Investment-as-a-Service: Fintech’s Latest Disruptor

  • Karol Sadaj, Chief Commercial Officer at ETFmatic

  • 12.10.2022 03:15 pm
  • #Investment

Embedded finance (EF) has done a tremendous amount in recent years to upgrade better access to banking products for millions of people by integrating them into the platforms and brands they use every day. Given the associated increase to both revenue and customer retention, best-in-class, Banking-as-a-Service (BaaS)-driven EF solutions are fast becoming a must-have for businesses of all sizes.

Just as embedded banking is helping brands to remove friction in their checkout journeys, Investment-as-a-Service (IaaS) is removing many of the traditional barriers to entry associated with accessing the global markets.

Explaining Exchange-traded funds (ETFs) 

Exchange-traded funds – or ETFs – created a new way to invest that made the global markets more accessible to more people. ETFs are types of securities that normally closely track the performance of a financial index, the American S&P 500 and Eurostoxx 50 are examples. ETFs are traded on the stock exchange just like shares in a single company and hold assets such as shares, commodities or bonds. ETFs typically have higher daily liquidity - meaning they can easily be converted to cash - and lower costs than mutual funds, making them attractive for investors.

ETFs are the backbone to our IaaS solution. Our API-based technology matches the risk profile of investors and is fully automated to stay aligned to that risk. With the backing of ECB-licenced Aion Bank - which acquired ETFmatic in 2021 - the security, legal and regulatory requirements needed for our clients to offer investments is covered.

The ETF portfolios offered in our IaaS solution are customisable, meaning clients can offer a service that is perfect for the unique makeup of their user base.

Who is adopting IaaS?

Anyone considering IaaS is looking to achieve two things: 1) increase engagement and 2) build additional revenue streams.

We recently partnered with German fintech, UnitPlus, to launch the world’s first ETF investment product with a seamlessly integrated payment function. This product makes it possible to access investments and also ‘pay with your portfolio’ via the UnitPlus debit card.

This presents an exciting case study for the real-world application of IaaS solutions. This is the first time ETF portfolios are being integrated in the international payment space, and this gives UnitPlus users access to a very convenient investment solution with money available to use anytime, making it tailored to their investing and spending needs.

IaaS’s breakout moment

With inflation across the globe rising to levels not seen in decades, the real-term value of savings is critically exposed. This is especially true for funds held in low-interest saving accounts. People are looking for smart ways to grow their money during this period of financial instability. Additionally, banks and fintechs are looking for ‘sticky’ products that can drive adoption and engagement. Embedded investments provide a compelling reason to engage with end users, and it builds on top of the current relationship to talk about what clients want to achieve in the future.

Such an environment provides the perfect conditions for IaaS to flourish, in terms of both consumer appetite and business eagerness to experiment. With this in mind, IaaS is set to rise rapidly in the near future, with many more investors accessing the global markets via fintechs or their favourite brands.

Like BaaS’s impact on banking products and services, IaaS is set to democratise investing for many more people by unlocking access and lowering the cost to wealth management solutions.

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