Everything we do, we believe in making investing better, for everyone.
We believe that making an investment should be as seamless as one-click checkout.
That is not the way it works today.
Investing is hard, yet it is so intrinsic to our lives. What makes people invest? In the simplest terms, to grow income or wealth, but whether you invest for your peace of mind, your wellbeing or a personal goal, chances are, there are barriers in your way to achieving those goals that you may not even perceive to be there.
Placing a trade with a broker might be the start of an investment, the literal point from which there is the potential for profitability, but it’s certainly not where the process begins for investors. That process begins with forming trade ideas. At the beginning of the chain, investors often start with consuming financial news themselves, discussing and exchanging trade ideas socially within their own networks, before expanding into more targeted, often paid for ideas and tools services. An investor typically uses five different services as input into investment decisions.
For the self-directed, there are now more trade ideas and tools services at their disposal than ever before, from charting, research, data and analytics services providing specific trade recommendations, through to portfolio management or no code algo platforms that equip investors with the software to generate their own trading ideas and strategies; and we’re only at the beginning of this evolution that is making services, previously only available to institutions and professionals, accessible to retail investors. Yet brokerage accounts remain disconnected from these services, disconnected from the context of where investors make their decisions.
An investor may read an article, exchange some ideas with a friend, check a chart, reference social media and then place a trade, each time having to leave one ecosystem and enter another. On average, there are four steps between formulating a trade idea and placing a trade; four barriers to turning an idea into an investment; four barriers to working towards an investment goal. More than 82% of trade ideas are abandoned because the process to turn that idea into a trade is too hard, too much hassle, or simply takes too long; and the moment has been missed. As an investor, why would you let something as basic as the hassle of logging on to multiple apps or websites, or manually calculating your trade order risk get in the way of achieving your most important investment and life goals? For the industry, how much would it benefit it as a whole if even 1% of those abandoned trade ideas were turned into investments?
In e-commerce, which serves as a useful proxy, experts estimate that shopping basket conversions can be increased by 35.26% by implementing the right checkout optimisation strategies. Shopify Pay has made checkout four times faster, with the better user experience translating into 1.7-times higher average checkout-to-order rates on all transactions; 1.9 times higher on mobile transactions, according to a Shopify study of its 10,000 largest merchants.
Whilst any investment arguably requires more research, analysis and commitment than a typical retail purchase, investing is in fact becoming increasingly more like e-commerce in terms of trade size. The average size of a retail trade was around $12,000, but with the advent of fractional share trading and the rise of millennial and Gen Z retail investors, DriveWealth saw an average trade size on its platform in Q3 2021 of $260; a value much closer to the size of a typical e-commerce transaction. The ease with which consumers can now trade right from their phones has been a contributing factor in the explosive growth in retail investing and that ease is also driving consumers increasingly to seek simple, embedded and more integrated experiences.
There is a clear opportunity to improve the investor experience and make it closer to the advances seen in e-commerce - simpler, more seamless and one-click transactions. So what, then, is needed to simplify the consumer journey, eliminate friction and remove barriers to one of the most important area of our lives?
Whilst there has been a lot of industry focus over the last decade on making investing easier and more accessible to more of the population, improvements to date have primarily been incremental, removing single layers of friction, or enhancing components of user experience here or there. What the industry changes achieved to date have not done, and will never do alone, is to transform the current model, one of disconnected siloes, into an ecosystem that works in optimum symbiosis for all its participants. What is required is much more radical product thinking and a fundamental re-wiring of the ecosystem. Only that can fully address consumer pain points and offer an experience that is closer to that which consumers already enjoy in multiple other areas of their day-to-day lives.
The barriers and friction that persist in investing stand in stark contrast to the connected, seamless, on demand user experiences we have long since been used to enjoying in shopping, transport, food delivery and entertainment, for example. One of the key factors that makes these services more connected and that wholly improves our experience as consumers is the concept of embedded finance. Embedded finance reduces complexity for the consumer, by bringing together what were once separate processes and reducing the number of steps and clicks in the new integrated experience. We all typically use services with embedded finance without realising that is what we are doing. Take ride- hailing apps such as Uber or Lyft, or food delivery services like Deliveroo or DoorDash, all have in-app embedded payments that remove friction and provide an integrated consumer experience.
