Hi embedded finance friend,

This has been an intense two weeks, specifically for the banking-as-a-services segment. Many players are under pressure but the route seems clear. So is it just a hiccup or a reason for bigger concerns?

Before diving into the news, there are two things from my side that I wanted to share with you:

‍

a) Embedded Finance Review Podcast 🎙️

I am finally launching my own podcast, where I interview the builders and shapers of embedded finance. I am publishing the very first episode next week Tuesday, and I will send you a mailing when it’s live. It would mean the world to me if you could support me with this project:

• Follow the podcast in your podcast app
• Give feedback directly to me
• Rate the podcast in your podcast app
• Suggest guests for next episodes
• Share the podcast with your colleagues and friends

You can find the podcast on Spotify and Apple Podcast with a short launch announcement.

‍

b) Embedded Finance Review Community 💁

I have started to build an Airtable list of embedded finance experts, including their specific areas of knowledge and I am planning to share it when I find it suitable (not publicly but with people/companies I am speaking with). So far, I have only asked specific people in my close network to submit their details, but I want to the list to grow. Thus, if you…

a) have practical experience in building embedded finance / fintech products (doesn’t matter how you gained it)

AND

b) are a helpful human being and would be willing to invest 20-30min to help a stranger (that has been vetted by me) with their embedded finance question,

then please reach out to me and I will share more details plus the link to submit your details.

I want to be transparent, that this is a bit of test. I have thought about a lot of different ‘community’ ideas, but wasn’t sure if bigger ideas will work out. Thus, I want to start with a small list, and let it develop from there. Let’s see. If you have any thoughts on this topic, you know where to find me 😎

But enough from my side, let’s dive into the news 👇

‍

Top Story 📰

German BaaS provider slides into insolvency

The German BaaS provider Dock Financial filed for insolvency last week. Unlike its US counterpart Synapse (read further down), there is not much drama or public information available - at least for now. What we know is, that two of the German entities of Dock Financial have filed for insolvency, but apparently not the regulated entity in Luxembourg. It seems that the company intends to continue its operation and remains on the search for a strong investor.

The history of Dock Financial is not the one of a normal startup, in fact it is not even a startup. Crosscard, that’s how the company was called until 2022, was founded in 2006 as a spinoff from PPRO and was sold in 2019 to its investors. At that time, the company was offering white-label issuing products, including some of their own brands. In 2021, no other than Marco Wenthin, Solaris co-founder and its first CEO, joined with other allies to turn the traditional company into an banking-as-a-service high flyer.

The rebranding announcement in 2022 was basically the starting point in their banking-as-a-service journey where they also announced their only funding up to this date. The investor was Claret Capital Partners, which happens to be one of the PPRO investors. Since then, Dock had only two bigger announcements, both of them were acquisitions. In early 2023, Dock acquired SME lending comparison platform Compeon after making a minor investment the year before. And in October 2023, Dock announced an ‘acquihire’ of Paydora, a banking frontend provider. Dock was betting that both services will complement the core banking-as-a-service product and help close additional deals. But was that the case? Dock’s website includes logos from Booking.com and other mobility and travel companies. But it remains unclear which products the company has actually powered and how big their reach really was.

Dock Financial was likely fundraising over the past few months but was not in a good position - unlike its direct competitor, Swan, which closed its Series B in the second half of 2023. As an outsider, its hard to judge why, but I would assume that the long history (founded in 2006) and corporate spinoff had its negative impact; especially on technology and the cap table (it seems that the management team holds less than 40% of the company).

I know a few of the team members of Dock Financial personally, and I really hope for the best for them. But the insolvency news will not help with fundraising, closing new deals, and putting signed clients live, so the challenge will be big.

(Link with paywall)

‍

Non-Financial Brands 🏢

Europe

• Restaurant vertical SaaS raises Series A: Nory closes $16 million funding, a few weeks after launching its restaurant financing product. Its founder says that Nory wants to be the one-stop shop for the restaurant sector and finance is just another way. (Fundraise; Interview)

North America

• Mercado Pago expanding to Mexico: The online payments subsidiary of MercadoLibre is in talks with the Mexican regulator as it looks to apply for a ‘Multiple Banking Institution licence’. Initially founded in 2003 to facilitate payments for MercadoLibre’s online marketplace, Mercado Pago has operated as an Electronic Payment Funds Institution for over two years. (Link)
• Walmart parts ways with Capital One: The two companies launched a reward credit programme in 2019 but Walmart grew unhappy with Capital One’s performance. A court ruling gave Walmart the opportunity to pull the trigger. (Link)

