Metro's Embedded Finance Defeat: Why Most Retailers Can't Make Banking Work

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Hi embedded finance friend

I joined my friends from Helsinki Fintech Farm on a webinar on Friday, where we spoke about embedded finance (surprise!) and whether Embedded Finance will eat Fintech. What do you think? Click here for my answer.

I have also spent some time writing a longer article on Embedded Finance, a follow-up to the slide deck I published last year. Initially, I wanted to write four to five shorter articles on this deck. However, I noticed many new subscribers through Google Search, so I created a longer pillar content piece (hopefully good for SEO) before diving into shorter articles. I will link the article in next week’s edition if all goes well.

And now let’s dive in 👇

German Wholesaler Metro Shuts Down B2B Financial Services After 25,000 Customer Milestone

What happened: The German wholesaler Metro is shutting down its subsidiary, Metro Financial Services (Metro FS; screenshot of customer mailing). The company's main product was a decoupled debit card that targeted businesses in the restaurant, catering, and hotel industries and offered them 1% cashback on all card transactions.

My comment: I have closely followed the Metro FS journey and published a podcast episode with Metro FS Michael Zyber (podcast) in June 2024. In this episode, Michael explained Metro’s decision to launch Metro FS and shared that the company has onboarded over 25,000 customers. But that was not enough, as Metro started to inform customers in January of this year that the service would be shut down on March 21st (this Friday). We do not know the internal expectation of customer numbers or how much customers used their cards. However, based on what I have gathered, it seems that Metro has decided that it wants to re-focus on its core business and is currently shutting down activities in adjacent sectors.

I have always used Metro FS as an example of a traditional corporation to launch an embedded finance product. Thus, it is a pity that they have not been able to make it work. However, Metro is not the first retailer (Metro is a wholesaler, but my point stays the same) that has failed with an embedded finance product (e.g. Coop in Switzerland). I would argue that it is extremely difficult for retailers and wholesalers to create magical customer value by adding a financial product. The major difference between a retailer offering a banking product and a fintech company or a traditional bank is often the brand and perhaps cashback (or discounts, loyalty) features. While this can work, it is not easy to achieve. Maybe this was different 10-15 years ago, but with fintech's rise, the number of available products has increased significantly.

If a retailer considers building a banking product, I would highly advise them to invest a lot of time and focus on how it intersects with their core product. Building a great financial product might not be sufficient; it must be the logical choice for many core product users/customers.

Maltese Insurer Laferla Enters Banking with BaaS provider Andaria

What happened: The Maltese insurance company Laferla is partnering with local banking-as-a-service provider Andaria to launch Laferla Money (BusinessNow). The offering includes a payment account, debit card, and currency exchange services.

My comment: The insurance and financial sectors have historically had close ties in many ways. Until today, many banks sell insurance products to their customers (aka bancassurance). Not that many insurance companies offer their own financial products (the biggest one is likely the Italian insurance company Generali, which owns Banca Generali, which offers private banking products), but there are multiple insurance companies with other models (e.g., Allianz’s failed fintech offering Hey Money).

It makes sense that banks can easily offer insurance products, but insurance companies often struggle to offer banking products. Banks can leverage their almost daily interactions with customers for cross-selling opportunities, but hardly any customer has an insurance app on their phone or interacts with them more than a few times yearly.

That being said, insurance companies are not all equal, and there might be an opportunity for some to offer successful financial products. This is likely less of an embedded finance play and rather leveraging the insurance company’s brand and customer access (similar to what I described above for retailers in embedded finance).

Vorwerk Launches Embedded Insurance for Kobold Vacuum Cleaners Through Hakuna Partnership

What happened: Vorwerk, the German corporation best known for its kitchen product Thermomix and vacuum cleaners, has announced a new insurance product for its vacuum cleaner brand, Kobold (Hakuna). The German corporation is partnering with the embedded insurance startup Hakuna.

With embedded insurance products, customers can extend their normal 2-year warranty with an additional 3-year protection. The insurance product can be purchased through any available channel: online, in one of the 50 Vorwerk stores, or through one of the 2,000 Kobold advisers that the company partners with.

My comment: I cannot claim to be an embedded insurance expert, but I have noticed that Hakuna has signed up interesting partners in the past few months. In addition to Vorwerk, I have already covered their partnership with eyeglass retailer MisterSpex and the discount retail chain Netto. These are some big names. We all know that such announcements do not necessarily translate into big business, but Hakuna’s embedded insurance offering that can be used for online and offline purchases seems to be attractive.

Short news

• BaaS provider Treezor launched local IBANs in Germany, Italy, and Spain in addition to its French IBANs (LinkedIn). 

• Santander and Amazon introduced their co-branded Visa card products in Austria (Finextra).

• US company Fortis will expand embedded payment offerings after securing strategic investment (PYMNTS).

• Intuit Adds ‘Tap to Pay on iPhone’ to QuickBooks Online (PYMNTS).

• Intergiro Bolsters Embedded Finance Defences With SEON Partnership (The Fintech Times).

• US BaaS provider Synctera raises $15 million and signs Bolt as a customer (TechCrunch).

Insightful stories

• Three Go-To-Market approaches banks can use to play in the embedded finance space (Innopay).

• How Not to Build a Ledger from the Accounting Basics for Engineers series (Formance).

• And my favorite two podcasts this week

  • Fabien Pinckaers, founder and CEO at Odoo, shares his unique story of using no outbound marketing and doesn’t care about valuation or an IPO (20VC). This podcast has zero embedded finance content, but it’s so good that I have to share it.

  • Daniel Cronin, co-founder and CEO of Integrated Finance, discusses his fintech journey and why most projects take much longer than initially anticipated (Spotify).