What happened: German Embedded Lending provider Banxware has received € 10 million in funding from UniCredit. In addition, it partners with Aion Bank and Vodeno (owned by UniCredit), which enables them to switch to a forward flow model (The Paypers).
My comment: To explain what the forward flow model entails, let’s stay in the world of e-commerce. Shopify’s German competitor, ikas, has partnered with Banxware to offer ikas Capital, similar to Shopify Capital. Banxware had set up a structured warehouse facility, which provided the money for every loan that e-commerce merchants received from ikas. With the forward flow model, Banxware no longer relies on a warehouse facility, and its bank partners assume the risk.
As with everything in life, there are pros and cons for each approach. However, with the forward flow model, Banxware can avoid managing the credit book itself and can focus purely on the technology. I would expect it's not easy to find bank partners for the forward flow model, but Banxware’s partnership with UniCredit already includes a previous investment and product partnership. On the other hand, not having a warehouse facility and relying solely on one bank partner for the forward flow model might also create a strong dependency; however, other bank partners may be added in the future.
