Xbox launches credit card | QuickBook turns a partner into an enemy with embedded finance

Hi friends

Welcome back to the biweekly newsletter that gets you covered with all things embedded finance in under five minutes. Before diving into this edition, there are two announcements from my side:

1. Job Board

This gives me a stronger conviction that one area to support non-financial companies could be helping them hire embedded finance and fintech staff. Therefore, please continue to send jobs or your profiles for the job board (links in the job board section at the end of the newsletter). Additionally, I am open to helping companies in a more active way by supporting their recruitment process, especially when it is the first embedded finance hire in the company. Interested? Get in touch!

2. Embedded Finance Event in Berlin

Our second Embedded Finance Review event is happening on October 12th in Berlin. Get yourself a free ticket if you have not done so; we are almost “sold out”. I am also happy to share a few more details about the companies involved in this event. The event was sponsored, and thus made possible, by

Banxware provides revenue-based loans embedded in platforms that borrowers use every day, thus avoiding having to navigate the traditional loan application process. Banxware's offering covers the entire financing chain, including the provision of funds and end-to-end credit management to bridge cash flow shortages before they become a problem.

Weavr supercharges revenue and customer experience with embeddable financial products, such as debit cards and IBANs, for digital businesses and banks. Their financial plug-ins for digital businesses are complete solutions designed for a range of use cases and come with built-in control and compliance.

Additionally, we will have two ‘frontend companies’ of Embedded Finance on stage:

Candis is a digital invoice management provider, and they will be sharing their learnings from launching financial products.

HiHealth is working on the intersection of healthcare and fintech, and they showcase their solutions and new product offerings.

I am excited about this lineup and look forward to seeing many of you in person. But now let’s dive into this edition of Embedded Finance Review. In this edition, we cover:

• 🤦 Xbox launches a credit card but decides on a co-brand. I explain why a co-brand is a step towards embedded finance but not the ideal outcome.

• 🤺 QuickBooks turns its most important partner into an enemy due to embedded finance. How did this happen, and why will we see more of this? Read below!

• 📰Plus, there are many news items from brands in the retail, vertical SaaS and airline industries, as well as infrastructure news about another bank launching BaaS and another US BaaS in some deep trouble. And check out the insightful read category as well 🍿

• 👩‍💻 2 new jobs at vertical SaaS providers that aspire to become fintech companies

And if you can’t get enough of me talking about embedded finance (poor you), join us tomorrow (Wednesday) for Marqeta’s webinar, ‘Embedded Revolution’.

Xbox launches a card, but somehow chooses to launch a co-branded card?

Microsoft’s Xbox has teamed up with Mastercard and Barclays US to offer a new consumer credit card in the US. The card has no annual fee, and card owners can collect reward points for eligible purchases, i.e., at the Microsoft store or for food delivery. There are five different card designs available, and card owners can decide if they want to have their gamertag printed on the back of the card.

Sounds exciting? Yes, it is great to see a brand like Xbox entering the financial services space. However, it is sad to see that they decided on a co-brand. I have written about other companies and their co-brand cards before, such as Walmart’s partnership with CapitalOne or Delivery Hero with Abu Dhabi Commercial Bank. Co-brands are different from an embedded solution in various ways. But most of the differences are built on the fact that a co-branded card product is the result of an equal partnership between a brand (i.e., Xbox) and a financial institution (i.e., Barclays US).

As a user, you can typically experience at various points that a co-brand is a combination of these two worlds, and it is not one coherent great product experience. This can often be seen in the registration process (i.e., re-entering of already-known details; paper documentation), the way the financial product can be accessed (i.e., a separate app or website instead of seamless integration), or the style of communication (i.e., the washed-down language of a financial institution instead of brand language).

An embedded solution, on the other hand, is a product built and owned by the brand from beginning to end. The financial institution involved in such an offering has the role of a vendor but is not an equal partner. This gives various benefits, such as the brand being able to fully integrate the financial offering into their digital product experience. This means the brand can fully leverage data and provide an outstanding user experience. Additionally, the brand would own the communication and customer relationships. Yes, the brand would need to obey the rules provided by their regulated partner; however, a vendor-customer relationship is very different from an equal partner relationship.

I am sure Xbox has considered both options but decided on the co-brand. I could imagine that this option was considered less risky and, thus, a safer bet. However, co-branded solutions are often not at the level of digital experiences we are enjoying in 2023. A co-branded approach was perhaps a less risky approach in the past, but due to these limitations, it is likely not anymore. The gaming industry is very relevant for embedded finance, and I believe Xbox has a unique chance of building an outstanding embedded product offering. I hope they will realise this too, and a negative experience with their co-brand product is not reducing the chances for an embedded product.

How embedded finance can turn partners into enemies: QuickBooks vs. Bill

The extremely popular US bookkeeping tool QuickBooks has been a long-standing partner of Bill. To simplify it a lot, a SME could use QuickBooks to write invoices and then use Bill for banking or payment-related activities. Both companies were benefiting from this partnership, with Bill mentioning the importance of QuickBooks as an acquisition channel multiple times. In the past few months, Intuit, Quickbooks parent company, has made steps towards separating from their partner Bill, which resulted in the (re)launch of QuickBooks Money - an all-in-one payments and banking solution. Additionally, and this is the very interesting part, QuickBooks also started to block API access for Bill, forcing their customers to discontinue using Bill in favor of QuickBooks's own solution.

In a world where everything can be embedded and smart leaders understand the power of embedded, this is likely to happen a lot more. Companies like QuickBooks did not have the possibility of an embedded finance product a few years ago when they started partnering with Bill. But the world of fintech infrastructure has changed a lot since then. Companies that are providing a sticky, data-rich B2B service (see the link to the Matt Harris podcast in the insightful read section) are ideally positioned to offer financial services. And why would you hand over your customers to a traditional financial institution or fintech company in exchange for a small revenue share when instead you could service them on your own with an embedded finance offering and earn a lot more? And in some cases, the non-monetary benefits of embedded finance create a flywheel, something any company is trying to find.