What is embedded finance? Put simply, it is the seamless integration of financial services within the product offerings of non-financial businesses. Embedded finance ushers in a more connected world for any consumer services, as well as more seamless, highly customisable and personalised experiences. Take buy-now-pay-later services that provide lending products during the checkout process, such as those offered by Afterpay and Klarna, or integrated insurance offerings such as Tesla’s, offered as part of the standard car purchase, or Metromile’s pay per mile connected car insurance. Embedded investing offers the same transformative possibilities that we are already seeing in embedded banking, payments, lending and insurance.
So what will embedded investing look like? Embedded investing integrates the task of placing a trade directly into those tools and services specifically used to inform investment decisions, removing friction and barriers, making it undeniably more seamless for consumers to turn their ideas into trades. However, investing focused services are only part of the human picture, overall making up just a small percentage of all the services an individual uses. Investing services exist to make life moments possible, yet those life moments are so often disconnected from the investments themselves. More fundamentally, the real power of embedded investing lies in the possibility to simply wrap it into any service a consumer uses, whether it has investing as its primary end purpose or not.
True, embedded services need to be accessible to the user wherever they are, whenever they want to use them. Whilst a consumer uses multiple financial services as input into their investing, in addition to their brokerage app, even the most serious, professional investors do not spend all of their time on their brokerage platform, or the apps and websites of their favourite trading tools. Smartphone users spend 50% of their mobile app time in social and communications apps, followed by video and entertainment apps, comprising 21% of their total usage time.
What is more, there has also been a noticeable shift in consumers demanding ownership of their data, as well as an increased trust and willingness to share their personal data with third parties, providing the necessary assurance and security is maintained, in exchange for a better consumer experience that helps them achieve the very personal real- world goals driving their investing. Embedded investing will reduce friction and increase accessibility for the consumer. It will be more convenient, seamless and simpler. Imagine being able to place a trade directly on your brokerage account, straight from your favourite social media network or news site, right at the moment you are thinking about an investing life goal, in one click?
Embedding investing seamlessly into every area of consumers’ lives, so they can invest exactly in context, creates connectivity and removes friction across their whole universe of services, financial and non-financial, in such a fundamental way that it completely rewrites the consumer experience. Can you imagine returning to a time where you have to pay for your taxi ride or your food delivery separately from the booking experience?
The benefits this brings for the consumer experience are clear, but what it means for the industry is potentially even more significant. Underlying the digital super-app race to build the ‘WeChat of the West’ is the same fundamental understanding of consumer behaviour that also points to why embedded investing represents such a significant growth opportunity for the industry - offering all the services a user wants, embedded within the app or site where they spend the majority of their time, is how to better engage users, grow revenue and provide financial products without the need to become regulated.
In enabling integration of investing into both trading related services and previously unrelated industries, the opportunity it brings for businesses to drive competitive advantage could not be clearer: it enhances the customer experience and satisfaction, creates greater stickiness and customer loyalty, whilst opening up access to new revenue streams, opportunities to better monetise the customer, without charging more, and boost customer lifetime value. Take Amazon Lending’s integrated credit line for merchants on its platform, which proactively offers them financing based on their Amazon Marketplace sales volume and other pre-defined triggers, or Uber’s use of embedded insurance that offers its drivers flexible insurance coverage, which adjusts according to driver context – whether they are on or off the platform, driving or waiting to pick up a ride. Both are innovative business models, opened up by embedded finance, that create integrated user experiences. Profit from new revenue streams can be invested into further product innovation and enhanced consumer value propositions, helping to give businesses a competitive edge.
Whilst services do need to think carefully about how to simplify the specific tasks their customers are looking to undertake and the value they are seeking to provide, when determining if embedding investing is the right path for them, those companies that don’t embrace it risk being left behind. In its survey on ‘Global Business Perspectives on Embedded Finance’, Accenture reports that, “of non-financial companies that have begun the journey to offer financial solutions, the majority of companies said they were either ‘very successful’ or ‘successful’ in increasing engagement levels (87.5%) and in attracting or acquiring new customers (85%).” Embedding investing is an enabler and it is exciting.
