What's new in Finance ? Embedded investing
My discussion with Max Linden (CEO and Founder of Lemon Markets)
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Hi all 👋
Welcome to this edition of Finscale’s Newsletter!
I have to make a confession. When I worked in Wealth Management (until 2016), I knew regulations inside out, understood the operational flows between brokers, custodians, clearing houses and clients and had experience on a trading floor. I had deployed front-office PMS, middle-office risk management tools and back-office settlement and reconciliation infrastructures. I had placed option orders, managed portfolios, handled cash and securities transfers, filed for several licences, including “Credit Institution,” participated in cross-border mergers and executed corporate actions.
But despite all of this, I had no idea what an API was. Even the acronym didn’t ring a bell to me… 😳
In 2015, I launched my first company, which unfortunately shut down two years later (for obvious reasons). While I had developed new skills, I was still far, ….very far…, from understanding how FinTech truly worked. I didn’t know about white labelling, BaaS or Embedded finance. In short, I had a lot to learn.
To bridge the gap, I had to start over by joining a start-up in RegTech. Gone were the breakfasts at The Bristol and the Gala dinners in my plush “Private Banking chair”. Instead, what I truly valued were lunches with developers (10 years younger than me). I observed them closely, absorbing every detail to understand how things worked.
It was a humbling experience for someone with 13 years of Banking expertise and a first experience of failed entrepreneurship.
But it brought me back to the foundations.
Today, investing via APIs and embedded brokerage feels intuitive rather than intimidating.
So, I’m excited to share this conversation with you, where I now fully grasp what my guest is explaining. I’m genuinely impressed by what Max Linden has built with Lemon Markets.
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Embedded Investing
Embedded investing refers to integrating investment capabilities directly into (non-financial) platforms, applications or services. Instead of requiring users to visit traditional brokerage platforms or Apps to buy and sell investments, companies can embed these capabilities into their existing ecosystems.
Brokerage as a Service
A Brokerage API is used to integrate brokerage services into platforms or Apps.
Max mentions three categories, let me dive into each of them :
“Vertical Brokerage” : this model involves making investing the core of the product. In a vertical brokerage set-up, the App’ or the Platform is specifically designed as an investment service. Lemon Markets could be used by a FinTech or start-up looking to create a dedicated trading or investment platform. Here, Lemon Markets' API serves as the primary infrastructure, providing all the trading and portfolio management capabilities necessary for the platform.
“Embedded Brokerage” : in this model, investing is added as a feature within an existing product rather than being the central focus. For example, a Banking App’ might use Lemon Markets’ API to enable its users to purchase stocks directly within the App’, without needing to leave their familiar banking environment. Here, Lemon Markets provides the technology to seamlessly integrate investment features, so the client company doesn’t need to build its own brokerage system.
“Contextual Brokerage” : this approach places investment options into new or unexpected product contexts. Lemon Markets could be embedded in platforms not originally designed for investing, such as lifestyle, loyalty or e-commerce Apps.
Lemon Markets
Lemon Markets is a FinTech based in Berlin and founded in 2020 by Max. The start-up provides a Brokerage as a Service platform with digital brokerage and custody infrastructure. Their goal is to enable any company (whether a traditional financial institution or a FinTech) to offer investment products to their clients. With an API-first, modular platform, Lemon Markets offers a customisable solution that simplifies integration and supports a wide range of use cases.
Their platform covers the entire investment value chain, offering support from migration projects to the launch of tailored investment products. They provide infrastructure for ETFs and funds, with plans to expand into stocks. By equipping companies with the tools to offer brokerage services, Lemon Markets aims to unlock access to capital markets for more consumers !!
👉 Lemon Markets aims to open 100 million brokerage accounts.
In January 2024, Lemon Markets secured the necessary regulatory licenses from BaFin, allowing it to operate as an investment firm. This enables them to provide services like contract broking, investment advice, portfolio management and custody services.
Lemon Markets recently raised an additional EUR 12 million (in July 2024), led by CommerzVentures, with participation from Heliad and existing investors Creandum, Lakestar or Lightspeed.
Lemon Markets' vision is to become one of Europe’s largest and most modern brokerage and custody platforms. They see a significant opportunity in Europe, where a large portion of financial assets are held in cash rather than investments. By providing flexible and efficient digital investment infrastructure, Lemon Markets aims to drive greater accessibility to capital markets for consumers, thus encouraging broader participation in investing.
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