Hi embedded finance friend!

I screwed up some email settings, and many of you did not receive last week’s newsletter. Sorry! To make up for this, I decided to send the next edition (this one!) already one week later instead of the usual biweekly rhythm. And this gives me the great opportunity to test a weekly cadence, something that I have been thinking about for a bit. Do you prefer a biweekly or weekly Embedded Finance Review? Feel free to reply or use the survey at the end of the newsletter.

You can find the newsletter from last week here. There are many interesting stories to read, but a few things to highlight:

1. Our Embedded Finance Review events are coming to Berlin and Amsterdam (during Money 2020) in 2024. Do you want to partner? Check out some details here, and get in touch with me.
2. Additionally, I spoke about a premium subscription and sponsorship in last week’s newsletter. What do you think about paying and/or seeing sponsors in this email? Let me know your thoughts, and you can check out premium subscription and sponsorship details through these links.
3. Lastly, I changed the design of the newsletter last week and have already made some changes in this edition based on the feedback I received. It is a bit of a struggle to make the newsletter look beautiful in various email readers, so I ditched many of the emoticons that I was personally a fan of. Please let me know your thoughts about the new design and send me screenshots if the newsletter looks “weird” in your email app.

But let’s dive into this edition:

• Germany greenlights a payment card for refugees, and the ‘SocialCard’ seems to be ideally positioned to capture the market
• €35 billion is kept in e-money accounts across Europe.
• The job board is now a community section, and I am looking forward to receive your input, questions, discussions, etc.
• Last but not least, Embedded Finance Review is an industry partner of the FTT Embedded Finance & Super Apps event in London. It’s a great event, and I highly recommend checking it out if embedded finance is part of your job (link below)

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Join FTT Embedded Finance & Super-Apps this May and meet 600+ innovators from retailers, marketplaces, brands, financial institutions and tech providers. Immerse yourself in the latest industry trends and gain invaluable insights from industry leaders that will give you a competitive edge. Embedded Finance Review is an industry partner. Register now.

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Non-Financial Brands 🏢

Germany greenlights payment card for refugees

The 16 different German states have decided to introduce (sorry, all links in this post link to German websites) a payment card for refugees (two out of the 16 have a slightly different approach than the rest, but all will introduce the card). The card will replace cash payouts from the authorities to refugees, and instead, the refugee will receive a pre-funded debit card that can be used to spend the financial benefits. The offering is purely card-based, and no bank account will be made available.

While there are some benefits in terms of limiting card usage (i.e., blocking gambling facilities), the main beneficiaries are likely the authorities that will have an easier system to payout and manage benefits for refugees. As an outsider with limited knowledge, it is hard to quantify the benefits of cashless payouts to refugees, but when a country like Germany chooses cards over cash, the benefits are likely big ;-)

As a frequent reader of this newsletter, you might remember news in the past few weeks where certain German cities or regions introduced a ‘SocialCard’ already. Those were the first movers that cooperated with the company Publk (or trading name SocialCard) to introduce such a card. The decision of the 16 German states to introduce a payment card does not necessarily mean that all of them will cooperate with Publk / SocialCard; however, the company is in a very good position to win many of the tenders that will be happening soon. Their CEO, Joerg Schwittwala, shares in a podcast some further details about the product offering.

The payment card for refuguees is a great example where a card is being used as a way of transferring fund ownership to another party. You could argue that a corporate expense card serves exactly the same purpose. In this case, the employee can make a transaction without needing to receive cash from her employer. I would assume that similar benefits could be brought to caretakers and their organisations in cases where they are legally responsible for the financial situation of the individuals under their care and pay out “pocket money” on a regular basis.

Note: If you are wondering how a payment card for refugees falls into the definition of embedded finance, I agree with you. Obviously, this product is not ‘embedded’ into a non-financial offering; nevertheless, I believe this is a good example of parties that historically have not offered payment or banking products but are now doing so for efficiency reasons.

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Europe

• Dutch MessageBird, a marketing, sales, and payments platform, is seeking to acquire a company with an Electronic Money or Payment Institution licence.
• French employee benefits platform Club Employés has partnered with Weavr to launch a debit card solution for employee benefits, which gives employees the power to pick the perks they prefer.
• German travel expense and benefit provider Circula launches it’s employee benefit card in the Netherlands.

