In the inaugural episode of the Embedded Finance Review Podcast, I interview Michael Zyber, CEO of Metro Financial Services. Metro is a traditional food wholesaler founded in 1964 that has ventured into the fintech space to offer innovative financial solutions.

You can find the podcast on Spotify, Apple Podcasts, and Amazon Music.

Key takeaways

• Strategic rationale: Explore the reasons behind Metro's decision to launch financial services and how this move aligns with their broader business goals.
• Unique business perspective: Learn how Metro, a decades-old food wholesaler, successfully launched a fintech subsidiary to offer financial services to the hospitality sector.
• Strategic insights: Discover why Metro chose to focus on a card product with 1% cashback and how this decision fits into their broader strategy.
• Customer-centric approach: Hear about the importance of understanding customer needs, particularly in a traditionally underserved sector, and how Metro tailored its offerings accordingly.
• Future plans: Gain insights into Metro Financial Services' future plans to fully embed their financial products into Metro’s core business and enhance the customer experience.

Don’t miss this episode packed with valuable lessons for any business looking to explore embedded finance.

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Written summary

In case you prefer to read, you can find an edited and shortened version below:

Lars Markull: Hi there, and welcome to the very first episode of the Embedded Finance Review Podcast. I'm your host, Lars Markull. Embedded finance is reshaping the way we consume financial services. Instead of going to a bank, whether digital or offline, we can use banking, lending, payment, insurance, or investment products from non-financial companies. In this first episode, I interview Michael Zyber. Michael is the CEO of Metro Financial Services, a 100% subsidiary of the food wholesaler Metro. Metro was founded in 1964 and operates 674 stores in 21 countries. A few years ago, Metro decided to enter the world of embedded finance and launched a card product. This product targets restaurants, hotels, and catering companies, offering them 1% cashback for every transaction. In this podcast, I speak with Michael about how Metro set up their fintech unit, why they deviated from the digital banking playbook, and how they define success for their embedded finance activities. Let's dive in.

Lars Markull: Hi Michael, welcome to the show and a very special thanks for being the very first guest on my show. How are you?

Michael Zyber: Thanks, Lars. It's a big honor to be your first guest. I hope I can live up to the expectations here.

Lars Markull: I'm certain you will. Michael, you are the CEO of Metro Financial Services. Metro Financial Services is a subsidiary of Metro, a wholesale food store offering financial products or embedding financial products. When we look at the landscape of embedded finance companies, we typically see vertical SaaS, marketplaces, and similar companies—not so often a food wholesale store. Can you take us back in time to the moment Metro decided to launch financial products? How was the company at that point in time, and what was the main driver for embarking on this journey?

Michael Zyber: Yes, what we realized at Metro was that we have great access to the hospitality sector but were very much focused on only one product, mainly food products. The goal was to leverage existing business relationships with the millions of professional customers we have to offer additional value-adding products and services for that sector. We called it wholesale 360.

The purpose was clear: we wanted to generate new additional revenue streams for Metro and create positive spillover effects to our core business. For example, we could offer credit solutions to allow people to buy more at Metro and special discounts for customers committed to buying more at Metro. This idea of leveraging existing customer relationships to drive business is what today we might call an ecosystem play, though at that time, the term was quite new.

Financial services were particularly interesting because the hospitality sector was very much underbanked, especially after the subprime crisis. A lot of banks stopped activities in the SME space. Traditional banks didn't offer modern neobanking features that were attractive to the sector, like real-time notifications, employee cards, and post-transaction BNPL. Access to these features was limited. Additionally, financial services provided us with valuable data, giving us a better understanding of customer behavior.

Lars Markull: You were a part of Metro way before Metro Financial Services was launched. Were there any changes necessary in the company to offer financial services? Metro is a decades-old German corporate that is a bit more traditional. Did you feel massive changes were necessary, or could you execute this plan quickly?

Michael Zyber: I was already part of Metro, so it was easier for me to convince the relevant stakeholders, especially the Metro AG board. We decided from the beginning that we wanted to operate Metro Financial Services as a separate venture. Banking as a service companies had just started offering their services, allowing us to enter the space in a very lean way without needing to apply for a banking license. This significantly lowered the entry barriers.

Lars Markull: You mentioned the core product is a card with 1% cashback. Why exactly this product? Why not a bank account? How did you derive this setup?

Michael Zyber: Our initial idea was a neobank for hospitality. We saw that players like Penta and Contest were already in the B2B space but no one focused on this sector. We realized from customer interviews that there was a low willingness to switch primary bank accounts, often due to existing banking relationships like mortgages. This would add complexity to their business. That's why we came up with a decoupled card solution, allowing customers to connect the Metro FS card with their existing bank account. This way, no switch is necessary, but they can still benefit from features like cashback. For example, unlimited 1% cashback is attractive in a sector with low margins.

Lars Markull: I understand that offering the card without a bank account makes it easier for customers to start using the product. But does this also pose a challenge in terms of retention, since there's no typical lock-in effect of having a bank account?

