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Hi embedded finance friend

It looks like summer is over in Berlin, where the temperature has dropped from 30 to around 20 degrees Celsius. I am not sure if it is because of global warming or me getting older, but somehow autumn is my preferred season of the year.

Before getting into the news stories, there are three small things I wanted to highlight right at the beginning:

1) My fintech friend Joris Hensen is collaborating with professor Silke Finken on an embedded finance report, and they need your help! They have created a survey to understand the impact and role of embedded finance. If you have a minute, please help (LinkedIn).

2) If you happen to be involved in embedded finance activities in Switzerland (or want to), you should have a look at the upcoming report and invite-only-event from our reader Dr. Manuel Thomet (LinkedIn).

3) Two weeks ago, I mentioned that Delivery Hero is reportedly working on their first lending product for restaurants. However, Delivery Hero has already been offering lending products since the start of this year through its Spanish brand Glovo, which they acquired in 2022 (The Paypers). Thanks Luuk for pointing this out.

But now let’s dive into this edition 👇

Fintech meets healthtech: How Nelly is reinventing finance for doctors 🎙️

In the newest podcast episode, we dive into the intersection of fintech and healthcare. I am speaking with Niklas Radner, co-founder and CEO of German startup Nelly. Niklas and his team are fintech experts, and they founded Nelly to build a new financial service provider for medical practices in Germany and Europe.

But instead of starting with a fintech product, they decided to launch a digital customer onboarding product. Why did they do that? And why does Niklas believe it was their advantage that none of the co-founders had a background in healthtech?

Tune in and find out. You can find the episode on Spotify, Apple Podcasts, and other podcasting platforms.

Virtual cards improve back office processes for travel provider

Holiday Extras is a travel platform, where customers can book travel add-ons such as parking spots at the departure airport, access to airport lounges, car rental at the destination, and a lot more. While travellers book directly on Holiday Extras portal, the company needs to ensure that the parking sport or car rental is actually reserved at the respective service provider. Typically, this required manual work from the staff at Holiday Extras, but now Holiday Extras has teamed up with Checkout.com (Paypers). The payment provider offers a virtual card issuing service, which Holiday Extras leverages to immediately make a reservation for their customer. In addition to time savings, the usage of virtual cards also enables Holiday Extras to lower decline rates and improve security.

The announcement of Holiday Extras is also a great example that embedded finance is not always something the customer experiences directly. As you can see in this example, the virtual cards are being created by a non-financial brand but not to provide them to their customers and offer them a better banking product. But instead, the non-financial brand is issuing virtual cards for their own benefits. The customer indirectly benefits from a better user experience, such as faster response times. Nevertheless, the customer does not know that a financial product was being created to achieve that.

Xero launches payroll services

The accounting provider Xero increases their financial product offering in the UK with the launch of a payroll feature (The Paypers). The feature was built in cooperation with banking-as-a-service provider Modulr. The two companies have been partnering already since 2023, when Xero launched an accounts-payable feature for their customers. With this feature, companies could make batch transfers for their incoming invoices, and thus, reduce time.

The payroll feature enables companies to process single or batch payroll payments. This allows them to decrease errors, reduce payroll processing times by up to 80%, approve payments via a mobile app, and consolidate multiple payments to a single recipient, potentially lowering transaction fees.

For companies like Xero, adding a payroll feature can have a massive impact. It does not only increase stickiness and improve user experience, but it can also generate substantial revenue. Xero is likely in a good position to cover all types of embedded finance products, perhaps at some point even insurance and investment products for SMEs. Personally, I would be very surprised if they were not able to make a majority of their revenue from financial services in the next few years.

Froda launches a new lending partnership; will non-financial brands follow?

The lending provider Froda has teamed up with SME neobank Juni to offer financing products to Juni’s users. The two Swedish companies describe it as an ‘embedded finance’ partnership (Froda). And while I know a few more people who would agree with this statement, personally, I consider it only embedded finance when the frontend solution is a non-financial brand. Juni is obviously a fintech, so why did I still cover it?

I have came across Froda the very first time earlier this year. While the company does have a direct offering for SMEs to apply for finances, it has created an internal team to focus on partnerships. So far, the company has partnered with fintech and fintech-y providers to embed their financing products. There are at least a handful of embedded lending providers with a strong track record working with non-financial brands. However, many of them focus on the UK or the big European countries. Froda appears to be one of the firsts to take this model to the Nordics. Surely, their competitors from the UK and central Europe are eyeing at the Nordics as well, so it will be interesting to see who can score more non-financial brands as customers.

A tax bill and funding round for a British banking-as-a-service provider

The UK company The Bank of London may sound like an official institution but is a British bank and infrastructure provider. It was launched in 2021 and is offering three types of services: clearing and settling for other banks, banking services for SMEs, and a banking-as-a-service solution. I have covered them in the past with new feature launches, but due to their young age and focus on fintech activities, I did not see them that often in an embedded finance context.

In the past week, the bank has been in the news for different reasons, and the whole story sounds a bit bizarre (Finextra). To break it down for you:

1. CEO resigns on September 3rd

2. UK government files a case for an unpaid tax bill on September 7th

3. £42 million funding announcement on September 8th

4. The bank announces that all taxes have been paid and that the disruption was caused by internal miscommunications on September 9th (PYMNTS)

Thanks to all these news stories, many more people will be familiar with The Bank of London, but that was probably not worth the price? Hopefully now that the tax story is settled, the bank can focus on putting the investment to good use, and perhaps we will see them in an embedded finance context in the near future.

Insightful links

• Deutsche Bank’s Dee Mitra (Global head of product for banking-as-a-service) discusses the potential of embedded finance for banks (PYMNTS).

• Our friends from Aperture published a new bancassurance report which is highly relevant for the embedded insurance sector (Aperture).

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