The new wave of fintech innovation may come far away from the world finance.
At least that's how Plaid CEO Zach Perret sees it.
From his vantage atop a firm that builds many of the data connections between financial institutions and technology startups, Perret has observed a growing trend of non-financial services companies plugging financial services into their platforms and products. For example, Uber drivers can use the ride-sharing app to access banking services or save money in a retirement account.
It's what Perret calls "embedded finance," and this trend "could be much larger than we expect and maybe even larger than" previous iterations of fintech innovation,
What exactly does this mean for wealth management fintechs?
For one, Perret points to the effects that the persistent low interest-rate environment has had on high-yield savings accounts such as those launched by Goldman Sachs' digital bank Marcus. This has prompted some firms to seek alternatives that will appeal to clients but still be lucrative to firms.
“Embedded ETFs or embedded index funds such that people can very seamlessly and easily transfer funds from a checking account or, frankly, any stored value account into something that is able to get returns in the market,” Perret said. “I don’t know how long that trend is going to go on, but it’s something that we’re starting to see demand for.”
The embedded finance trend also creates new opportunities for finance education and literacy, he added.
“If applications and products are adding the ability to buy stocks, they should also be adding the ability to get advice on those stocks,” Perret said. “I’m hopeful that we’ll see some expansion there.”
Perret’s comments come just weeks after
While the deal would have helped Plaid better serve the digital finance community, “massive” changes in the fintech market, such as the coronavirus pandemic forcing widespread digital adoption, over the last year impacted the situation, according to Perret.
He also shared his thoughts on the
“I don’t want to comment on any one of the apps that are out there … but what I will say is I think the sense of community is pretty amazing to watch,” Perret said. “I hope that over time we’ll find a way to take that community and focus it on long-term, sustainable things for all consumers.”