North America

• BILL, an accounts payable, receivable, and expense solution, is partnering with Adyen to deliver advanced acquiring and issuing experiences for it’s accounts payable (AP) and accounts receivable (AR) solutions.
• Maybe Apple’s wallet was never about payments but about something much bigger: biometrically-verified government identification

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Infrastructure Provider 🏗️

€35 billion of customer deposits across Europe now held by Electronic Money Institutions

International research company Celent has published a report, commissioned by ClearBank, showing that €35 billion of customer deposits are now held by e-money institutions. E-money institutions (EMI) started to emerge after September 2020, when the Electronic Money Directive (EMD) was adopted with the goal of creating “a 'narrow bank’ type that would have a smaller capital requirement and whose activities would be confined to the issuing of e-money.”

All of us have likely used (or are currently using) an e-money-powered solution, either from a fintech or a non-financial brand. What is important to know about e-money institutions is that they are not banks, and thus, they cannot lend or pay interest on deposits (but there are workarounds in some cases). In order to protect customer funds, every single EMI needs to have a safeguarding account with an ‘actual’ bank. This can be a pure infrastructure bank or any other high-street bank. In addition to safeguarding funds, the bank often provides other services, such as access to banking or payment rails, to the EMI as well.

It is quite clear that EMIs have been an important driver of fintech and embedded finance in the past few years, but there are also many challenges to the model. The most obvious ones are the narrow scope of issuing e-money and not being able to lend money, which is often the most important way for a bank to make revenue. Additionally, the involvement of a bank behind the EMI can cause friction as well. I am not indicating that the concept of EMI is doomed, but there are benefits (and challenges) working with banks directly. EMIs have often been the clear choice in the past for the product launches; will this change now?

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Europe

• UK banking-as-a-service provider Griffin is searching for a new COO.

North America

• If you thought last week’s news for US banking-as-a-service providers was tough, this was apparently just the beginning, and pressure from the US regulator is increasing.
• But when it comes to BaaS, Alex Johnsons points out correctly that there are different models with their own benefits and challenges.
• Mesh, an embedded finance solution facilitating seamless digital asset transfers and account aggregation, has received an investment from PayPal Ventures.
• CSG Forte and Lendica have formed a strategic partnership to allow small and medium-sized businesses to borrow money directly from their software vendors.

Australia

• Apparently, a new embedded finance provider is launching in Australia under the name We Are Embedded. The company acquired assets from the failed neobank Volt Bank. Thanks to Shaul David for discovering and sharing this story.

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Insightful links 🤓

• How Lithuania became a fintech hub in Europe
• Sifted ask, ‘will every company be its own bank by 2034?’ and I say yes to ‘offer banking’ and no to ‘be a bank’.
• Dee Mitra, responsible for ‘BaaS and Embedded Finance’ at Deutsche Bank, speaks on this podcast about her work and vision for the industry.
• The story of how Visa was founded and developed is extremely fascinating, so I highly recommend reading ‘Electronic Value Exchange’, but with a ~130€ price tag, it is not cheap. Luckily, my favourite podcast, Acquired, did an almost 4-hour deep dive into the history of Visa.
• Why PayPal’s new features didn’t match the anticipated hype.

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From the community 🏘️

• Jobs
  • Director Business Development and Head of Payments at an automobile payment company (EU)
  • VP Marketing at an embedded banking provider (EU)
  • VP Banking at an embedded banking provider (UK)
  • Interested in a role? Hit reply!
• I found this invite-only event for embedded insurance experts in London in February. I am not involved, so reach out to the team directly if you are interested.
• Our reader Shaul David shares a nice anecdote from his time at British banking-as-a-service provider Railsr when they pitched to Facebook.

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Update: I rebranded the job board. It is now a community section, which will still include relevant jobs. Overall, I envision that Embedded Finance Review will offer more and more community features over time, since I believe it can offer massive value - likely more than content. If you agree with me, please help me with content, links, questions, quotes and other things to make it a true ‘community section’.

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