SAP, Embedded Finance, 1980’s Bank Boards - Issue #3

Is SAP Moving into Embedded Finance?

SAP contributed its core banking customers, IP and staff into a JV with Dediq which invested €500M. This new unit will reportedly focus on building an end-to-end offering by keeping all related data in one place to improve speed and innovation for its customers.

“Jointly, we will extend our existing FSI portfolio to cover banking and insurance processes end to end. Helping our customers to become more agile through digital business innovation and cloud technology will be front and center for our new FSI Unit.” SAP Forms Strategic Partnership for Financial Services Industries

+ Forbes: SAP Retreats From Finance, Spins Off IP And Staff To A Partner
+ Finextra: SAP Sets Up Dedicated Financial Services Unit

This move raises two big questions:

  1. Will the new company really build an end-to-end solution that leverages the same data across all functions? If so, it could be a really interesting embedded finance solution distributed to all big corporations buying and selling on SAP’s Ariba platform. 

  1. With many other payments and banking vendors trading at significantly higher multiples than SAP, there’s probably lots of shareholder value to unlock. But giving up so much potential revenue growth for just a 20% stake and reducing operating costs a good trade?


It’s 2021, Why Don’t Bank Boards Take Tech Seriously?

Tech expertise on bank boards are the exception, not the rule. They say they “get it” but really, do they? Only 10% of bank boards have a director with technology expertise while “67% of boards overall have at least one board member with technology expertise, compared to 57% in 2015.” While consumer demand for better digital banking is skyrocketing and embedded finance is shaking banking’s foundations, how many mistakes and missed opportunities does this lack of tech expertise create?

+ Accenture: Boosting the bank board’s technology expertise
+ Tearsheet: Four charts on the lack of tech expertise in bank boardrooms
+ ING: ING splits board level responsibility for operations and technology
Looks like ING gets it - CTO now elevated to their board.


Modulr Scores Strategic Investment from FIS

Fast growing Payments-as-a-Service provider Modulr allows corporations and fintechs to effectively circumvent banks for wholesale and transaction payments. FIS, saying “Working with Modulr, we’ll be able to help our clients in the UK and EEA market accelerate their journey to digital payments…” has followed PayPal and other investors into the deal, apparently hedging against the possibility that their bank customers don’t move fast enough to satisfy the company’s ambitions.

+ Finextra: FIS Ventures invests in Modulr
+ Modulr: We've received strategic investment from the venture arm of FIS


Extras:

+ Tearsheet issued a good, concise primer about Decentralized Finance (‘DeFi’). 
+ ZDNet: Mastercard buys digital identity firm Ekata for $850 million adding some great offerings to its fraud and security portfolio.
+ Pitchbook VC interest in Latin America swells as fintech takes flight  “Brazilian banking sector is one of the more profitable sectors in the world, but oftentimes they "don't really invest in customer experience and diversity of offerings the way they could."