How could embedded finance enable Gen Z acquisition for brands?

Hidden conflicts and risks of DeFi, How do apps become super apps?

Perspective for today:

  1. Big tech’s move into fintech continues with Apple’s acquisition of Credit Kudos
  2. How could embedded finance enable Gen Z acquisition for brands?
  3. Is Apple about to offer “iPhone as a Super App” services?
  4. Hidden conflicts and risks of DeFi
  5. Go-to-market motion for Game DAOs
  6. Should we still use the term “Primary” in the context of checking or current accounts?
  7. Crypto Business Models
  8. How do apps become super apps?
  9. What are the current concerns with Web3?

Big tech’s move into fintech continues with Apple’s acquisition of Credit Kudos

Apple has acquired UK-based fintech start-up Credit Kudos, signaling a deeper push into payments technology by the iPhone maker.

Credit Kudos uses machine learning to create an alternative to traditional credit scores, suggesting that the US tech giant may look to expand its lending services. Apple offers a credit card, which is currently only available in the US, in partnership with Goldman Sachs, and also offers installment payment plans for its devices.

Apple has expanded into financial services more slowly than some in the banking industry had feared back in 2014 when it launched Apple Pay, which allows contactless payments using its iPhone and Watches and through its Safari web browser.

Reports last year suggested Apple was planning to introduce a “buy now, pay later” feature to Apple Pay, similar to installment options offered by Klarna, PayPal, and Afterpay.

The acquisition of Credit Kudos could provide Apple with this functionality, said Simon Taylor, chief product officer, and co-founder at fintech consultancy 11:FS. “Instead of forcing consumers to do a full credit pull just to buy a $50 jacket, why not quickly check their affordability and creditworthiness directly from their bank account?”

Credit Kudos does not have a UK banking license but takes advantage of the country’s Open Banking standards, which are meant to make it easier and safer for consumers to share selected financial information from bank accounts and credit cards with hundreds of smaller services providers.

Aiming to make affordable credit more widely available and assist in faster lending decisions, the company looks at alternative measures to assess the credit risk of individuals for companies, including rental apps, brokers, and other fintechs. Traditional credit assessment measures such as bank statements and utility bills have faced criticism over their ability to accurately assess a consumer’s financial situation.

The Silicon Valley-based company rarely makes large acquisitions instead of acquiring small teams or add-on technologies that it can use to accelerate the development of new features for the iPhone.

Credit Kudos declined to comment on the takeover, which was first reported by fintech news site The Block.

Apple said: “Apple buys smaller technology companies from time to time, and we generally do not discuss our purpose or plans.”


How could embedded finance enable Gen Z acquisition for brands?

I have come across an interesting article on one of my most liked topics embedded in finance.

Author John MacIlwaine CEO of Highnote shares his views on How embedded finance can help brands cater to the needs of Gen Z.

1. Make payments a digital-first experience

Gen Zers are the digital-first generation. The question for brands, then, is not whether to accept digital payments but how to do it effectively. Two challenges are likely to arise: first, choosing which payment methods to accept (Fiserv’s research suggests PayPal is currently the most popular, but the market is fragmented), and second, streamlining the reconciliation of additional payment types.

Embedded finance can help with both. Of particular interest to many accounting teams in the general ledger system, some providers now offer, which automates the work of account reconciliation, so your accounting team only has to audit the record. Another compelling offering: virtual cards, which make for an easy and frictionless commerce experience. When brands can accept virtual card payments, transactions are smoother, and security increases — everyone wins.

2. Align your card rewards with your brand’s mission

Gen Zers are mission-driven, therefore, pay attention to what you offer.

Make your cards available through virtual experience as soon as customers order them. Make rewards programs aligned with the goals of customers and the global community, such as helping the climate through planting trees and decreasing carbon footprint. And most importantly, make your reward programs personalized by learning from customer behaviour.

Again, all of these are possible with today’s embedded finance solutions.

3. Offer fintech financing options

Brand-backed financing is nothing new, but it has had a digital makeover as buy now, pay later (BNPL). This financing option is particularly popular among Gen Zers.

The big drawback with leading BNPL providers, though, is that they require brands to hand off their customers at the point of sale.

