Hi EF friends

Last week we hosted our very first Embedded Finance Review Event in Hamburg and are happy about all the positive feedback we received. Thanks again to Mehrwerk, Swan, Yassir and Metro for their support. We are in the early stages of planning another event later this year in Berlin, so please reply to this email if you are interested in supporting it.

Since I moved from blogging to writing newsletters, I am testing a new provider. Thus, a few things might be different; let me know your feedback and don’t forget to share EF Review with your friends and coworkers!

I will be attending FTT Embedded Finance & Super-Apps Europe 2023 on Tuesday May 16th in London. Come say hi if you are around.

Non-Financial Brand News

^{Non-Financial Brands are the 'Frontend' in Embedded Finance. By definition, these companies are not from the Financial Service industry but are offering financial products 'embedded' in their non-financial offerings.}

🇺🇸 Olo partners with Adyen for its SaaS platform to enable restaurant businesses to consolidate digital and in-store payments, apply for capital, and manage cash flow

🇺🇸 Apple nets $1 billion in deposits within a week of savings account launch

🇺🇸 Stripe powers Microsoft Teams business customers to accept payments and GoDaddy is one of the partners to implement the feature

🇺🇸 Starbucks tests a new payment method in one store in the state of Washington: Customers can pay with the palm of their hand

🇺🇸 The Head of Banking Christina Riechers describes in a podcast the evolution of Square Banking and its journey in the past 7 years.

🇺🇸 BlueCart, an online ordering platform for the hospitality industry, adds vendor bill pay solution

🇺🇾 MercadoLibre sees growth in commerce and Financial Services in Latin America (see below)

🇸🇬 WhatsApp and Stripe help Singapore businesses accept payments directly in chats

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Brand spotlight: MercadoLibre

^{In this section, I am sharing the story of a non-financial brand that is building and launching financial products.}

Let’s play a game. Think about a company in the e-commerce space that generates a few billion dollars revenue per year, of which a substantial amount comes from Fintech products. Shopify? Not wrong, but there is also Latin American e-commerce giant MercadoLibre. The company was founded in 1999 in Argentina, but its headquarters are now in Uruguay. MercadoLibre is active in 18 countries in Latin America and is the most popular e-commerce provider in most of these countries. Their main business is an e-commerce marketplace, but the company also offers advertising, real estate, and other services.

The majority of MercadoLibre’s fintech revenue comes from its Mercado Pago unit, which offers payment and insurance products. Additionally, the company also offers a lending product. While the lending unit, Mercado Crédito, generates lesser revenues than Mercado Pago, it grew last year by an impressive 151%.

MercadoLibre and Shopify are both e-commerce companies, but obviously with different main products: MercadoLibre operates a marketplace and Shopify an infrastructure product. Nevertheless, there are quite a few similarities between the two giants. Both companies started their Embedded Finance journey with payments which became very successful outside of their own platforms. Furthermore, both companies expanded their fintech offerings into lending and banking. Lastly, both companies are not looking at revenue alone for their financial products but they see Embedded Finance as a way to bind customers to their ecosystem and as a base from which to launch additional products.

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Interesting facts about MercadoLibre's fintech performance:

• 44% of revenue comes from Fintech activities
• 70% of payment revenue is generated outside the Mercado Libre marketplace
• Growth rate of Fintech units is 94% vs. 20% for the commerce unit
• MercadoLibre is planning investments of $3.6b with a strong focus on Fintech activities in Brazil

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Infrastructure News

^{Infrastructure providers are the 'backend' of Embedded Finance and empower the non-financial brands to offer financial products. In this section, we cover pure technology companies, financial institutions or a combination of both.}

🇩🇪 Paydora Finance unveils white-label banking platform. Paydora is a subsidiary of BaaS provider Dock Financial and a joint offering of both companies combines frontend and BaaS.

🇩🇪 Tyr Ventures invests in Aazzur. Aazzur offers a white-label banking product, and they partner with different BaaS providers.

🇱🇺 Banking Circle joins UK Faster Payments scheme

🇬🇧 LHV secures UK Banking Licence from the PRA

🇺🇸 Velmie adds card module to white label embedded finance package

🇺🇸 Salsa Raises $10 Million to Help Platforms Embed Payroll Features

🇺🇸 FIS and Jifiti roll out embedded lending services

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Question from the community: How is Embedded Finance impacting customer behavior?

^{In this section, I am discussing a question that subscribers have sent to me. Thanks to Alice P. for providing the question for this edition. If you have any topics or questions you would like me to cover, please hit reply!}

Do you remember visiting an unknown city before Google Maps? Do you remember getting in touch with your friends before the smartphone? New inventions and solutions that provide customer value often raise expectations to a higher level. Personally, I remember using N26 for the very first time for a purchase in the grocery store and how amazed I was that I received a notification at the exact same moment of paying. I wasn’t used to this, but after using the product for some time, I couldn’t imagine going back.

I believe this will be the same with Embedded Finance. And I believe this will be very strongly the case in business use cases. Broadly speaking, business owners and managers often rely on various software and tools to manage their operations. Usually, managing finances (most commonly banking, payments, and lending) requires a separate set of tools and processes. This takes time and is inconvenient. When these business owners have the opportunity to do the same processes inside a non-financial product, they are likely to be faster (no need to copy and paste data) and produce fewer mistakes (due to lower manual involvement), thus, they get to the same or better outcome faster.

I am certain that business owners who have found a suitable Embedded Finance solution, they will have a hard time going back to their previous workflows. I am not saying that any Embedded Finance solution will achieve that, but once the business owner has found a setup that addresses her needs, there is no way she will go back.

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Insightful reads

💸 Six key developments in BaaS and how to use tech to respond

📚 Report: The State of Banking-as-a-Service in the UK & Europe

🦓 Should BaaS change its stripes?

🍎 Apple’s Embedded Finance playbook

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Thanks for reading, and I look forward to your comments!

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