Is banking-as-a-service provider Solaris for sale?

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Hi embedded finance friend

welcome to our weekly 5-minute embedded finance digest ☕️

I have updated the benefits for referring new subscribers to my newsletter. I have replaced older benefits, and from now onwards you can get a personal shoutout in the newsletter for every three new subscribers that you refer. This means you can get multiple shoutouts at 3x, 6x, 9x, etc. referrals, and the shoutout will get bigger with every stage (let’s see how far this can go 😉). Additionally, I treat you to a business lunch in Berlin if you refer 12 subscribers. You just need to share your personal referral link (see end of this newsletter) with your network.

On another note, I am planning to return to publish longer articles on embedded finance. Some of you might remember that’s how I started before launching this newsletter. I have not decided yet if I will send the articles in a separate mailing or if I just include a link to the article in the following newsletter. I am leaning towards the former option, but give subscribers the chance to opt-out. What do you prefer?

Job board: A banking-as-a-service provider in my network is searching for a Germany-based senior business development manager (company HQ is not Germany). Sounds interesting? Hit reply, and I will tell you more.

And now let’s dive in 👇

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Is banking-as-a-service provider Solaris for sale?

What happened: Last week, it was reported that German banking-as-a-service provider Solaris is searching for new funding of reportedly €100-150 million (FinanceFWD). The team is planning to close the round before the end of the year, but it was also stated that Solaris is talking to potential buyers as an alternative to a new funding round. Just a few weeks ago, Solaris announced it was shutting down its e-money unit, formerly known as Contis (covered in a previous EF Review edition).

My comment: Solaris’ closed their last funding just earlier this year, which was a €96 million round plus another €100 million as a guarantee, all from their existing investors. A few people reached out to me after they read the above linked article and asked me if it was true. I don’t have any special insights, but based on Solaris’ stage and the market environment, it should be pretty standard to evaluate different options, including a sale. That being said, a sale of Solaris might be more likely than many of us believe after hearing about it the first time (including myself). Solaris was the first fully focused banking-as-a-service provider in Germany (perhaps continental Europe), but its first mover advantage feels now more of a curse than a blessing. The initial plan to remain a long-term partner for neobanks didn’t work out (they go out of business or get their own licence at one point), and new venture areas such as identity, crypto, or trading-as-a-service were either stopped before they properly launched or didn’t fully meet their internal expectations. In the past years, Solaris returned to focus on banking products and significantly increased their requirements in size for new customers. Early-stage startups have had an ever harder time speaking with Solaris than before, and enterprises were the only customers that mattered (e.g., for co-branded cards).

Obviously, none of us know how the story of Solaris will continue, but a VC-funded tech company in its 9th year that is somehow still searching for its place won’t find fresh funding easily. I will cross my fingers that it works out for the team though.

The banking-as-a-service unit of SEB chooses Thought Machine for new products

What happened: The banking-as-a-service unit of Scandinavian bank SEB has announced that it has selected Thought Machine as its core banking provider. (Thought Machine). The press release highlights that SEB Embedded, the name of SEB’s banking-as-a-service unit, leverages Thought Machine’s Vault Core product, which enables them to launch their first customer, the retailer Hemköp, in just ten months (covered in a previous EF Review edition).

My comment: First of all, this was kind of a re-announcement of a previous press release from 2019 (Thought Machine). Back in 2019, SEB laid the foundation for SEB Embedded when its innovation studio SEBx explored the future of banking and started to integrate Thought Machine. The re-announcement a few years later makes sense for both parties because we know exactly what SEB Embedded is and have seen the first live customer.

Similar to banking-as-a-service, there is a variety of core banking providers with very different flavours and approaches (fun fact: when I google ‘core banking provider’, I see four sponsored adds before organic results). From my experience, I don’t think there is one core banking provider that has a tailored offering for banking-as-a-service providers and, therefore, is the logical choice for such providers. The partnership between SEB and Thought Machine seems to be going well, but it will be interesting to see with whom other new entrants will partner.

Cambodia’s new payment app enables tourists cashless travel

What happened: In August of this year, Combodia launched the Bakong Tourists app. The app enables tourists to travel the country cashless and spend at various merchants via the app and QR codes. Last week, the National Bank of Comboda announced that tourists can now connect their existing MasterCard to the app, which reduces the need to refill the Bakong Tourists app wallet (The Paypers).

My comment: Yes, this app clearly does not meet my own requirements of embedded finance, as the solution is a pure financial service solution. However, I found it extremely relevant, as the country of Combodia has identified cash supply and payments as a major challenge for tourists and solved it with a tailored offering. Perhaps this won’t result in doubling the tourist numbers but will likely increase the number of transactions.

Short stories

• The rise of embedded lending: Nearly three-quarters of small businesses are already using it already (PYMNTS), and platforms understand their customer’s demand very well (PYMNTS).

• Mollie expands to Italy (Finextra) and enables tap to pay on iPhone in the Netherlands, France, and Germany (Finextra).

• Zalando partners with Adyen in order to optimise payments for European clients (The Paypers).