Fintech Daydreaming S07E03 - Is SEB Embedded the next Nordic success story? with Christoffer Malmer

Thank you, Paul and Villa, for having me. I'm taken aback by that introduction. Flattery can never be too exaggerated, and you really nailed it. Over-the-top, but thank you. I completely agree with your view on the passage of time accelerating. My name is Christoffer Malmer, and I run SEB Embedded. I come from the craft of banking, studied finance, worked at Goldman Sachs as a banks analyst, a hedge fund, then SEB in client coverage, wealth management, and retail. About five years ago, I started sEbX. The initiative was born from a disruptive phase in the industry. We saw fintech, customer behavior, regulatory changes, and technology acceleration creating a perfect storm. SEB has been around since 1856, so we needed to do things differently to be here for another 156 years. We realized we were slowed down by legacy, not just technology but also processes and structures. So we said, let's start sEbX as a fresh organization, as if starting a bank from scratch. We set it up at the fringe of the organization, reporting directly to the CEO. It was about exploring new tech and building new products. I'm now at the intersection of banking and technology, privileged to see the opportunities as the industry continues to transform.

Great question. I remember the first slide: the strength of an incumbent combined with the opportunities of a fintech – capital, license, data, customers, financial muscle, plus new tech, agility, curiosity, challenger mindset. What could go wrong? But running something disruptive inside a large organization is hard because the fabric isn't set up for that. The key was a clear, strong commitment from management and board. Our CEO was adamant about keeping it at the fringe of the organization. We established a clear setup: report directly to CEO, outside existing divisions. We just decided to give it a go. We went to Silicon Valley for inspiration, but ultimately we said let's just do it. I raised my hand to lead it. We started with seven people in a small conference room in Stockholm with no brief, no direction, no plan – only to explore new tech and build new products. That was uncomfortable for a bank that usually has detailed plans. When we announced it in Q1 2018, it was buried under 'other items.' It wasn't a big announcement; it was an uncomfortable thing for us to do. We didn't model this on one specific thing, but the idea of separating disruptive innovation from the line organization made sense. It's hard for a line manager to invest in uncertain long-term projects when evaluated on quarterly profits. So separating and letting it go was key.

I think a lot of organizations have learned from these initiatives. For example, JP Morgan launched Finn, then discontinued it, but later launched Chase UK successfully. NatWest launched Bó and Mettle and learned from them. For us, we had a dual purpose: explore new tech and build new products. Exploring new tech was for the rest of the bank – building in the cloud, etc. Building new products introduced a commercial element – we needed to be evaluated on revenues and profits. So the team looked for underserved segments. Using a Sequoia pitch deck template, we asked what questions would be asked if we raised money. We settled on the small business segment because it was underserved, data-driven, small tickets but large volume, requiring minimal manual intervention. From the beginning, we knew we were building a platform – an API-driven scalable core – that could serve the group and external parties. Launching that first product validated that we could get into production faster than in the traditional organization. That led to a strategic partnership with Google and an investment in Thought Machine for the core banking ledger. So we were building both a value proposition for the target market and proving the scalable platform concept.

I think we initially over-relied on technology to solve our challenges. Technology is a critical enabler – yes, cloud-native infrastructure and speed are key – but it's combined with new ways of working and organizing teams. In hindsight, I would emphasize the capable individuals even more. But short answer: yes, the tech choices were critical for future-proofing, speed, flexibility, and scalability. But they had to be combined with the right people and processes.

It's an important question. How do you evaluate the ultimate metric? For the commercial side, it's straightforward: customers onboarded, revenues, ARR. But the technology exploration brings intangible payoffs: investments in Thought Machine, the Google partnership, redesigned KYC and onboarding, employer branding, internal morale. Those are harder to quantify, but we must still evaluate ROI in the traditional sense. We were named one of the best financial innovation labs by Global Finance. But ultimately, we are building shareholder value. With SEB Embedded, we have a clear path to profitability. If I did it again, I would keep a strong ROI mindset and constant evaluation. It's okay to pivot – most fintechs don't end up where they thought. Allowing an entity to find its way is a learning for an incumbent.

This is a great avenue. In our experience, it has been a close collaboration with control functions – legal, compliance, risk, credit. They have a wealth of experience. We came from scratch and said, how would we like transaction monitoring to work with real-time data? We jointly innovated. For example, a redesigned onboarding and KYC model came out of this. It wasn't about bending rules; it was a fresh take on how to build it today. That blended the strength of the incumbent with fintech agility. We didn't go to control functions to convince them; we partnered from the start. That has been extremely valuable.

Absolutely. In our experience, fintechs are open to conversation, whether for technology, partnerships, speed, or investments. It's a healthy relationship.

Sure. From sEbX inception, we built the platform and launched our first product. Then we started a small team in the bank building next-gen mobile apps using the same tech stack. We're all the same legal entity under SEB. We signed our first external banking-as-a-service customer, Axel Johnson, a Swedish retail conglomerate. That triggered a lot of interest. By autumn last year, we felt we needed to focus fully on embedded finance. So we turned sEbX into a business unit called SEB Embedded with a clear mandate to scale BaaS. But we didn't want to lose the exploration spirit, so we started sEbX 2.0, with Nicola Mock (former CIO) now in the same role I had – alone in a conference room exploring what's next for banking in 2023: AI, blockchain, etc. So SEB Embedded is the commercial unit, sEbX is the innovation lab.

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We're excited to see what comes out of the next version.

There's been so many learnings. The road has been rocky. Software development is not for the faint-hearted. When I ran operations, I was surprised when tech things didn't work. Now working closer, I realize these things happen – you fix them. My initial mindset was 'what do you mean it's not working?' but now I understand. The blend of software dev mindset with banking mindset is a constant learning journey. We've had technology choices to reverse and directions to pivot. The key is stamina and determination to keep going. Failure is hard, especially in a large regulated organization where the gut reaction is to assign blame. We need to step back and ask what we can learn. For example, when we launched our first product, we built a mechanism to stop inflow of customers in case of explosion. That was ridiculous. We didn't get inundated. That shows the mismatch of worlds. Also, risk-reward profiles differ: GDPR fines for a large bank are huge, so we can't take the same risks as a startup. Striking that balance is constant. There are many examples where we tilted too much one way or the other. We could devote another episode to our mistakes.

For job opportunities, visit sEbX.io/career and SEBEmbedded.com (fresh page with career). For the self-employed product, unqo.com.

Thank you, absolutely.