Hi embedded finance friend,

This edition should have been in your inbox on Tuesday, but I didn’t get as much done as I hoped over the Easter break. Ops. But the next edition will be sent out on the usual Tuesday, which will be April 16th.

Before jumping into the news, I want to share two things about this newsletter and my work in general:

• I cover embedded finance stories around the globe, but I do this through the lens of a European. Therefore, I am not only biassed towards European news stories; I will also describe non-European stories from an European point of view. I am happy to have subscribers from around the world, but please keep this in mind.
• Secondly, I am not a journalist. I cover and write about things that I am excited about. Additionally, I work as an independent advisor. My clients cannot buy placement in this newsletter; however, the two things will naturally overlap since they follow my personal interests. I don’t think that’s a bad thing, but I feel you should be aware of that. Today’s main story about non-financial brands is a good example of this.

But now let’s dive into this edition.

Join us on April 24th in Berlin for our third Embedded Finance Review event. We will have some great speakers, content, and lots of time to connect and network with industry experts. You don’t have a ticket yet? Register here

Non-Financial Brands 🏢

NX Technologies raises $24 million—is this the rise of new vertical providers?

Cologne-based NX Technologies has announced the closing of their Series B, led by PayPal Ventures. The company is offering an all-in-one digital payment platform under the brand bezahl.de, with a pure focus on car dealerships and other players in the automotive industry. The company initially launched their accounts receivable product in 2019 and later added a payment solution through a partnership with Adyen.

Car dealerships use the product to manage everything payment-related that is happening in their dealerships, from tracking incoming bank transfers for cars that have been sold to point-of-sale card payments for a car inspection. With the new funding, NX Technologies is planning to expand geographically and add new products.

From an embedded finance point of view, NX Technologies represents the common vertical SaaS approach (even though the company has a stronger fintech footprint than usual). NX Technologies serves only one industry, the automotive sector, and builds back-office services and payment products around them. I guess its no surprise that after the payment-related products, the company is now looking to add financing, insurance, and other embedded finance products to their offering.

But why did I add their story to the non-financial brand section? Well, I see your point. The car dealerships are clearly the ‘non-financial brands', and the various payment and banking partners of NX Technologies are the infrastructure providers. And NX Technologies? I guess you could best describe them as an additional layer in between, taking the services of traditional infrastructure providers and making them consumable for the non-technical car dealership target group.

There are many types of infrastructure providers, and many consume services from each other; however, I still struggle to categorise a company like NX Technologies as a pure infrastructure provider. And there are other companies that I would put in the same bucket. At our last Embedded Finance Review event in October 2023, we had the founder of Austrian startup HiHealth present their solution: a white-label app and debit card for insurance to improve their claim process and customer experience. Hi Health also consumes services from traditional infrastructure providers and makes them accessible for an industry with very specific needs.

So perhaps we are seeing a new rise of vertical-specific providers, making embedded finance more consumable for specific industries? What do you think?

Disclaimer: I am currently working as an interim head of payments at NX Technologies. Check the beginning of this newsletter edition for further details.

Europe

• Adobe Commerce, previously known as Magento, announces a new partnership with Adyen, which enables it’s merchants to provide a better payment experience as well as improved fraud prevention.
• ShopCircle launches ‘Shop Circle Capital’ in the UK and US, an instant funding product powered by Liberis. Shop Circle offers dozens, if not hundreds, of different tools for e-commerce stores through the Shopify marketplace.

North America

• A US judge ruled that Walmart could end its credit card collaboration with Capital One early. Walmart claims that the bank has failed to meet their required services, including response and delivery times. Capital One is considering appealing the decision.

Infrastructure Provider 🏗️

Quo vadis Solaris?

Just a week after Solaris was fined €6.5 million by German regulator BaFin for late submission of suspicious transaction reports, the German banking-as-a-service provider announces a strong €96 million in funding led by SBI Group and existing investors. The funding was much needed, not to pay the fine (at least let’s hope so), but to be able to onboard Solaris biggest customer, ADAC, the German automobile club. ADAC is currently offering a co-branded credit card with the German bank LBB, but due to a strategic shift, LBB has terminated their co-branded credit card deals, including ADAC. But let’s go step by step.

