Hi folks

I thought summer was going to be quiet in the embedded finance world, but apparently I was wrong. Find a full-packaged edition below.

Before getting into the news, I have two updates for you:

a) After a successful first Embedded Finance event in May in Hamburg, I decided to organize an Embedded Finance event on October 12th during the Berlin SaaS Week 2023. The event planning is still in progress, but if you are a non-financial brand that is eager to share their story, please get in touch (ideally SaaS but not mandatory).

b) I have been speaking with a few companies that are currently thinking about offering their very first lending product. Are you in a similar situation? I would love to have a chat and compare notes.

But enough from my side; in this week’s edition, I will cover:

• Metro’s financial unit is growing
• How Taylor Swift helps a digital bank in Singapore
• Visa makes an Embedded Finance acquisition
• My rant about comparing apples to oranges when selecting Fintech providers

🏔️I will be hiking in the mountains in two weeks, so the next Embedded Finance Review edition will be in your inbox one week later than usual: on Tuesday August 1st.

Please hit reply for any feedback, thoughts or suggestions, and don’t forget to answer the survey at the end of this newsletter ✌️

Thank you,

Lars Markull

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Thanks to the 72 new subscribers and 453 total subscribers for your support. Do you know a friend or coworker who is interested in Embedded Finance? Please share EF Review with them.

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Metro Financial Services crosses 10,000 customers

The German wholesale provider Metro was founded in 1964 and has 674 stores in 24 countries, most of them in Germany and France.

In 2021, Metro Financial Services (“Metro FS”) was founded as a 100% subsidiary of Metro Group. Metro FS launched a Mastercard Debit Card (without a bank account!) in partnership with Vodeno in 2022 and currently focuses on the German market. Typical customers of the Metro wholesale stores are restaurant owners, caterers and hoteliers, and Metro FS aims to onboard them to their card product. Today’s main benefit of the card is 1% cashback paid on every purchase made with the card, which is attractive for many but especially for business owners in the restaurant and hotel industries. Metro FS has already launched BNPL and is expected to offer other financial products.

A few weeks ago, the company announced that it had onboarded their 10,000 customer. It may not be the biggest number, but it’s an interesting milestone and according to Metro FS CEO Michael Zyber shows that there is a clear product-market fit.

Personally, I like the Embedded Finance story of Metro for several reasons:

• Metro is not a startup, not a technology company, but a 60-year publicly traded company. Often we speak about the stories of tech companies launching Embedded Finance products, but a company like Metro is different.
• The team has spent a good amount of time understanding their ideal clients and their needs. Instead of going for a standard bank account and debit card product, they realized that their customers wouldn’t give up their existing bank account since they would use that for cash pay-ins. Thus, Metro FS went for a detached debit card where each transaction is pulled via direct debit from their bank account.
• Metro has launched Metro Financial Services not purely because they wanted to offer financial products but because they realised they needed to increase touch points with their customers and understand them better. The Metro debit card can be used like any other MasterCard, and the card owner will receive 1% cashback for every purchase. Metro is likely not purely focused on earning as much money as possible from their card products but rather aims to understand the purchase and shopping behaviors of their customers better. Metro is likely better able to adjust and address customer needs when they know where customers are going for purchases.

I will continue to follow the Metro FS journey closely, as I believe this could develop into a role model for other similar companies.

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Other Non-Financial Brand News

🇩🇪 Shopware offers BNPL to their merchants via a partnership with Billie. The German e-commerce solution provider offers various features to B2C and B2B shops, and it’s taking its first step into embedded finance.

🇺🇸 Apple’s Card partnership could move from Goldman Sachs to American Express. Apple might be an attractive partner, but the US bank might have realised that it is not well positioned for this product. American Express seems to check all these boxes.

🇺🇸 Twitter Gains Payment Licensing in Three US States. Elon Musk's vision for turning Twitter into a bank was widely discussed in the past few months, but now Twitter seems to be starting to execute.

🇮🇳 SAP partners with Visa and enables its customers to make B2B payments in a simple and secure manner powered by Visa corporate cards.

Additionally, there are four more announcements that are not really ‘embedded’ finance but are still relevant for the ecosystem (if you are not sure why these news pieces are not embedded finance read my post here):

🇩🇪 Lufthansa and Miles & More enter into a new partnership with Deutsche Bank and Mastercard. The cards were previously issued by the German DKB, and the product is a co-labeled card.

🇩🇪 FREENOW partners with Revolut to offer drivers Revolut Pro access. Instead of offering their own banking and card products, the German mobility provider FREENOW decided to partner with a neobank.

🇫🇷 Orange in exclusive negotiations with BNP Paribas as it looks to exit the retail banking market.

🇸🇬 Taylor Swift fans caused a surge in debit and credit card applications for Singaporean bank UOB. Card owners will have privileged access to concert tickets.

