Hi friends

Welcome to the Embedded Finance Review newsletter, this time with a fresh new logo. I hope you like it.

In 2023, I hosted two embedded finance events in Germany and I plan to continue that in 2024. I am likely to host an event at the end of February in Berlin and another one in May in Hamburg. Are you interested in sponsoring? Fill out this survey. For any other event-related comments or inquiries, just hit reply!

On a personal note, I have tested a few different activities to promote my newsletter outside of the traditional fintech bubble. Especially one channel proved to bring quite a number of subscribers; however, it appears that many of them are not opening mail at all. Since I prefer to have a clean subscriber list, I activated an automation, and every subscriber that hasn’t opened the last three or four newsletters (~6 weeks with no newsletter opened) will need to re-confirm their subscription and will otherwise be unsubscribed. This reduced the growth of net new subscribers in this edition and will likely cause a reduction in subscribers until the next edition.

Thank you and the other 874 subscribers for supporting my work!

I have stopped any other promotional activities and will rely purely on word-of-mouth (+ LinkedIn, Twitter, and Slack sharing). So if you like my work, please help me grow my subscriber base!

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Swiss supermarket Coop launches banking services, payments, and pension solutions.

The biggest Swiss retailer, Coop, has launched an extensive embedded finance offering. The product is called Coop Finance+ (website) and consists of a bank account and debit card. It appears that investment and insurance products will follow in the future. Coop has collaborated with Additiv, a fintech orchestration provider from Switzerland that is known for its embedded investment technology. This might be the first time that the company also supports the integration of banking and payment products. While Additiv covers the orchestration and technology layer, Coop Finance+ relies on banks, investment, and insurance companies for other crucial aspects: Hypothekarbank Lenzburg, Vanguard, OLZ, Liberty Vorsorge and Glarner Kantonalbank. The mention of Vanguard and Liberty Vorsorge gives a strong indication that investment and insurance products will follow.

Depending on what country you call home, you might know a local retail company that offers financial services. A brand that probably many of us know is British retailer Tesco, which owns Tesco Bank, whose predecessor was founded in 1997. And guess what? Even Coop has had its own bank in the past. This bank was founded in 1929 by Coop’s predecessor and has been called Coop Bank since 1995. However, Coop sold its stakes in 1999 and the bank rebranded as Bank Cler in 2017 (Bank Cler website). Therefore, a retailer launching financial services is anything but new, even for Coop. The interesting piece is that Coop Finance+ is not relying on its own license but is partnering with various financial partners in the background. I believe this is the right decision in 2023 and this gives the Coop Finance+ product a very different spin.

One of the challenges that Coop will have to solve is the question of why their customers should use their offering. Coop Finance+ is a separate app that customers will have to download and they can earn additional points. Personally, I believe that outstanding embedded finance products create an 1+1=3 atmosphere where combining financial services with something non-financial creates a bigger result than the sum of its parts. While Coop has chosen a setup that provides them with more flexibility and lower costs, they will have to prove that their product is appealing to their targeted customers. I am sure they understand this and I will make sure to follow their journey.

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Non-Financial Brand News

🇩🇪 Publk launches the SocialCard in cooperation with Visa, a payment card for local authorities to transfer social benefits to refugees (additional details here in German).

🇩🇪 Onvista, an online platform for stock and other financial data, embeds a trading feature that enables its users to buy and sell stocks in their existing portfolios. Currently, a handful of banks are supported but Onvista aims to increase this with their partner Brokerize (no English media coverage is available).

🇺🇸 US Elon Musk shares it’s ambitious plans to launch X’s banking product by the end of 2024 and aims to handle the entire financial life so users can replace their existing bank.

🇺🇸 Airline CEOs predict loyalty program doom under proposed legislation. The bill aims to save consumers money on credit card fees but could kill rewards programs.

🇺🇸 Shipping platform Shippo introduces an insurance solution for eCommerce merchants to ensure a positive shipping experience for their customers.