Solaris was not the first European banking-as-a-service provider (companies like Wirecard and Fidor were already offering such services before), but it was one of the driving forces in the late 2010’s. It received its bank licence at record speed in 2016, and for the years following that, it was the company everybody recommended when it came to banking-as-a-service providers (at least in Germany). This was obviously due to limited competition in combination with the collapse of Wirecard, but credit where credit’s due. Solaris was behind many of the local success stories, from business banking provider Penta to B2C neobank Vivid. But we all know where this ended and that neobanks are not very attractive customers for banking-as-a-service providers.

Therefore, Solaris has tried to enter the crypto and investment space with an as-a-service offering, but both of them have been shut down. What remains besides the traditional cards and accounts offering is the lending and verification product. Solaris pushed their verification product around the year 2020 quite a bit, but it got quiet around it. I am not sure if it’s still in high demand, but with the rise of many specialised players, especially for KYB, I would have my doubts.

Which brings us back to lending in combination with cards and, thus, to the co-branded credit deal with ADAC. You can argue that co-branded credit cards are not the most financially attractive deals since the brands negotiate hard on commercials, and the capped interchange in the EU is not helping either. But it might be the deal Solaris needs to move away from neobanks and closer to big brands. There are likely other co-branded credit card deals on the market, and I would assume that most of the Solaris sales focus will be on them. Therefore, I believe that announcements around new banking launches (such as Jimdo and Lexoffice in 2023) will reduce.

2024 is going to be a crucial year for Solaris and I will make sure to follow which path they are going.

Europe

• Railsr's parent company, Embedded Finance, has written to payments firm Equals Group to propose a potential combination of the two companies.
• MeaWallet launches Mea Card Gateway, a solution for companies that need to process or handle payment card data without directly having access to the data (i.e., issuers or merchants).
• Bulgarian banking-as-a-service provider Paynetics announces the strategic acquisition of Novus, a UK neobank with ‘conscious features', for example, tracking the user’s carbon footprint. It is expected that Paynetics will make some of these features available to their customers.
• Riverty and Adyen announce a new partnership that enables Adyen’s platform customers to offer 14-day payment terms for retail customers in the DACH region.

North America

• Visa and Mastercard agreed to reduce credit card interchange fees in the US, which could mark the end of a 19-year litigation and negotiation process. Flagship Advisory Partners aggregates the story with the most important reactions.
• Unit announces that their clients (fintech companies and non-financial brands) will have a direct relationship with their underlying partner bank. Previously, Unit wanted to prevent this, but recent developments in the US have shown that the regulator is not supporting such concepts.
• Thredd, previously known as GPS, enters the US with their debit and credit card processing solution. Thredd is the partner of choice for many European fintech companies, and their US launch announcement was long expected (if not overdue).
• Galileo allows their customers (banks and fintech companies) to offer cardholders new post-purchase installment payment options via their existing debit or credit card account.

Asia

• Singapore’s Grab will discontinue the GrabPay Card. Grab is observing much higher adoption and use of other offerings, namely its PayLater offering, on which the company plans to focus.

Insightful links 🤓

• How to be(come) a great partner bank in the BaaS space
• Before you boldly go into partner banking, focus on data and compliance
• BaaS banks need a new take on risk and compliance
• For those of you who want to dive deeper into the US partner bank market, check out
  • The Fintech Map, which shows important industry partnerships,
  • The BaaS partner bank landscape 2024

From the community 🏘️

• In this LinkedIn post, BILL is accused of breaching customer trust and profiting from virtual cards without consent. I have doubts that this is actually true, and since there were no further coverages, this is likely the case. Nevertheless, if companies were doing something like this, it could seriously hurt the adoption of embedded finance. So let this be a warning, even if its not true.
• HSBC Innovation Banking (which was SVB UK before) shares insights into their partnership with embedded lending provider Liberis. Liberis was part of ShopCircle’s funding product announcement (see non-financial brand news section).

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