‍

Infrastructure Provider 🏗️

Europe

• Navro introduces EU accounts: The account are equipped with individual IBANs, facilitate payment collections across Europe and other regions using local payment systems. (Link)
• BNP Paribas partners with Billie: The two companies have entered a strategic pan-European collaboration. BNP Paribas is set to assist Billie’s payment processing and cash management procedures. (Link)
• Stripe launches payment and financing tools in the UK: The US payment giant is strengthening its position in the UK, opening a flagship London office in the heart of the City and launching its first Open-Banking-powered payment method and new financing options for small businesses. (Link)
• No capping of Visa and Mastercard fees in the UK: The UK's Payment System Regulator has stepped back from imposing financial penalties on Visa and Mastercard scheme and processing fees, despite evidence that the firms are running an effective duopoly in the supply of services to merchants. (Link)
• Fabrick expands to Germany through acquisition: Banca Sella’s digital subsidiary Fabrick acquires German open banking provider FinAPI. Fabrick offers open banking and banking-as-a-service products in its home market, Italy. (Link)
• £10 billion valuation thanks to the SaaS platform?: The British neobank Starling Bank offers it cloud native platform to other lenders and neobanks around the world. One of their investors believes this additional revenue could help them reach a £10 billion valuation. (Link)
• Worldline teams with Visa on virtual card issuance for online travel agencies: The project will focus on the Online Travel Agency (OTA) market and by combining the parties’ acceptance networks and seamless payouts, the virtual card issuing solution will streamline cash flow for OTAs. (Link)

North America

• Visa seeks to “revolutionise the card”: Visa announced at the annual Visa Payments Forum in San Francisco an array of new products, incl. a feature for users to toggle between debit, credit, rewards points, and buy now, pay later (BNPL) when completing a transaction. (Link)
• The dispute between Synapse and Evolve Bank & Trust continues: Bankrupt BaaS provider Synapse claims that its former banking partner is owning them $50 million, but the bank says the ledgers don’t add up. While it’s unknown how the dispute will be resolved, two things are clear: end consumers are likely the one suffering due to frozen accounts, and the case will result in tighter controls and more checks for other partnerships, which is good news for the industry. (Link 1; Link 2)
• Embedded accounting on the rise?: US startup Layer raises $2.3 million. It offers SMBs bookkeeping and accounting features, which enable them to compete with standalone accounting software providers. (Link)
• Synctera launches Bring-you-own-Bank: The US-BaaS provider partners with a number of banking partners, but is now enabling its fintech and brand clients to use banks outside of the Synctera network as well. (Link)
• Cover Genius raises $80 million: The embedded insurance provider is growing around the globe and offers insurance products to users of Ryanair, eBay and Uber. (Link)

Rest of the world

• Mastercard collaborates with embedded finance platform in the UAE: The card scheme partners with ABHI, which provides its users access to the Mastercard-powered salary advance cards. (Link)

‍

Banks & FIs 🏦

• How to transform a century-old community bank into a fintech: In this podcast Jackie Reses, co-founder, chair, and CEO of Lead Bank, shares how she handled culture issues while creating an innovative business out of a traditional one. (Link)
• Embedded finance reversed: HSBC UK partners with accounting software provider Ember and embeds their services into its new financial insights tool for small businesses. The tool will provide small business customers with real-time profit and loss reports alongside insights into self-assessment tax and dividend availability. (Link)

‍

Insightful links 🤓

• US BaaS unpacked: The team of Contrary Research publishes an in-depth research, explaining where we came from and how the market developed. (Link)
• Banking-as-a-service middleware is going 'direct’: The market and regulator wants banks banks to have a direct relationship with their fintech and brand partners, a panel of experts discusses the impact. (Link)
• Report indicates growing interest of B2B SaaS companies in embedded finance: The report, which was published by UK BaaS provider Weavr, finds that over 70% of B2B SaaS product managers have embedded payments and/or cards on their roadmap (Disclaimer: You can find a comment from myself in the report as well). (Link)
• Can BaaS providers sell to startups and enterprises at the same time?: The core product may be the same, but the needs can vastly differ for these two type of consumers. Providers often try to sell to both but it is not easy. (Link)