What happened: German invoicing and bookkeeping provider Lexware is expanding its financing partners and has announced a partnership with Youlend (LinkedIn). This is the company's fourth financing provider, following Banxware, Iwoca, and Silvr. In addition, the company has partnerships with various business neobanks and launched a banking product in partnership with German banking-as-a-service provider Solaris a few years ago.
My comment: It is no surprise that a company from the bookkeeping space strongly focuses on different financial services. Lexware understood that their core product of bookkeeping and financial services are so closely connected that they cannot leave it to their users to figure it out and connect them. That being said, one thing stands out in the Lexware offering. Except for its Solaris-powered banking product, all other financial products are ‘partnerships’ and not really embedded products (as far as I can see). This means that the financing products might be promoted within the Lexware product ecosystem, but applying for them happens on the provider side, likely with entering all necessary information, including company details. The alternative would be to ‘seamlessly integrate’ (or embed) one of the financing providers. The argument for the partnership model is that you avoid technical integration and can partner with several providers for the same offer. There might be a strong case for this, e.g., certain users might get a loan from provider a but not from provider b. However, truly embedded products often perform much better than partnership models for various reasons, including the issues with overchoice.
That said, perhaps the partnership model is the best way to learn and understand a) your customer needs and b) the fit of available providers. Without the partnership model, Lexware would need to rely on its own research and customer interviews, but with it, it can understand its customers' actual usage and make a much better decision about which providers should be seamlessly integrated.
But this is just my outsider view, and I know there are many factors I didn’t consider in these few paragraphs. What do you think about a partnership first, embedded second approach? When does it make sense, and when does it not?
