Simon Torrance: The future is embedded

On this episode, Sabine VdL interviews Simon Torrance who is well known across the FinTech and insurance sectors as Mr. Embedded Finance.  In December 2020, Simon wrote a very well-known article, ‘Embedded Insurance, A $3 Trillion Market Opportunity That Could Also Help Close The Protection Gap’. He works with leaders, executives, and board members to create and implement new growth strategies based on corporate venturing techniques focused on the Platform economy and Digital Ecosystems, helping large enterprises transform the business of today to meet the needs of tomorrow. His focus today is on AI risk. KEY TAKEAWAYS The main problem is that digitization, which is happening across every sector, tends to shrink traditional profit pools because of new competitors, new entrants, new regulations, and changing customer expectations. So companies must spend more money to keep up with those emerging expectations. The old models that were absolutely fine in the analog world are coming under increasing pressure. Traditional players are increasingly feeling that pressure and need to do something different. When I was working in telecommunications, I started to think about the why. Why are those digital companies (Google, Facebook) so successful, and what could TelCos learn about them? TelCos have a lot of power in the market, but they tend to focus on what they know best – creating the infrastructure – not so good though at creating services or new types of digital business models. In 2005-6, it was clear that the companies that were succeeding most in a digital world were those that were running ‘platform-based’ business models; they weren’t necessarily creating the end customer products themselves, but they were acting as an intermediary between the customer and the third party that had the solutions. That still is the most powerful business model in the digital world. I wasn’t interested in financial services, I hadn’t done a lot of work in it until about 3 years ago, but it seemed to me that it’s so important for the world, it underpins all our commercial and social activity – we can’t operate without financial services – yet there was something fundamentally broken with that industry and the gap between what people need and what they were being given was incredibly wide – there are so many people who are unprotected and have no insurance around the world – it’s so important for a small business to get a loan. The type of experience I have with my old bank is lightyears away from the new banks that are popping up now, and no one’s really making solutions that look after my financial wellness, to help me understand how I need to save, borrow, plan for the future. I’m just left to access a few quite basic solutions from the incumbents. So, I thought, with these huge gaps and numbers of people excluded or badly served by the industry, there’s got to be some change needed. Embedded finance cuts across all different business models and says: Why don’t we enable other organizations that are much closer to end users and interact with them more frequently than we do? We should do so in order to sell financial services because they have more regular interactions or touch points with the end-users, and they’re often more trusted in certain contexts too. Why don’t we help them not only sell solutions but also embed them – use components that we’ve got to create new types of experiences that make their propositions more attractive. Digital technology has become much more sophisticated; all those capabilities (products, data, underwriting) that were locked away within traditional companies can now be modularised and extracted into software technologies developed by tech companies. They are configured in ways that better suit the customer or are more convenient for end-users through unique experiences. BEST MOMENTS 'The business model is the most fundamental way that a company creates and delivers value for customers, captures value for itself, and increasingly shares value with others. It’s the most fundamental aspect of innovation, and most companies find it very difficult to execute on their business model innovation promise because well-crafted business models address so much more than what is often delivered right now.’ ‘Digital companies have taught us that you do not need to create a platform yourself; you can co-opt developers and third parties to create solutions for your customers, as Apple does with the App Store. In so doing, you drive demand for your core business, in Apple’s case, their phones.’ 'Over 50% of the big publicly traded financial companies were making zero or negative economic profit. There’s something wrong here: the customers aren’t getting what they need, and the majority of those supplying financial products aren’t making any profit either. That suggests there is a fundamental business model problem in finance, which is so important for everybody to live, work, and enjoy the company of others.’ ‘99% of a financial institution’s resources and money go on digitizing, making more efficient, and optimizing the existing business model. It is necessary but insufficient if that business model is going to deliver profits and economic returns to shareholders.’ ABOUT THE GUEST Helping companies transform their business models with digital platforms, ecosystems, and ventures, Simon Torrance works with leaders, executive teams, and boards to create and implement new growth strategies and ventures based on the new disciplines of ‘Platform Strategy’, ‘Digital Ecosystem Management’, and ‘Corporate Venture Building’. Simon is the author/presenter of the New Growth Playbook and co-author of a new book called 'Fightback' (how traditional corporates can win in the digital economy with platforms, ventures, and entrepreneurs). As we enter more deeply into what many are calling the ‘Fourth Industrial Revolution’ – enabled by a fusion of emerging technologies that are blurring the lines between the physical, digital, and biological worlds – Simon believes that organizations in every sector need to radically rethink their role in the world and how they create and capture value. Working in collaboration with a global network of subject matter experts and tech entrepreneurs, he supports organizations with this transition via a mix of services: Advisory: helping clients develop and implement new strategies that transform their business models into faster-growing, more valuable platform-based models. Digital Ventures: helping incumbent organizations create portfolios of impactful new businesses. Executive Education: training leaders and teams on the topics of 'New Growth Strategies in the Digital Economy' Simon collaborates with many leading institutions, including the World Economic Forum, MIT, London Business School, and Singularity University. ABOUT THE HOST Sabine VanderLinden is a corporate strategist turned entrepreneur and the CEO of Alchemy Crew Ventures. She leads venture-client labs that help Fortune 500 companies adopt and scale cutting-edge technologies from global tech ventures. A builder of accelerators, investor, and co-editor of the bestseller The INSURTECH Book, Sabine is known for asking the uncomfortable questions—about AI governance, risk, and trust. On Scouting for Growth, she decodes how real growth happens—where capital, collaboration, and courage meet. If this episode sparked your thinking, follow Sabine VanderLinden on LinkedIn, Twitter, and Instagram for more insights. 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