Website Builder Jimdo launches Banking Product | Railsbank's EU license revoked

Hi Embedded Finance Friends,

it’s time for another roundup of the Embedded Finance space. It’s hot in Berlin these days, but also in Embedded Finance.

If you have a second, please reply, forward, click on a link or interact in any other way with his email. I am sending this newsletter from a new domain and need to make sure it is not caught by spam filters. Thank you 🙏

In this edition I cover

  • Website builder Jimdo launches a banking product
  • Railsbank getting their EU license revoked
  • Amazon launches flexible financing option for smaller merchants
  • Zalando’s Payment unit follows the EF playbook

A few weeks ago, I chatted with a friend about my newsletter, and he asked me how many subscribers I have. He quickly followed up with the guess “a few thousand maybe”? Well, as of hitting send for this edition, there are a total of 381 subscribers. If you had asked me a few months ago, I would have probably guessed it would be a bit higher as well (but not in the thousands).

However, instead of reaching a certain subscriber number, I am actually more focused on getting the right people to subscribe to my newsletter. I am very happy that you and other builders and shapers of the Embedded Finance ecosystem are among the subscribers. And don’t worry, I will continue to produce relevant Embedded Finance content, no matter the total number of subscribers. That being said, this doesn’t mean I am not going to ask you to share EF Review ;-)

Thanks to the 26 new subscribers and to all 381 subscribers for reading, commenting and providing feedback every two weeks. If you like my content (and only then), please share this newsletter with a friend, coworker or just drop it into the “interesting read” Slack/Teams channel of your company :) Thank you!

Website Builder Jimdo Launches Banking App

The popular website builder Jimdo from Germany has launched a banking product powered by Solaris (Jimdo website in German). The product includes a bank account and a Visa Card and is only available for paid Jimdo customers at the moment. Jimdo has helped entrepreneurs and small businesses create more than 32 million websites since its foundation in 2007.

When you are working in the Fintech bubble, you might be surprised by such a development and be thinking about all the digital business banking products out there (i.e. Qonto, Fyrst, Finom and many more). However, Jimdo founder Matthias Henze mentioned in the product announcement that they discovered that many of their customers in the solo-preneur category are using their personal bank accounts to manage their business finances. The Jimdo banking product is not as developed as the digital alternatives, but it appears that their bet is that the access Jimdo has to it’s customers is more important than the perfect product.

Jimdo’s move into banking is also not their first move outside of pure technical website play. In the past years, they have launched different features to support their clients with legal texts and other products that a person early in their entrepreneurial journey might need.

I have not followed Jimdo closely in the past, but from a typical Embedded Finance success story, Jimdo seems to be in a good spot. It will be interesting to see what else they launch over the next few months that is directly or indirectly connected with their banking products.

Also, kudos to the team at Solaris for this deal. Jimdo will likely not be in their top spot in terms of revenue or brand value; however, it’s the perfect story for their Embedded Finance positioning.

Other Non-Financial Brand News

🇩🇪 An analysis shows that Zalando Payments generated EUR 268 million (in German only) in revenue and EUR 5 million in profit in 2021. BNPL and invoice payment were likely the focus of efforts in the past years. Where could this end? Check out my piece about Mercado Libre from a few weeks ago.

🇸🇬 Singaporean insurance company Singlife bins its groundbreaking debit card after a change in leadership. The card allowed customers to withdraw money against their policies, and Singlife tried to create more touch points with their customers.

🇬🇧 Amazon launches flexible financing for small and medium-sized businesses in the UK. The product is powered by Youlend, and merchants repay the financing based on future sales.

🇺🇸 Adyen and Shopify partner to power new payment options. The partnership is enabling larger enterprise merchants to integrate other payment options, which is important for Shopify outside of their US home market. Typically, Shopify works closely with Stripe, but the international angle and perhaps diversifying the payment partner relationship might have helped Adyen win this deal.

Lithuania revokes Railsr’s EU license

Do you remember when Wirecard fell apart and many startups had to find a new banking provider in a very short timeframe? Well, this story might not be too different.

Railsr, or as many, including myself, still call it, Railsbank, has had a terrible downfall over the past few months. In this newsletter, I covered their troubles, which ended with some of their investors and customers taking over the remains, keeping in mind that the company was valued at almost one billion dollars less than two years ago.

Railsr was operating a Banking-as-a-Service offering in the UK and EU, and for their EU activities, it relied on an e-money license from Lithuania, which was held by their subsidiary Payrnet. The Lithuanian regulator announced that they revoked Payrnet’s license license and started insolvency proceedings for Payrnet as their liabilities exceeded their assets. The regulator published the full details of its findings (see link above), but let me show you how it starts:

The business model of UAB PAYRNET was exclusively focused on activities through intermediaries. During the inspection period, the institution provided financial services through 90 intermediaries, distributors or other legal entities distributing the institution’s financial services. In most cases, the institution would establish a business relationship with them without due diligence and without assessing their suitability, reputation and risk; in cases where the assessment was conducted, it was inadequate. The institution did not control how and to whom intermediaries provided the services of the institution, how they performed the money laundering and terrorist financing functions delegated to them (…).

When you realise that Railsbank was able to obtain and keep a license for that long even though they did not follow many of the requirements that come with a license, you might understand why Lithuania was so attractive for Fintech companies that were looking for a rather easy application process. The findings are very serious, and the drastic step taken by the regulator to revoke the license is the only option. The question remains: how will this case impact the work of the Lithuanian regulator, and will Lithuania lose its popular status for license applications? And will other countries and their regulators (e.g. Malta) in a similar position react as well? Only time will tell.

Hopefully, the 90 customers (Fintech and embedded finance players) of Railsbank in the EU are not caught by surprise like many Wirecard customers were and have started to identify or even integrate another banking provider already.

Other Infrastructure News

🇫🇷 / 🇪🇸 The UK BaaS provider Modulr establishes a presence in France and Spain. Modulr holds two EU licenses in Ireland and the Netherlands, and with the French and Spanish branches, they are likely going to offer local IBANs and other local products.

🇩🇪 SAP Fioneer launches tailored SME banking offering. Fioneer was initially announced in 2021, and Embedded Finance was a strong part of their product which is aimed at (neo)-banks and financial institutions. Also in this announcement, Fioneer highlights embedded services as a key part of their new offering.

🇬🇧 Bankable acquires embedded finance platform Arex Markets. With this move, the UK BaaS provider will be able to integrate credit and working capital financing into the payment flows.

🇺🇸Treasury Prime and announce long-term partnership and launch a first product enabling users to top up their Treasury Prime-powered wallet with a third-party Debit Card.

🇮🇩 Finfra raises USD 1 Million in funding and lets Indonesian businesses add embedded finance to their platforms.

Insightful reads

🇪🇺 The rebirth of Banking-as-a-Service in Europe. The Griffin investor MMV deep dives into the local BaaS opportunities and describes their motive to invest in Griffin.

🏦 Integrating financial services into platforms: This Citi-paper suggests a new strategy for the integration of financial service into marketplaces and platforms through the creation of ‘three-sided markets’

🔬 Tearsheet is taking a closer look at Stripe’s new charge card program for Stripe Issuing users.

🪪 How to get an Electronic Money Institution (EMI) license in Europe?

🛳️ Everybody knows what embedded lending is, but nobody knows what embedded lending is.

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