Scaling Embedded Finance Around Customer Value With Zip Co

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[00:00:32] What if the business mistake that companies are making with embedded finance is thinking it is primarily a technology problem? Well, my guest today will argue customers don't wake up wanting embedded finance. They actually want financial products that make their life easier, works reliably and feels like a natural part of the experience. His name's Rory Herriman from Zip.

[00:00:57] And he's going to explain why operational complexity can become the real challenge as platforms grow, but why the strongest partnerships begin with customer value rather than technology or even revenue, and how AI could finally allow financial products to adapt to people instead of expecting people to adapt to them. So we've got a lot to talk about today. So buckle up and hold on tight because I'm going to beam your ears all the way to sunny Florida,

[00:01:27] where you can join myself and Rory in conversation right now. So thank you for joining me on the podcast today. Can you tell everyone listening a little about who you are and what you do? Yeah, happy to do it, Neil, and thanks for having me now. So I have a bit of a unique role. I am both the chief technology officer and the chief operations officer for the ZipCo's US business

[00:01:54] So I like to think about that role sort of sitting at the intersection of product and technology. Operations is a big part of it. Business strategy is a big part of it. And really making sure that we build the right products that deliver the right value for our customers, our merchants, our partners, and doing it in a way that's safe, that's reliable, that's resilient.

[00:02:21] And in the context of today's discussion, making sure that it's scalable for our partners. And I would imagine as U.S. CTO and COO at ZipCo there, you will spend a lot of time thinking about embedded finance beyond just simple distribution. So what do most people that could be listening to this podcast now, they have their own preconceptions of what the industry is,

[00:02:48] but what do people mostly misunderstand about what it takes to scale embedded financial products responsibly? You probably hear a lot of things that just aren't true. Maybe even see a few things on your LinkedIn feed as well. But what do people mostly misunderstand? You know, my sense is that most people think that embedded finance is simply bringing one financial product into someone else's experience.

[00:03:18] You know, it's sort of a technology-driven endeavor. You know, for a successful embedded finance to happen, you have to think about it as embedding value into embedded finance. You know, customers don't wake up every day thinking about embedded finance. They wake up thinking about, you know, is this product going to meet our need?

[00:03:41] And so if the embedding process creates an interruption instead of an enabler, then it's probably failed and it's not true embedded finance. But, you know, I often talk about this idea of this derived product market fit when I talk about embedded finance, you know, this idea that it's not simply enough

[00:04:07] for the individual products to have strong product market fit. They have to create something truly unique when they come together. Something that the independent companies could not or do not create on their own. And when you achieve that, when you could achieve that emergent value or that derived value, then generally speaking, the overall solution is far more sustainable for customers.

[00:04:36] And one of the things I've seen on my own news feeds there is the public markets seem incredibly excited about all things embedded finance, but there are still a few question marks around scalability. That's what keeps surfacing. But from your perspective, where do the real constraints show up first as platforms try to grow? What are you seeing here? It's operational complexity.

[00:04:58] I think we've surpassed the sort of the technology hurdles when it comes to integration. And we've sort of crossed those what I'll call value-oriented hurdles. It's really about operational complexities. As you add more customers, you're creating more customer journeys. You know, you have compliance obligations. You have servicing models. You have just operational processes.

[00:05:28] All of them have to come together in a seamless, in a very, very seamless way. And that the more you do it, the more partners you add, the more complex it becomes. It's not linear. It's exponential complexity when you do that.

[00:05:48] And the companies that go into it understanding that problem space are far more successful at embedded finance than those that think about it as sort of a technology-first endeavor. And before you join me on the podcast today, I was reading how you've previously spoken about building complete financial ecosystems rather than just one-off integration.

[00:06:11] So how does that shift change the way tech teams are approaching things like architecture and long-term product planning? Because I think over the last few years, it began with the AI hype and everyone was just trying to get those short-term fixes, those quick wins. But we're finally starting to think bigger and better now, right? Yeah, I think we are. Look, I think maybe it goes back to that prior question you asked about the challenges.

[00:06:34] I think as we begin to realize those operational complexities and understand them better, it does force you to think about it slightly different, to think about more of an ecosystem approach. So for me, it starts with change in the nature of the question.

[00:06:51] It's not how do we integrate with this partner, but it's what reusable capability can we develop as part of this integration that makes the overall capability that much stronger? And that's a platform-first mentality, but it gets at this idea that every partnership should create a more than one-plus value to the overall capability that you create.

[00:07:21] And so, you know, as you think about building APIs and you move into configuration and shared services, it's really about how do I do that on a platform basis across my entire ecosystem, not just a one-off integration for a specific partner or specific opportunity. And in that way, the technology decisions that you make today are more durable. You know, they're longer lasting.

[00:07:46] They're about serving the whole ecosystem as that ecosystem evolves, not simply setting you up for the integration or the next integration. And when you talk about partnerships there, I mean, from the outside looking in, partnerships sit right at the center of your strategy at Zip. So why is alignment on market philosophy, brand values and customer impact?

