversion at the point of sale.
Embedded fintech is a global phenomenon.
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In China, back in early 2010s, Alibaba and Tencent launched Alipay and WeChat Pay attached to their respective e-commerce and mobile messaging products, which have come to comprise over 50% of total payment volume in the country over the course of the past decade. Embedding financial services into commercial platforms has worked successfully in other markets—we believe the U.S. is next.
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In Southeast Asia, Grab has integrated mobile wallet, stock investment, business loan, and insurance offerings into its core ridesharing and food delivery app.
In Latin America, Frubana is starting to extend working capital loans to farmers and restaurants that buy and sell on the platform.
In the U.S., the new generation of fintechs are adopting an embedded strategy to scale quickly and learn fast.
The benefits of doing so are manifold:
Lower customer acquisition costs
Speed up product launch as UI / UX frontend is already built
Garner greater trust from consumers by being affiliated with a larger brand
Proactively push personalized financial service offerings vs. reactively serve customers when asked
Share risk between the financial service provider and the platform
Leverage troves of proprietary data to gain an edge in risk underwriting.
GGV's Fintech Investments
At GGV, we have invested in fintech globally, backing companies that democratize access to financial services through technology.
GGV led Affirm’s Series E in December 2017 seeing potential in embedding consumer lending at checkout to catalyze e-commerce purchases. In January 2021, Affirm went public at a $12 billion valuation.
The name "Karat" is born. 🥳
kar·at
[ˈka-rət]
a measure of the purity of gold, pure gold being 24 karats.
GGV led Idwall’s Series C in June 2021 to support founder Lincoln Ando’s mission to reduce fraud and malicious financial activity for fintechs and digital services in Latin America.
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