This is where embedded finance can make all the difference. Today’s providers make it possible for brands to incorporate BNPL solutions into their own platform creating “branded” BNPL experiences. This also enables them to maintain and cultivate customer relationships long after purchase. Embedded branded BNPL solutions also make it possible for brands to offer the kinds of rewards they would for any customer purchase.

How else can embedded finance help brands attract Gen Z customers?


Is Apple about to offer “iPhone as a Super App” services?

A few days ago, Apple acquired UK fintech startup Credit Kudos in a move to strengthen its presence in the financial services market.

According to Bloomberg LP, Apple wants to make owning a phone like subscribing to apps.

The service would be Apple’s biggest push yet into automatically recurring sales, allowing users to subscribe to hardware for the first time — rather than just digital services. But the project is still in development, said the people who asked not to be identified because the initiative hasn’t been announced.

The idea is to make the process of buying an iPhone or iPad on par with paying for iCloud storage or an Apple Music subscription each month. Apple is planning to let customers subscribe to hardware with the same Apple ID and App Store account they use to buy apps and subscribe to services today.

Apple has been working on the subscription program for several months, but the project was recently put on the back burner in an effort to launch a “buy now, pay later” service more quickly. Nonetheless, the subscription service is still expected to launch at the end of 2022, but could be delayed into 2023 or end up getting canceled, the people said.

The company has had preliminary discussions internally about attaching the hardware subscription program to its Apple One bundles and AppleCare technical support plans. Apple launched the bundles in 2020 to let users subscribe to several services — including TV+, Arcade, Music, Fitness+ and iCloud storage — for a lower monthly fee.

The subscriptions would likely be managed through a user’s Apple account on their devices, through the App Store, and on the company’s website. It would likely also be an option at the checkout on Apple’s online store and at its physical retail locations. Apple accounts are typically tied to a user’s credit or debit card.

The question here I would ask is would it apply only to Apple’s own services, or third-party apps could become part of the subscription and work on revenue sharing model?


Hidden conflicts and risks of DeFi

The global umbrella organisation for securities regulators has warned that decentralised finance contains myriad hidden conflicts and risks as authorities begin circling one of the fastest-growing corners of cryptocurrency markets.

Comparing the current rise of decentralised finance, or DeFi, to the dot-com bubble, Martin Moloney, secretary-general of the International Organization of Securities Commissions (IOSCO), said its explosive growth warranted “closer attention by regulators.”

“Most DeFi protocols rely on centralisation in one or more areas, and there are protocols that have a hidden centralised authority and are decentralised in name only,” the board of Iosco wrote in the report.

Moloney said the financial and material interests between development teams and DeFi projects are “highly conflicted, in many cases.” Development teams often play a role in distributing cryptocurrency tokens that help to govern the projects while giving themselves large allocations.

“The key issues are evidently around conflicts of interest, and they are evidently around the key players who continue to have centralised power and control in the sector,” Moloney said. “If they’re not willing to acknowledge the power and control that they have, then we have a problem.”

Cryptocurrency owners have committed more than $210bn in capital to DeFi projects, according to the analytics website DeFiLlama, with much of it used to finance over collateralised loans and peer-to-peer trading. Venture capitalists have also poured money into development teams and cryptocurrency tokens issued by the projects.

In the report, Iosco also warned about market manipulation risks that are “somewhat unique” to DeFi, such as the front-running of trades on Ethereum by users who help validate transactions on the digital ledger.


Go-to-market motion for Game DAOs

Today, most web3 games, whether play-to-earn, play-to-mint, move-to-earn, or another type, closely resemble popular web2 counterparts — but with two key distinctions:

1. The use of in-game assets native to open, global blockchain platforms rather than the closed, controlled economies found in traditional pay-to-own and free-to-play titles; and

2. The ability of game players to become true stakeholders and have a say in the governance of the game itself.

In web3 gaming, the go-to-market strategy is built through platform distribution, player referrals, and partnerships with guilds. Guilds such as Yield Guild Games (YGG) allow new players to start playing a game by loaning them game assets that they might otherwise not be able to afford. Guilds choose what games to support by looking at three factors: the quality of the game, the strength of the community, and the robustness and fairness of the game economy. Game, community, and economic health must all be maintained in tandem.