[00:08:12] Why are all these things so hard to achieve and what trends go wrong if those elements are treated as almost secondary? Again, you've probably seen examples of that elsewhere, but tell me more about them. Yeah, you know, it's an excellent point. It's an excellent question. I think it's incredibly important that the first step of any partnership exploration is ensuring you have brand and value alignment.

[00:08:41] There are great examples on the bet at finance where it seemed like a square peg round hole. And those are ones that rarely, rarely succeed. And sort of that deep alignment is so important. And for us, we sort of anchor that alignment around, are we improving the customer's experience? That fundamental question, are we improving the customer experience?

[00:09:08] Are we doing it in a way that is consistent with our beliefs and our values for customers? And if we can start there, then we will figure out the right commercial model and we will figure out the right technology integration. Those are the solvable things. But if you can't to get that first part right, then the partnership is ultimately doomed.

[00:09:36] And I think many embedded finance deals start incredibly quickly. But then there have been well-documented examples of them struggling to deliver on lasting value. So from your point of view, what signals will tell you very early on whether a partnership will deepen those customer relationships or quietly dilute trust over time? You must be quite used to spotting some of those warning signs. But any standout? Right.

[00:10:01] You know, I think it's for me the earliest signal is the very first conversation. If what dominates that first conversation are discussions around the customer journey, for example. Yeah. You know, if that's where it starts, that's usually a very positive signal. And to contrast that, if where it starts is how do we all make money or, you know, how are we going to technically integrate?

[00:10:31] Then we're probably not off to the right start. It's important, maybe going back to the last question or tying the two together. It's extremely important that we get that customer value prop right first and let the other things sort of come together. And so by doing that, you're more likely to create that derived product market fit that I talked about earlier.

[00:10:59] But, you know, if you can't get that right, then I suspect the opportunity probably won't sustain. You know, one of the questions I often ask the team is at the end of the planning session is, if we did this and then we removed it in the months following, would the customer even notice?

[00:11:25] And if the answer to that is yes, then you probably have something right. If the answer to that is no, well, then you're probably built something that's not of any true value for the customer. And of course, this is a tech podcast. We do have to mention AI. It is increasingly used to tailor financial services inside embedded environments. And I'm curious, there's a lot of hype and noise surrounding AI.

[00:11:53] But where have you seen AI genuinely improve things like engagement and loyalty? And where does personalization start to feel intrusive or risky? It feels like it's somewhat of a balancing act. Well, it certainly is. I think we're, this is a topic I speak on frequently. And I will tell you the, my perspectives of law at the rate at which the industry is evolving. But, you know, we're still in the early days from a consumer AI adoption.

[00:12:23] So much of what we talk about is prognostication, not necessarily prediction. But, you know, the focus on personalization and productivity and automated servicing, that is dominating the conversation. And certainly personalization is part of that as well.

[00:12:48] And those are all important experience enhancers that AI has begun to unlock. But I think we feel strongly that the real opportunity in AI is about fundamentally improving the financial service that we deliver. And if you think about it, historically, customers have had to adapt to the financial products.

[00:13:15] I think AI gives us the opportunity for the financial products to adapt to the customer. That is a new era of personalization, of adaptive experiences that I think, you know, ultimately AI can unlock.

[00:13:37] And as well as many, many other use cases, you know, it's, you know, I think about this idea of transitioning from AI in the future to more as an intelligence layer that not only guides how the consumer experiences the product, but also, you know, you know, eliminating a lot of those friction points that exist in financial products. Those are the real opportunity for customer-facing AI.

[00:14:04] And I think for us, big, massive areas of focus, of research, of development, of investment for us over the coming years. And moving from a single product integration to a multi-partner platform, it can also introduce new layers of complexity if not managed correctly. So what technical and governance challenges tend to surprise teams during that kind of transition?

[00:14:31] Any familiar or usual suspects that keep dropping up here? Yeah, well, certainly you hit the right custom. Governance becomes as critical as the technology. What is often difficult in multi-product, multi-partner, embedded approaches is that there aren't many repetitive playbooks. Most of the embedded opportunities are by their nature unique.

[00:15:00] That's why you do them. They offer, as I said earlier, the combination of the two offers something that the individual companies don't do on their own. So what you end up with is a collection of bespoke offers. And so the governance around that becomes incredibly difficult. The technological capability becomes incredibly difficult if you don't approach it the right way. Customer support.

[00:15:28] How do you provide customer support when those customers may be coming in through, you know, 10, 12, 15, 20 different customer experiences? All of these are problems that have to get solved when you begin to scale across products and across partners. The other surprise, I think, is the accountability.

[00:15:51] You know, different partnerships have different customer support and experience expectations. And so when one expectation or one experience of one embedded partnership is substantially different than others, it creates a difficulty, a complexity difficulty that you have to work through when a customer problem emerges.

[00:16:18] Not all organizations are set up well to support that kind of variance in the offerings that can often get in the way of success. And I always try and give people listening a valuable takeaway. And if we do have fintech or platform leaders listening to a conversation today who are motivated to build our one-to-many embedded finance models,

[00:16:44] what kind of principles should be guiding their decisions to growth so that it doesn't come at the expense of the customer outcomes or the brand credibility and all those usual hurdles that can derail progress? Any advice that you would pass to them? I think what we've found that is the greatest success is, as I said earlier, you start with customer journey, not the financial product. Yeah. You know, and I made this statement earlier, but I'll make it again here.

