Embedded Fintech: Fueling A New Wave of Growth For Small Cap Tech Stocks

An embedded fintech is a non-financial company offering its own fintech products and services that complement its existing business, according to Christine Loredo, vice prresident fintech evangelism and innovation programs at Yodlee. 

“What it enables is a big tech company to offer a financial service directly in their product before they might have to go to a third-party or the consumer would have to go to that third party,” she said.

Loredo and Sean De Clercq, the founder and CEO Kickfurther, participated in a panel discussion at the Benzinga Global Small Cap Conference on Wednesday, discussing the ways embedded fintech is inspiring the next generation of small-cap growth stocks.

The seamless, touchless nature of embedded financing has really resonated with customers of companies such as Uber Technologies Inc UBER and LYFT Inc LYFT and Starbucks Corporation SBUX, Loredo said. 

“Places like Starbucks, who if you’ve seen their stock has done pretty well, part of it is because consumers are comfortable going in there because the payments are touchless and it’s easy,” she said.

Connecting Investors With Companies: The idea behind Kickfurther came after De Clercq had difficulty finding attractive funding options for a previous business despite already having established a track record, he said. 

“We saw crowdfunding and Kickstarter and Indiegogo having a lot of success, and they were really funding what I would consider to be the riskiest entrepreneurs, people that have not done even one production run and have no history," De Clercq said.

"And we said, 'hey, isn’t there an opportunity to bring that community of users that are funding these risky entrepreneurs and introduce them to businesses like mine and hundreds of other businesses all across America that need inventory finance but can’t find people to help them fund the inventory?'" 

Today, De Clercq said the best approach for small companies to take to get access to capital is to utilize third-party data from platforms like Shopify Inc SHOP or Amazon.com, Inc. AMZN.

“The basic advice I give to small cap operators is that the cheapest finance you’ll get today is going to be based off of your data.”