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As previously outlined in our blog, embedded finance is one of the major developments shaping the financial industry. By using APIs as distribution mechanism, new types of financial services providers directly embed their offerings where the end-user actually needs them, such as inside own ERP systems for business users or directly at the e-commerce check-out for retail users. The embedded finance market is expected to grow by 39.4% to surpass $240 bn this year and according to a survey conducted in Europe in 2020, more than 90% of non-financial companies announced plans to launch embedded finance services. While payments was the initial product vertical that got embedded tightly into various apps and non-financial services, the lending vertical is currently next in line with the emergence of buy-now-pay-later as well as integrated business lending

Wealth management and brokerage is a vertical that is rarely included in embedded finance market studies, yet an area poised for strong future growth. When discussing strategic options with our clients, we often divide the field in aggregators vs. platforms, where the former aggregates demand and the latter aggregates supply as a logical consequence of digitalisation processes. A typical aggregator would be the HR SaaS provider Gusto, which  has launched an integrated wallet and savings account feature. Typically, embedded finance offerings are enabled by a banking-as-a-service provider in the background. One example from the brokerage segments is Alpaca, which offers an API for stock and crypto trading for both businesses and individuals.

In Europe, lemon.markets has recently raised a round of €15 mn in order to enable European developers to trade stocks and ETFs through their API. In this episode, we sat down with the lemon.markets CEO and co-founder Max Linden to discuss how embedded finance plays out in the brokerage segment and how Max envisions to build up Europe’s API-first brokerage provider.

Building a brokerage offering that allows to build any trading strategy

Lemon.markets currently is fully focused on providing developers with easy to use tools to execute trades and retrieve market data, i.e. directly through APIs. Similarly to Scalable, which early on targeted engineers or consultants as a beachhead, lemon.markets clearly carves out a specific niche of early adopters that a) have money to invest and b) seek a more technical access to trading stocks or APIs. The rationale is that others will find some of the emerging use cases that these individual developers build on top of the lemon.markets infrastructure useful, too. These can then be scaled up into standalone propositions or the companies these developers work at might be directly interested in integrating a brokerage offering through lemon.markets. This go-to-market approach consequently requires proactive community development and content generation to reach developers and support them in solving their jobs to be done around trading and investing.

The current core offering of lemon markets centers around two APIs:

• Trading API, which offers a Live Trading environment that is connected to the user’s actual brokerage account. It additionally offers a a Paper Trading environment, where users can test out ideas risk-free
• Market data API, which offers access historical as well as real-time market data

There’s a lot going on underneath the hood in order to enable developers to trade through APIs. Finding the right execution and regulatory partners to pull off a brokerage API has been one of the more challenging aspects in building up lemon.markets according to Max. Currently, the fintech has partnered with Gettex for order execution and DonauCapital as regulatory partner.

Early use cases that are currently being built via lemon.markets include following insider trades, automating a mean-reversion strategy, or dashboards that visualise trading positions. We’ll for sure follow lemon.markets to check out innovative trading use cases that will be emerging in the future!