A New Category of Financial Services: Embedded Finance


Key Takeaways

  • What’s embedded finance?
  • What’s the appeal for consumers?
  • What’s the impact to the wealth landscape?
  • How you can prepare for the change

An evolution taking place right now in fintech is creating a new category of financial services: embedded finance. Now’s the time to get familiar with the term because it’s changing the landscape of investing for both investors and advisors.

What’s embedded finance?

Embedded finance is the ability to interact with financial services in places that aren’t native financial services apps. Imagine:  

  • Walmart lets you take the funds from a return and put them into an investing account instead of back on your credit card. 
  • Facebook gives you the ability to gift shares of a stock to a friend/connection. 
  • PayPal allows you to take your funds and buy cryptocurrency directly from your account (this one is already reality!).  

It’s investing your money right where you receive it—Uber, Instacart, Amazon, etc.—with companies you may not normally think of when you think “financial services.” Before too long, these types of transactions could  be automated and widespread. Financial services will be seamlessly woven into the micro movements of a consumer’s financial life.

The appeal for consumers

Consumers want choice. They want efficiency. In some cases, they want to be empowered to take control of their finances. Embedded finance offers that. 

We shouldn’t have to put our money into one place to save, another to invest, yet another to get a loan, and then another to make a purchase. Embedded finance puts the opportunity to make a smart financial decision right where the consumer is already spending their time – and importantly – right where they’re already interacting with their money. A routine interaction in your day becomes an opportunity to make a wise financial decision.

The impact to the wealth landscape

This technological evolution addresses one of the root causes of wealth inequality—access. 

Professionally managed portfolios, financial planning tools, and more were once only available to consumers at a certain income level. Embedded finance helps those tools become democratized for all. Even those who have been denied access to a financial advisor are suddenly able to consider options that can positively impact their futures and help them achieve their goals.  

And, as consumers benefit from increasingly streamlined financial interactions and opportunities to put their money to work, it’s likely they’ll continue learning about managing their finances. As they build their skills, they’ll be more prepared to take advantage of opportunities to grow their wealth.

This changes the acquisition game for financial advisors. How will you find these customers who are building wealth disparately through consumer apps? And when you find them, how will you advise them?

The Intelligent Financial LifeTM

At the end of the day, facilitating the Intelligent Financial Life™—bringing together the disparate pieces of a person’s financial life into one complete picture— is complex, and an advisor will be required. There’s no question about that. 

So what about finding clients to work with? Where traditional networking techniques helped financial advisors find potential clients ready to work with an advisor now, embedded finance actually helps to create more potential clients who will be ready to work with an advisor tomorrow. A larger pool of potential clients equals more opportunity to grow your business. Here’s what you should consider now to be ready for this change: 

  • Be forward-thinking. Don’t wait for this shift to take hold; start planning for it now.  
  • Focus on relationships. Nothing can replace human empathy and understanding. Find ways to deliver a truly engaging experience for your clients throughout all stages of your relationship and their finances.
  • Be proactive. Your clients may already be dabbling in embedded finance, so don’t be afraid to bring it up so you can get a better picture of their financial lives and actively offer advice. 
  • Leverage technology. More financial interactions could mean more stress. Your clients deserve data-driven advice that looks at their holistic financial picture. The Envestnet ecosystem offers dynamic, 360-degree views of your clients’ finances, and we’ll continue to build, partner with, or buy the solutions you need to help you be a hero to your clients.  

This shift is already taking place, and it’s an opportunity for both investors and financial services professionals to grow. Start taking action now to enable your potential to scale and reach a new generation of investors.  

To connect with our Embedded Finance team, reach out to Envestnet today at  EmbeddedFinance@envestnet.com.