While developers of blockchain-based games might have a lower ownership percentage and/or take rate, by incentivizing players as owners, the developers are helping grow the overall economy for all.

But unlike in web2, purpose and community lead. For instance, Loot, a game that started with content first before moving to gameplay, is an example of purpose and community, rather than product, driving GTM. Loot is a collection of NFTs, each known as a Loot bag, which has a unique combination of adventure gear items (examples include a dragonskin belt, silk gloves of fury, and an amulet of enlightenment). Loot essentially provides a prompt — or building block primitive — upon which games, projects, and other worlds can be built. The Loot community has created everything from analytics tools to derivative art, music collections, realms, quests, and more games inspired by their Loot bags.

The key idea here is that Loot grew not due to an existing product that users flocked to, but because of the idea and lore it represented — an open, composable network that welcomed creativity and incentivized users through tokens.

The community makes the product — it’s not the network making the product in hopes it will attract a community. As such, a key metric here would be the number of derivatives, for instance, which could be considered even more valuable here than traditional metrics would.


Should we still use the term “Primary” in the context of checking or current accounts?

It seems like no, and here is why.

1) Few banks have sufficient data about the breadth of their customers’ relationships. Gen Z and Millennial households could have 30 to 40 banking relationships. Seeing the total picture is nearly impossible (for banks and consumers).

2) Consumers have primary account providers — but not necessarily a single primary financial institution. With many consumers having multiple checking accounts (a third of Gen Zers and Gen Xers, and 40% of Millennials, have two or more checking accounts), multiple payment accounts, multiple investment accounts, and using various tools.

3) Determining primary status from just the data misses the emotional aspect of the relationship. Someone may make a lot of mobile check deposits into one of their checking accounts and use that bank’s debit card frequently but use other tools by other service providers too.

What’s Going On Here?

What’s the Cornerstone Advisors’ data on primary checking account status telling the industry?

1) Digital banks aren’t the “challenger” banks anymore. They won. More Gen Zers and Millennials call a digital bank their primary checking account provider than those that consider a community bank or a credit union to be their primary checking account provider — combined.

2) Consumers are looking for a different kind of account. It’s inaccurate to call what the digital providers offer “checking accounts.” They’re more like mashups from what have traditionally been separate accounts. Cash App, for example, provides crypto and tax prep capabilities built into the service — features typically not found in the traditional checking account.

3) Checking account usage is becoming specialized. As consumers open additional accounts — increasingly with digital banks — they consider their accounts from traditional banks to be their secondary and third accounts. Those accounts stay open but are increasingly used for specific purposes — like making expenses for specific items or sending money to other people.

4) Gen Z is flocking to PayPal and Cash App. Chime is a strong neobank among Millennials and is growing its primary customer share among Gen Xers. But its primary status among Gen Zers has slipped since 2020 — from 6.5% in October 2020 to 4.6% in January 2022. PayPal and Square picked up the slack — and more — with 8% of Gen Zers now calling PayPal their primary checking account provider and 4% applying that label to Cash App.

5) Personal relationships still matter. The uptick in primary customer market share for community banks reflects a growing need among some consumers to have a personal touch. According to Charles Potts, Chief Innovation Officer at the Independent Community Bankers of America, “Many consumers need a banker, not just a bank — and the relationship banking model is at the heart of community banking.”


Crypto Business Models

This video is highly educational and informative.

Yahya explains that the consensus mechanisms of blockchains create trust among independent participants in decentralized networks.

At first glance, this may seem at odds with the idea of capturing value since none of the factors that allow companies to build moats in traditional industries — trade secrets, intellectual property, or control of a scarce resource — apply in crypto. This leads to the “value-capture paradox” — how can easy-to-replicate, open-source code be defensible in a competitive landscape? The answer is that network effects are just as powerful, if not more so, in crypto than in traditional industries. This is due to the economic flywheel enabled by tokens, which incentivize participants and coordinate all economic activities in crypto networks.

Combined with the ability of developers to build on each others’ networks using autonomously executing smart contracts, this should result in winner-take-all dynamics, contrary to what might seem intuitive in open source, Yahya says.

How do apps become super apps?

