How Europe's Largest Marketplace Built a Lending Business Rivalling Banks

Hi {{first name|embedded finance friend}}

I had a fun last week with lots of events and podcasting activities (see my LinkedIn post). This included our virtual event on Friday, which definitely catered to the embedded finance geeks as the topic was co-brands vs. Embedded Finance.

For our next virtual event, I'm switching gears. This time, I want to focus on non-financial brands and their practical questions around Embedded Lending.

Is your company thinking about, planning, or in the early phase of launching a lending product? Then join us on November 7th for our new format, 'Ask Me Anything: Embedded Lending Edition'. I'm collecting questions from the community and will be discussing them with two experienced Embedded Lending builders. This is your chance to get answers to the questions that actually matter when you're building this stuff.

That said, anyone curious about embedded lending or wanting to learn more about the space is welcome to join too: Register here.

And now let’s dive in 👇

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Polish e-commerce marketplace Allegro is a role model for many. It’s not only Europe's largest e-commerce platform by website visits and the biggest marketplace of European origin, but it also uses Embedded Finance to further grow its transaction volume.

The company offers a B2C marketplace with over 21 million active buyers and a B2B marketplace with over 160,000 merchants. The primary market remains Poland, but the company has also expanded to other Eastern European countries (e.g., the Czech Republic, Slovakia & Hungary).

Allegro Pay is a payment and financing solution enabling consumers to defer payments for 30 days or split the purchase into instalments for up to 20 months. Allegro Pay is also available on its B2B marketplace and offers merchants a similar service, although with slightly different timing options.

This week, I went through press releases and investor reports to understand the volume of Allegro’s Embedded Finance exposure (Allegro):

The most significant new development happened in September 2024, when Allegro teamed up with Visa to launch a payment card that made Allegro Pay features available outside of its own marketplace (Allegro).

As you can see, Allegro has substantial exposure to Embedded Finance, using it not only to create new revenue but also to grow their marketplace. Each investor presentation of the past few years has had a slide about Medium-term strategic priorities. What’s a recurring point on the slide? Building new engines through seamless fintech solutions.

UK-based payroll provider PayCaptain has launched real-time payroll payments and savings accounts through a partnership with infrastructure provider ClearBank (Crowdfund Insider).

Before any of you call me out, I haven't used the words 'embedded finance' for this use case. Why is that? A payroll provider isn't the usual kind of non-financial brand, like a retailer or vertical SaaS, as payroll is closely related to payments and, thus, financial services. On the other hand, payroll software isn't really a core offering from most banks, especially when we focus on the 'software' aspect. So I hope you agree with me that there's some relevance for the embedded finance ecosystem, even if it sits in a grey zone.

What really caught my eye here is the savings account feature. Real-time payroll is great, but the savings account is where things get interesting. Employees at companies using PayCaptain can now open savings accounts with competitive interest rates directly through the platform. It reminds me of what Gusto is doing in the US with their embedded investment solution through pension savings.

The potential here is significant. A savings account embedded in payroll software could reach customers that financial institutions struggle to access on their own. The key question is integration. How well is this embedded into the actual customer journey? If PayCaptain gets this right, I could see other players jumping in. HR software companies (e.g. Personio from Germany) or employee of record service providers (e.g., Deel from the US) could follow suit and start adding similar financial features to their platforms. It's a space worth watching.

US Embedded Finance provider Unit has launched the Embedded Everything Directory. In this Directory, Unit presents a variety of US-focused service providers for any 'Embedded' services, such as embedded accounting, business formation, marketing and payroll.

This comes shortly after Unit expanded its offering from pure embedded banking to include financing and payment services.

The Directory is clearly broader than just Embedded Finance, as it covers many non-financial services as well. The logic behind Embedded Everything is actually pretty straightforward. Once you have customers using your platform, distribution becomes your most valuable asset. You already have their trust, their attention, and you're already solving one problem for them. So why send them elsewhere when they need accounting software, payroll services, or business insurance?

This is where embedded service providers come in. They allow any company to offer services beyond their core product without having to build everything from scratch. The key difference from a regular API provider? It's about selling a complete service to your customers, not just adding a technical feature to your product. You're becoming a one-stop shop, and the embedded provider handles the complexity in the background.

The Directory is a lovely source of inspiration for what is available in the US market. On my side, I have been managing my own internal overview of Embedded Finance service providers in Europe. Maybe I should make this list available in a similar way?

Thank you for reading. I hope you enjoyed this edition.

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And if you need help understanding, building, or launching an embedded finance product, visit my website and get in touch with me.

Best wishes from Berlin,

Lars Markull (LinkedIn)