Whilst the case for consumers and partners is clear cut, embedded investing brings some natural unease for the financial services industry and necessitates a shift in thinking that will be one of the factors critical to its success. Brokers have traditionally always tried to drive customers to their apps or platforms and invested heavily in doing so. Whilst there are great brokerage services out there, with slick online experiences, and the market is growing - the size of the global online trading platform market is projected to grow to US$ 2078.8 million by 2027, up from US$ 1493.8 million in 2020 - we know, and brokers know too, that investors do not realistically spend the majority of their time on their brokerage app.
Inherent in embedded finance is the concept of sharing the customer relationship, product interfaces and surfaces, a concept with which both brokers and partners need to get comfortable. Whilst brokers are typically fearful of anything that has the potential to diminish their ownership of the customer relationship, those that embrace the potential of embedded investing by harnessing the full potential of their APIs, in addition to their existing customer-facing platforms, will extend their reach way beyond what they will ever be able to achieve through their proprietary platforms alone. How powerful is it for brokers to be visible to their customers in context, on any service, at exactly the moment an investor wants to place a trade?
Brokers also have a critical role to play in this new ecosystem. Investing is a highly regulated and high stakes environment. Brokers are the authorised entities with the regulatory licences, expertise and compliance management systems to operate in this space. Whilst API only brokers, such as Alpaca, Apex Clearing and DriveWealth are leading the way with their full stack embedded investing infrastructure / brokerage as a service offerings – they are behind services, such as Gotrade, Stash and Revolut, respectively - forward-looking brokers that, to date, have led with consumer facing apps or platforms, have the potential to thrive in the new landscape.
In fact, all brokers can and should seize the opportunity that embedded investing presents. If they don’t, they too will be left behind. Following the path of embedded banking, payments, lending and insurance, where the gap is already being bridged between financial services and the experiences they are meant to enable, it is clear that embedded investing is how we, as consumers, will receive services in the future – invisibly integrated into any service, easier to access, precisely when and where we need them.
In order for embedded investing to succeed, there also needs to be infrastructure, the pipes or connective tissue layer between all the brokers (API only and more traditional consumer app or platform first brokers) and all the services (financial or non-financial) that consumers use. Some investing focused services understand the fundamental value of these pipes already for their customers and for their businesses - some of the newer portfolio management tools and no code algo services, that have built their own integrations to brokers, have seen trading volumes double and their reach into new markets increase with each new broker integration added. They also know that it becomes a beast to manage.
It does not make commercial sense for each individual service to overcome the rather monumental task of doing custom integrations – commercial and technical - with hundreds of brokers, particularly for non- financial services. Nor can any single service provider offer a broker the consolidated scale and revenue potential of multiple services integrations. An independent infrastructure provider has the expertise, regulatory authorisation and dedicated focus to bring the best, most commercially competitive solution to market. It has no limit to the number of its integrations - brokers and services - which necessarily go hand in hand for an optimally functioning ecosystem; and no limit to its potential scalability. A neutral, multi-broker embedded investing infrastructure provider connects existing, siloed ecosystems and creates a re-wired ecosystem that activates new capabilities and possibilities, offering a win-win-win opportunity for every participant involved.
That is IXily, that is what we do. In a few lines of code, we seamlessly integrate investing into any service, with our easy to embed trade order tools and global broker connectivity. We make it really simple to embed investing into every area of consumers’ lives, so that they can place trades on their brokerage accounts, in one click, directly from any app or website, in context, exactly where they want to, when they want to. Because we believe that there is a better way to invest.
Creating an ecosystem where financial tasks are present in non-financial activities, engenders a profoundly different market - a new way of financial services distribution that simplifies the consumer interaction with the financial ecosystem and enables financial transactions using the consumer footprint of other captive ecosystems. Collaboration, “co-opetition” and partnership, underpinned by consumer privacy and trust, will be key in the new landscape.
Fast forward a decade and it will seem archaic that we once weren’t able to place a trade from any service of our choice, that contextually fitted with what we were doing right at that moment. Integrated consumer experiences will be standard and embedded finance will permeate every aspect of our day-to-day lives. It will seem inconceivable that our universe of services once operated in disconnected ecosystems.
Louise & Cynan