🇺🇸 Amazon extends Affirm BNPL option to B2B store.

🇸🇬 Digital travel platform Agoda enhances its B2B payments in the travel and tourism industry in partnership with MasterCard.

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Should you build or buy your frontend?

Photo by Tran Mau Tri Tam ✪ on Unsplash

There were different triggers for me to discuss the question of whether you should buy or build your embedded finance frontend, but the one that I can share publicly is the announcement of US embedded banking provider Unit, who has launched their white-label banking frontend. Everything that follows is not directly linked to the Unit announcement.

Thanks to such a product offering, companies like Unit cannot only offer their customers the APIs and regulatory framework to build financial products but also give them the frontend product. If you look at the whole market, you will find embedded banking or BaaS providers that offer:

a) Zero or close to zero frontend (i.e. just widgets for certain regulatory-sensitive elements)

b) A basic frontend where you will need to invest additional resources in to tweak

c) A full-fledged frontend product that even includes customization and necessary adjustments.

Additionally, you can find companies that offer only the frontend and partner with different infrastructure providers for the BaaS piece.

But what’s the right path? Depending on whom you ask, you will get very different answers, and in some cases, you will end up in philosophical debates (trust me, I have been there). There are many things to take into consideration but in short:

• Pro white-label: Faster product launch; many banking features are always the same; companies might not have knowledge or staff to build this themselves
• Con white-label: Every use-case is different; if you don’t own your frontend, how will you differentiate or achieve 1+1=3? (read the Coop story above for context)

The people who are against using white-label solutions would often say that if you don’t have the knowledge or staff to build the necessary frontend, should you even enter this market? If you had asked me a couple of years ago, I would have probably said something along those lines. But my opinion has shifted and I believe there are situations when non-financial brands could go with a white-label product.

For example, if you have unique access to a certain target group and want to offer them a standard banking product under your own brand, why not start with a white-label product? There might be a point in time for such a company where you would want to own your frontend, but maybe not right at the start? Additionally, thanks to the growing speed of development in embedded finance, we are seeing more and more cases where this is being used outside of the traditional areas. For example, I have heard of a case where a large company has partnered with a BaaS provider and is using a white-label banking product to provide their thousands of partners with an internal solution for complex payment flows. These are just two examples, but in a world where speed matters more than many other things, why not use a white-label product to get to the next stage?

If you are a non-financial brand, how do you think about owning your frontend? And feel free to get in touch if you are looking for a provider that can help you with that.

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Infrastructure News

🇬🇧 Railsr sets sights on growth after £20 million funding boost

🇬🇧 Two new UK licenses were secured for EU companies Mangopay and Mollie: Mangopay, a platform-specific payment infrastructure provider, secured an EMI license, and Mollie, a payment service provider, secured a Payment Institution license.

🇺🇸 Cross River Bank CEO Gilles Gade is bullish on the opportunities that lie ahead for BaaS providers and their banks, saying 2024 will be a banner year for firms in the space.

🇧🇷 Banking-as-a-service startup QI Tech has raised $200 million, led by General Atlantic.

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Insightful reads

👫 How mutually beneficial partnerships within the BaaS ecosystem can help banks and fintechs expand into lending.

📈 Executives believe bank and fintech tie-ups, including BaaS, are critical for success.

🕵️‍♂️ A deep dive into the agent model in financial services and why compliance is key to its future.

❓ Embedded finance visions should start with the ‘why’ - says J.P. Morgan

📦 Banking as a Service unpacked by Treasury Prime CEO Chris Dean.

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Job Board

1️. Head of Compliance at a vertical embedded banking provider.

2️. (Senior) Commercial Manager at an Open Banking provider.

Does one of these roles sound interesting to you? Hit reply, and I will tell you more!

Are you hiring? Submit your vacancy and get featured in the next edition.

Are you looking for a new opportunity? Submit your profile and I will send you suitable opportunities (I won’t share your name with anybody).

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