1. Analysis
June 24, 2022

CEO Chat: Alex Mifsud of Weavr

The CEO of Weavr reveals why embedded finance isn't a new thing, despite the growing buzz around it in fintech circles

By Eric Johansson

Alex Mifsud is the CEO of Weavr, the fintech startup aiming to spearhead the embedded finance revolution. At a glance, the company has a lot going for it. For starters. the venture  secured a $40m Series A round in February.

Embedded finance refers to the idea that non-financial services can provide financial services. Think how some shops offer things like buy-now-pay-later options at the checkout or how businesses offers you insurance for new goods and you get an idea of what embedded finance is. Another phrase describing these type of services could be banking as a service, or BaaS.

Mifsud is a frequent speaker at fintech events. You can usually find him somewhere explaining the reasons why he believes embedded finance is the future of business. Although, he is equally adamant that while it has become a buzz word of late, the origins of embedded finance dates back to the early 20th century, something the Weavr CEO explains in more depth later in this interview. It would be easy to brush aside the spiel from the Weavr CEO as just another sales pitch. However, that would be missing the point.

Firstly, the Weavr CEO isn’t alone in being interested in embedded finance. In fact, when looking at Google trends, it’s clear that searches for embedded finance have skyrocketed over the past five years.

This has coincided with the overall growth of the fintech ecosystem. As Verdict has reported in the past, the global fintech industry enjoyed a surge in funding over the course of the pandemic. Fintech companies raised a record $84.5bn across 2,356 venture capital deals in 2021, according to data from research firm GlobalData. That’s up from the $30.7bn raised in 2020 across 1,772 deals.

While the flow of VC deals slowed down in 2022, the industry looks set to still top the levels seen in 2020. So far, the fintech industry has raised $23.9bn across 750 deals in 2022. Later in this interview, the Weavr CEO attributes this slump to VC backers having grown weary of the sky-high valuations some startups have enjoyed without truly proving their worth.

Of course, all that interest wasn't part of the embedded finance revolution. However, a significant chunk of it was. The fact that BNPL companies like Klarna, Affirm and Block all achieved huge valuations over the course of the pandemic can somewhat be attributed to this trend. Although, these companies have seen or risk see their valuation be sliced due market uncertainties.

It is also clear that Weavr and its CEO aren't alone in this space. It is facing fierce competition from the likes of Kernolabmmob, Modulr and Toqio. They are all vying for position in a market Juniper Research estimates will be worth $138bn by 2026

The Weavr CEO also devotes some of the time in our latest instalment of our CEO Chat series to talk about what people get wrong about embedded finance, reveals his biggest pet peeves and what advice he'd offer other CEOs.

Eric Johansson: Tell us a bit about yourself. What did you do before founding the company?

I’m basically an engineer who loves building stuff. In fact, I can't stop building stuff. I designed and built a complete microprocessor from scratch (using bit slicing) as my undergrad project, and for my first job, I built a digital mapping service for the Maltese Government. As I was finishing my PhD in Computer Science, I co-founded the non-profit Malta Internet Foundation – which still manages the dot-MT top-level domain for Malta, and ran the national Internet Exchange in the 1990s – and more recently in 2018 I co-founded another non-profit the London Blockchain Foundation.

Where did the idea come from?

The idea for Weavr came while running my previous business, Ixaris. During that time, I realised that there should be more reuse when building payment solutions for large companies. I also realised that to achieve our goal of scaling from a handful of projects a year, to supporting hundreds, we would need to push more of the bespoke work to third-parties, and instead operate the common layer or platform. That led to the creation of the Open Payments Cloud, an experimental technology stack funded by the EU Horizon 2020 programme, which I later spun off outside Ixaris. That code is in fact the genesis of the Weavr stack.

What's the biggest misconception people have about embedded finance?

Embedded finance was the fintech buzzword of 2021, and a big broad bandwagon if there ever was one. Nowadays, many financial providers and processing vendors cast themselves as enablers of embedded-finance solutions. However, embedded finance is not a technology or a service – it’s an outcome that results from the integration of financial services into essentially non-financial businesses. There are many ways to deliver embedded finance, even non-technical ways. In fact, arguably the oldest example of embedded finance is car finance offered by dealers, a concept invented by the Ford Motor Company in 1919.

There has been a marked slump in fintech funding recently. Why do you think that is?

There has been a general slump in VC funding, it’s not specific to fintech. My understanding is that this has been triggered by higher interest rates, which are widely believed to depress equity returns. In turn, this makes the VC risk-return model relatively less attractive, not least because IPOs are more likely to dry up during such periods. That’s the theory. I suspect that a lot of VCs were getting nervous about ever-increasing valuations and this change creates a convenient trigger for a (probably healthy) reset.

What one piece of advice would you offer to other CEOs?

In the current context, CEOs of venture-backed startups should expect it to be harder and to take longer to raise their next round, so make sure you don’t run out of cash. Consider raising venture debt if you can get it, to buy yourself more time. Then focus on extending your runway, making your next raise happen, or hitting profitability. When the availability of cash becomes scarcer, you simply have to think less about vision and prioritise not running out of cash.

What’s the most surprising thing about your job?

What’s always surprising is how company culture emerges, whether you consciously do something about it or not. You look at clearly discernible patterns of collective behaviour across the team and wonder: did I do this or did it just happen despite me?

What is the most important thing when you want to scale a company?

Scale can only happen efficiently once the formula works. If it doesn’t work in miniature, it sure won’t by multiplying sales, marketing, delivery and supporting resources. You just get a bigger problem to solve. Take the time to create a repeatable end-to-end process that evidently works, even if it’s not optimised, before you pump up the volume.

What’s your biggest pet peeve?

I hate gold-plating. To move fast, fail fast and learn quickly you need to ship and validate as early as possible. That means perfection is a destructive force in innovation. The judgement is to make it just good enough not to cause catastrophic damage, then ship and learn.

What's next for Weavr?

Weavr has a very focused mission that’s going to keep us busy for the next couple of years: to continuously simplify the adoption of embedded finance and to extend our footprint across the most important digital economies. A big next step, apart from our expansion efforts in markets outside Europe, is a new ever-more powerful and simpler form of embedded-finance solutions called Financial Plug-ins. Keep your eyes out for more on this in the months ahead.

GlobalData is the parent company of Verdict and its sister publications.