Lexware Expands Financing Stack + Airwallex Targets Creators

_{Welcome to Embedded Finance Review, where I make embedded finance more accessible with weekly newsletters, biweekly podcasts, and events. This newsletter went out to 1,481 subscribers. If you want to support my work, you can upgrade to premium or become a sponsor.}

Hi embedded finance friend

It’s not too late to express your interest in our first private dinner, which will take place on April 3rd in London. I have teamed up with Marqeta for this intimate dinner to discuss the future of smarter payouts. So feel free to ping me when you are in town and have experience or exposure to the topic of payouts.

And now let’s dive in 👇

_{Advertisement:}

More than two thirds of the tickets for our 6th Embedded Finance Review Event are already gone. We will announce the lineup soon, but make sure to get your ticket before they are gone.

How Aareon Spain is reinventing banking for property managers

In the newest edition of our podcast, I sit down with Enrique Sanchez from IESA (part of Aareon Group) to discuss the intersection of fintech and property management.

Aareon developed a digital banking product for homeowners associations in Spain, solving long-standing property management and financial services challenges.

Key Highlights:

• Unique challenges of property management in Spain

• How traditional banks overlooked property administrators as customers

• A digital banking solution fully integrated into property management software

• Simplified account opening and management process

• Potential for AI-driven insights and cost-saving recommendations

You can find the episode on Spotify, Apple Podcasts, and YouTube.

Lexware extends its financing partner stack

What happened: German invoicing and bookkeeping provider Lexware is expanding its financing partners and has announced a partnership with Youlend (LinkedIn). This is the company's fourth financing provider, following Banxware, Iwoca, and Silvr. In addition, the company has partnerships with various business neobanks and launched a banking product in partnership with German banking-as-a-service provider Solaris a few years ago.

My comment: It is no surprise that a company from the bookkeeping space strongly focuses on different financial services. Lexware understood that their core product of bookkeeping and financial services are so closely connected that they cannot leave it to their users to figure it out and connect them. That being said, one thing stands out in the Lexware offering. Except for its Solaris-powered banking product, all other financial products are ‘partnerships’ and not really embedded products (as far as I can see). This means that the financing products might be promoted within the Lexware product ecosystem, but applying for them happens on the provider side, likely with entering all necessary information, including company details. The alternative would be to ‘seamlessly integrate’ (or embed) one of the financing providers. The argument for the partnership model is that you avoid technical integration and can partner with several providers for the same offer. There might be a strong case for this, e.g., certain users might get a loan from provider a but not from provider b. However, truly embedded products often perform much better than partnership models for various reasons, including the issues with overchoice.

That said, perhaps the partnership model is the best way to learn and understand a) your customer needs and b) the fit of available providers. Without the partnership model, Lexware would need to rely on its own research and customer interviews, but with it, it can understand its customers' actual usage and make a much better decision about which providers should be seamlessly integrated.

But this is just my outsider view, and I know there are many factors I didn’t consider in these few paragraphs. What do you think about a partnership first, embedded second approach? When does it make sense, and when does it not?

Airwallex launches new products focused on the creator industry

What happened: Airwallex has announced the launch of a new tax submission and other features that specifically target the needs of creators (The Paypers). This is part of Airwallex’s platform or embedded finance offering, which aims at platforms serving this customer group.

My comment: Airwallex's focus on creator-focused platforms makes a lot of sense. I haven’t covered Airwallex in my newsletter that often, but after last week’s partnership with Vistra, it’s the second time in a row. Airwallex was not founded as an embedded finance player, but as a pure fintech company that offers businesses worldwide a spend management and financial platform. With the rise of embedded finance, Airwallex has focused more on its API product offering, which includes a banking-as-a-service, payment and treasury offering.

Since it operates in countries worldwide, it also competes with local players, such as banking-as-a-service providers. It might be hard for Airwallex to build all the local features that a provider needs in a single market to succeed (e.g., local IBANs in Europe). However, their offering is likely very attractive for platforms targeting a customer group that is located in various parts of the world - which is the case for creators. A local European banking-as-a-service provider could help a creator platform service their European creators, but none outside Europe. In industries like these, the global reach beats local features. Thus, the new product launches or actually the announcement itself might open a few new doors for the company. And there might be other industries with the same characteristics, so maybe Airwallex will target another niche after that?

Short stories

• UniCredit finalised the acquisition of Vodeno and Aion Bank after receiving regulatory approval for its € 376 million move into the banking-as-a-service market (The Paypers).

• How can certain companies offer higher loyalty features on cards than what the interchange is? US retail giant Target has built its own payment stack and relies on a closed-loop offering that bypasses traditional payment rails (LinkedIn).

• Visa has started rolling out its new payment product, focusing on fleet management and fueling-related features (LinkedIn). 

• The spectacular Synapse collapse: The fallout of the US banking-as-a-service provider that left $200 million in customer money frozen was covered in a detailed, in-depth article (Fortune).