Embedded finance is rapidly emerging as one of the most significant areas in global financial services and e-commerce. In this episode of Talking Banking Matters, McKinsey payments sector leader Roshan Varadarajan engages in a conversation with Pedro Silva, CEO and co-founder of Alviere, a leading embedded-finance platform company. Let's delve into the key aspects of this growing field.

Unlock the Potential of Embedded Finance with Alviere

Journey of Evolution: From Mezu to Alviere

Alviere began as Mezu with the mission of creating a consumer-facing peer-to-peer payment app. It had a unique proximity feature based on geolocation to enable users to exchange money without sharing contact information. However, in 2017, building such an app was challenging as it took until mid-2018 to find a compliant bank. This led to the decision to license money transmission licenses across the US and shift to a more independent platform model. The fully featured platform handled KYC and card issuance, laying the foundation for its future growth.Later, enterprises started approaching Alviere, seeking to outsource or white-label its services. This led to a shift towards a B2B strategy, focusing on providing a one-stop shop for large enterprises to offer financial services.

Value Creation for Different Customer Types

Alviere aims to be a one-stop shop for large enterprises, helping them extend their services and provide financial products to their clients. Nonfinancial institutions often lack the resources to build compliance teams, so Alviere offers a comprehensive solution. For example, the Starbucks app saw the potential of a financial product to guarantee future sales. Alviere guides enterprises through the process, providing professional services and project management.In different markets and verticals, customer demands vary. In the consumer market, there is demand for products like remittances and digital wallets. In airlines and hotels, cobranded credit and debit cards are popular. On the B2B side, payment optimization and banking services wallets are in demand. Alviere's diversified portfolio allows it to meet these diverse needs.

Differentiating Factors in Embedded Finance

Large enterprises buy embedded-finance offerings if they enhance the core business, have no regulatory liability, have modern technology that is easy to integrate and scale, and offer a one-stop service. Alviere is compliant because it is licensed and constantly examined and audited.In the future, Alviere sees opportunities in the large-enterprise and SMB spaces. It plans to expand into lending and credit and international markets like Europe, Latin America (including Mexico, Colombia, and Brazil).

Challenges in Marketplaces

Online marketplaces like rideshare and travel apps are new to financial services and face challenges. They often have overly complex strategies, taking years to decide on product setups and hiring teams. Focusing mainly on payment capture is simple, but understanding more complex financial services like having a master bank account with virtual ledgers is a learning process. Alviere aims to simplify this for marketplaces.

Guidance for Banks in Embedded Finance

Banks can be divided into three categories. Large banks have a need from their corporate clients for new products. Midsize banks with assets between $6 billion and $100 billion are interested in modernizing their technology to offer embedded-finance products. Other banks are looking to support fintechs and banking as a service to access new markets. All banks need to change their approach to fintech and embedded finance.

Day in the Life at Alviere

In the current fintech environment, banks are more cautious and scrutinizing. Alviere plays an active role in managing banking partnerships and other types of partnerships. There is still a lot of innovation to bring to the market, and Alviere is committed to changing the industry by increasing participation in fund flows and revenue from financial services.