A super-app is an umbrella app that offers a full ecosystem of services shaped around users’ everyday lifestyle needs, using one integrated interface or platform. It usually involves a marketplace of third-party offerings fully integrated into the ecosystem and makes use of vast amounts of data to engage with users and offer a wide variety of experiences and services.

Some of the most common features in super-apps include:

– Payments and financial services

Cashless payments

Mobile payments

Investment platforms


Credit and loans

QR code payments and rewards

– Retail services

Event ticket bookings (e.g., movies, theatre, sporting events)

Restaurant and grocery ordering

Hotel bookings


Transportation ticketing (e.g., bus, train, flight)

Other e-commerce

– Other functions

News and media content

Calling and messaging

Job search

Entertainment (e.g., music, videos)

Real estate and rentals

Cloud storage

Why are super-apps on the rise?

Super-apps offer the benefit of a one-stop platform for multiple tasks that users want to perform online. Opening a single super-app is much more convenient for users than managing dozens of individual apps. This is the main reason super-apps are gaining ground over single-use apps.

By bringing together a range of experiences, services, and functions on a single platform that customers already feel confident using, super-apps provide seamless experiences that keep users engaged. Also, by offering loyalty rewards, users are encouraged to conduct more of their business on the super-app to maximize those benefits.

How is Open Banking powering super-apps?

Maximizing personalization: Open Banking creates an ecosystem that proactively helps platforms leverage customers’ data and create truly personalized experiences for them.

Accessing everything on one platform: Once the super-app is able to use Open Banking data, consumers can make payments, check their account balances, monitor recent transactions, and perform other traditional banking operations from the app’s digital wallet, reducing the need to access a bank’s own app.

Using advanced technology: Analytics, artificial intelligence, and machine learning can leverage Open banking data to build customer-relevant products and foster a culture of data sharing and data-driven decision-making across the super app’s business ecosystem.

Connecting the right partners: As Open Banking expands further into open finance and open data, super-apps will be able to access and connect with a larger number of partners to provide faster speed to market for new products and an even wider customer base.


What are the current concerns with Web3?

I really like Tatiana Revoredo’s thoughts on some of the concerns with Web3. Tatiana is a founding member of the OXBC — Oxford Blockchain Foundation and is a strategist in blockchain at Saïd Business School at the University of Oxford.

As she says, every significant change comes with a high risk.

Better explained, the fully matured Web3 space is still a long way off, and nobody has a clue what exact form it will actually take. As the Web3 infrastructure is intended to be fully decentralized and uses peer-to-peer networks, dispensing with traditional trust validators (or intermediaries), people will be fully responsible for their data and their crypto actives.

This means the necessary overcoming of cultural barriers and a change in behavior on the part of users, who will need to learn what digital wallets are, how public and private keys work, which cybersecurity practices are most appropriate, be constantly alert for phishing scams, never give their private key to a third party, among other things. In short, users will not delegate the security of their identity and data to third parties; they themselves will be responsible for keeping their vigilance at all times.

In short, security is still not a universal truth in Web3. You may trust the blockchain, but do you trust yourself? There are also scalability issues. While few would argue that decentralization is a bad thing in and of itself, transactions are slower on Web3 precisely because, at the current stage of developments in blockchain structures, decentralized networks do not yet scale satisfactorily.

In addition, there are the gas fees — payments that users make to use the Ethereum blockchain, one of the two most popular blockchain platforms in the world. Put another way, “gas” is the fee required to successfully conduct a blockchain transaction. These fees can drive up the value of a transaction to hundreds of dollars during peak times.

Then there is the conundrum of decentralization. Even though blockchain networks and DAOs may be decentralized, many of the Web3 services that use them are currently controlled by a small number of private companies. And there are valid concerns that the industry that is emerging to support the decentralized web (Web3) is highly centralized.

In any case, it is important to remember that while there is still a considerable list of concerns and obstacles to overcome, Web3 is still in its infancy, and brilliant people are actively working to solve the current problems.

What about you? Do you think we will enter a new era with a truly decentralized and privacy-focused web? Do you think that if the developers working on the current Web3 problems are successful, we will eventually get there?


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How could embedded finance enable Gen Z acquisition for brands? was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

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