[00:17:13] Customers don't wake up wanting embedded finance. Many don't even sort of have the concept of what embedded finance is. They wake up wanting the financial product they're using to accomplish something. They want it to meet their needs. And if it doesn't do those fundamental things in a very seamless way, well, then there's really no point in pursuing the opportunity.

[00:17:39] The second or third principle I would say is build platforms, not projects. While you may approach the opportunities one project at a time, you know, stay grounded in that platform-first mindset

[00:18:00] so that you don't create one-off solutions that inhibit, that create a level of complexity that inhibits scale or create, you know, as we talked about earlier, this overly burdensome approach to governance. And you don't limit capabilities by just becoming a collection of different integrations. 100% with you.

[00:18:26] And a question I'd love to ask on a personal note, because I think there is a real pressure on us all to be in a state of continuous learning here. And you're in a very complex industry. Where or how do you self-educate? Or what keeps your curiosity alive and what helps keep you open-minded as the pace of technological change keeps ramping up?

[00:18:48] Yeah, I think what I've found through my years of life is that it's much easier to keep up than it is to catch up on a topic. So just in terms of how I've approached my sort of daily life is I've embedded learning into my everyday routine.

[00:19:15] My mornings start with learning something new, whether that's, you know, reading about an emerging technology or listening to a podcast. Or I spend a lot of time reviewing industry research to help sort of shape some of my thinking. Sometimes I'll just explore a new idea. But that sort of small investment in learning sort of compound over time.

[00:19:39] And that's really helped me sort of continue an everyday journey of adding something new to my knowledge. But I also take whatever opportunities I can to listen to other people and hear different perspectives. To get insights from, you know, conversations not only with people I work with, but also customers and partners.

[00:20:10] You know, it's about sort of energizing that curiosity and getting viewpoints that are hopefully different than my own so that I can challenge my own thinking. I'm not, I don't, I don't get a lot of value from sort of echo chamber base, base interactions where all of us agree. I get a lot of value in, you know, in environments where there's good, honest, open debate about, about, you know, different viewpoints.

[00:20:40] And you're, you're getting to, to, to hear those viewpoints and either deepen your own thoughts from them or challenging your own thoughts from them. And I think that is such an important message, especially in an age of polarization, which we see on both sides of the pond and the echo chamber problem that we see. And as you said, having the courage to challenge your own thinking there is so important.

[00:21:03] And I, for one, have loved chatting with you today about the biggest risks or challenges in scaling embedded finance and, and also learning more about the art of making international partnerships and why alignment on market philosophy, brand views and customer impact is just non-negotiable to what you're doing there. So, so many words to take away and think about, but for people listening that want to dig a little bit deeper on this or carry on the conversation with you.

[00:21:30] Well, do you like me to point everyone listening that just want to find out more information about you or indeed zip? Yeah. Yeah. Look, I'd love to invite everybody, visit our, visit the zip.co website, you know, learn more about our products. We, we have a very active social media platforms across the usual social channels, LinkedIn included, and then please connect with me on LinkedIn. I love, I love getting, as I said earlier, I love hearing from people across industries within the industry.

[00:21:58] I love when, as I said, I like, I like to hear when people disagree with what I'm saying. It helps me, you know, take a, take a second or third look at my own, my own perspectives. Well, I encourage anyone listening that is interested in the role of AI in tailoring financial services within embedded environments, or wanting to learn more about how to scale embedded finance beyond single product integrations to multi-partner platforms.

[00:22:24] Go and check out the website zip.co, as you mentioned there. I'll include it in the show notes too, along with a link to your LinkedIn. I'd love to hear from anybody listening. What did you take away from today? Tell me more about your insights, your experiences and expertise, but more than anything. Thank you, Rory, for starting this conversation today. Appreciate your time. Thank you, Neil. It was good spending a few moments with you.

[00:22:49] I think today's conversation was another reminder that successful embedded finance starts with a simple question. Are we genuinely improving the customer's experience? Because Rory explained today why businesses should build platforms rather than a collection of one-off projects, and why partnerships built around commercial agreements alone seldom create lasting value.

[00:23:16] And also why continuous learning matters when technology and customer expectations are changing so quickly. And I also love that point that Rory made towards the end of the episode there, that keeping up is so much easier than catching up, especially when curiosity becomes part of your daily routine. But I'd love to hear your thoughts. Are financial services becoming better at adapting to customers, or are customers still being asked to adapt to the products that they're given?

[00:23:45] And how do you stay curious? How do you continuously learn? TechTalksNetwork.com. Please drop by and let me know. Love to hear from you. But it's time for me to go now. I've taken up far too much of your time. I will be begging for a little more time tomorrow when I'll be waiting in your podcast feeds with another guest. But thank you for listening today, and hopefully I'll get to speak with you then. Thanks again. Bye for now.

[00:24:10] Bye for now.