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Visa acquires Pismo for 1 Billion US-Dollars

Visa is making a big acquisition (subject to regulatory approval) and is taking over Pismo for 1 Billion US-Dollars in cash. Pismo is headquartered in Brazil and is active in South America, Europe and Asia. However, the majority of their customers and revenue are from South America.

Pismo is offering core banking and processing services, and their customers include traditional banks (e.g. Citi, Itaú), neobanks (e.g. Nubank, N26, Revolut) and marketplaces (e.g. Falabella). Visa highlights that the acquisition will allow them to increase their offerings around core banking and issuing processing (incl. debit, prepaid, credit and commercial cards), as well as add emerging payment rails to their platform. The most important payment system is PIX, the Brazilian instant payment system (comparable to UPI in India).

Strategic investments and acquisitions like this one are vital for companies like Visa. Only regulated companies (e.g. banks) can work with Visa (and MasterCard), thus, the number of potential customers is limited (but not small). The card schemes have become fairly active with strategic investments in infrastructure providers that are selling directly to unregulated companies (e.g. Visa's investment in Railrs and Solaris). This gives them not only insights but can also be used as leverage to become the preferred scheme for those service providers. The acquisitions of the card schemes often serve the purpose of acquiring products they could not build themselves on a certain scale or that are competitive with their core products. This means that the deal size for acquisitions is often in the range of one billion US-Dollar or even higher, like for CurrencyCloud, Tink and now Pismo.

Also, kudos to the team at the VC Headline for various investments at different stages into Pismo and owing in total approximately 30% at the time of exit.

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Other Infrastructure News

🇬🇧 Weavr rolls out an embedded finance solution for banks. This is interesting, as many banks want to offer embedded finance products but are struggling with different aspects. The technical foundation will help but I wonder if that’s the only missing element.

🇪🇸 Swan continues its localization and launches, after its French and German IBANs, now also Spanish IBANs. Launching IBANs in a new country is quite a bit of work and is technically not required to expand within the EU. Unfortunately, due to IBAN discrimination, many players demand local IBANs, especially for certain use cases.

🇫🇷 Qover raises 30 Million euros for its Embedded Insurance orchestration platform. And one of the cofounders shares details about their partnership with an electric car manufacturer.

🇩🇪 Mehrwert, a value-added service provider for financial products, acquires competitor Etvas. Both companies have heavily targeted banks, but with the rise of consumer-embedded banking offerings, there will likely be a shift to non-banks as well.

🇩🇰 Subaio and Mastercard launch a subscription control tool for banks. If you interested in knowing more about their potential intentions - especially in the US - have a look here.

🇬🇧 Divido unveils an embedded retail finance platform. The checkout financing product offering was already available in the UK and is now being launched in various EU countries.

🇦🇺 Wise offers its infrastructure to issue accounts and cards to third parties in Australia. Initial customers are two fintech companies, but non-financial brands could be targeted as well.

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Fintech advise: Don’t compare Apples and Oranges

In the past few years, I have worked with many different teams to build new financial products. I learned a lot, and I am planning to share the most important lessons with you. The first is to make sure you understand your partners well enough to be able to compare them.

We all know the idiom of not comparing apples to oranges, but I see this happening in fintech quite frequently. Obviously, this is more common for teams with less experience in financial services, but I am actually surprised at how often it happens with experienced teams as well.

But what do I mean? Let me use the example of launching a debit card. By now, there are luckily (!) many providers out there who can enable you to do this. However, they often have very different setups (compliance, product and technology) and this means you might have to work with them in different ways. These different ways affect not only your integration roadmap with that specific provider but also the investments you have to make in order to work with them.

People who compare apples and oranges in fintech, assume that one product, in this case, launching a debit card, works the same across all these providers. They look at the commercial offers they receive from the relevant providers and sort them from low to high. Very often, they assume the company with the best commercial offer is the right partner. But that means comparing apples to oranges.

When I work with my clients, I make sure to spend a good amount of time on the product itself and understand what the client is able to take over in terms of processes and requirements (not just technical integration but, for example, also managing regulatory processes). Only then does it make sense to take a look at the price comparison. Personally, I typically include some providers who might be a bit out of reach for my clients but explain the pros and cons. However, it is important to include potential additional investments (e.g. additional hires) into the price comparison to avoid comparing apples to oranges.

PS: Do you have some learnings or questions about building and launching financial products? I am curious to hear your story, please hit reply!

Insightful reads

🧑‍🏫 Aperture launches an Embedded Finance Consulting practice and shares their view that embedded finance does not only create new revenue streams but also makes the core business stronger. Disclaimer: I am discussing a collaboration with Aperture. Get in touch if you would like to know more.

💿 Swan and Banxware describe how they leverage data to create fully contextualized embedded banking experiences and use Agicap as an example.

🇱🇹 Lithuania confirms its National Fintech Guidelines for 2023-2028.

📈 E-money accounts outstrip bank current accounts in the UK.

🇺🇸 Contrary Research publishes an analysis of the US BaaS provider Unit.

⏩ How and why to offer your customers instant payouts

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