Michael Zyber: Currently, the proposition is strong enough. Customers can choose between using their existing debit card and getting nothing, or using the Metro FS card, which is free of charge in its basic version, and getting up to 1% cashback. It's an easy-to-understand value proposition for the customer.

Lars Markull: You launched the product a couple of years ago. Can you tell us a bit about where you stand at the moment? Are you sharing customer numbers or any insights there? Did you have any internal milestone expectations set by Metro?

Michael Zyber: We reached over 26,000 customers since the launch approximately two and a half years ago. We exceeded our internal growth targets for new customers three months after the start of the fiscal year. Growth has not been a problem for us, thanks to our good access to our target customer group through Metro markets. We have a sales team physically present in the stores, and this works very well. In terms of growth milestones, the company is quite happy with our performance.

Lars Markull: We've spoken a lot about the current offering of a card with cashback features. Is this the final product, or are you working on more products? How do you see Metro FS evolving in the next months and years?

Michael Zyber: Our first goal was to prove that we have a product that works and is accepted by the customer. We checked the boxes for product-market fit and product-channel fit. Our next step is to reintegrate the company into the customer journey of Metro. We are one step before being a truly embedded financial product. We wanted to prove first that it works, and now we are integrating it. The real advantage compared to other standalone FinTech companies can only be unlocked when we reintegrate it into the customer journey, offering credit solutions during the purchasing process across all Metro channels.

Lars Markull: The Metro Financial Services app is currently a standalone app, which is more comparable to a fintech or banking product itself. It is not embedded into any other digital Metro products. Was it impossible to do that from day one?

Michael Zyber: Yes, it was more about proving that we have a chance to acquire customers and that they want to use the product. Once we achieved that, we could potentially look into embedding it into the core product of Metro and the overall user experience.

Lars Markull: Do you see a change in growth and adoption of the product through different channels?

Michael Zyber: There's a big difference. Initially, we approached it as a digital banking product focusing on online channels, which was wrong. It took a lot of effort and money to acquire new customers online, which we now achieve in a week or a few days. The key to our growth success was moving the onboarding process into the stores, making it easier for customers to understand and sign up for the product.

Lars Markull: It seems like you've gone against the typical playbook of launching a new digital banking or card product, but it makes sense given your customer demographic. Do you see the traditional bank as your biggest competitor?

Michael Zyber: The restaurant business is still very cash-dominated. Many restaurateurs prefer banks with branch networks for cash deposits,

which is why traditional banks remain significant competitors. While younger restaurateurs are familiar with new banking offerings, the necessity for cash deposits keeps many tied to traditional banks. This has influenced our approach of combining the best of both worlds with our products—offering new banking advantages while allowing customers to maintain their traditional banking relationships for cash deposits.

Lars Markull: You mentioned the importance of creating a competent center for payments and fintech within Metro. Can you tell us more about the team at Metro Financial Services? Did you hire people specifically from fintech backgrounds?

Michael Zyber: Interestingly, no one on our team had a significant fintech background, including myself. We started with a mix of freelancers and permanent employees, assembling a team of about 20 people. The key was having dedicated and young people interested in building a digital product in the fintech space. Despite the lack of specific fintech know-how, the willingness and dedication to build something new was crucial. Many of the people who started the journey with us are still around.

Lars Markull: Does your team handle everything related to Metro Financial Services, or do you rely on additional support from the parent company?

Michael Zyber: While we handle core competencies like marketing, sales, and customer support ourselves, we rely on Metro for administrative services such as payroll and legal support. Product development is partly done in-house and partly by our banking-as-a-service partner. Everything crucial to the success of our product is managed by our team.

Lars Markull: How does Metro define success for Metro Financial Services? Is it purely commercial, or are there other factors?

Michael Zyber: Commercial success is certainly a basis, but it's not the sole focus. For a company of Metro's size, the commercial contribution of Metro Financial Services is relatively small. Other factors, like creating a competent center for payments and fintech within Metro and generating more business in the core wholesale business, are significant measures of success. While we are still in the early stages of measuring these impacts, integrating financial services more deeply into the customer journey will make it easier to measure such effects.

Lars Markull: For listeners working in similar companies and considering starting an embedded finance product, what advice would you give them?

Michael Zyber: Start as independently as possible to move faster and gather data points to support your case. However, keep in mind the eventual need to reintegrate into the parent company to leverage the advantages of existing channels, brand awareness, and the customer journey. This approach helps balance the speed of a lean startup with the integration benefits of a large corporation.

Lars Markull: My final question relates to the market for banking-as-a-service providers, which is quite challenging at the moment. Does this give you any concerns?

Michael Zyber: It's definitely a challenge. When we were choosing partners, one of our options was Wirecard, and we were fortunate not to go with them. The collapse of Wirecard taught us a lesson about the risks associated with our partners. Switching partners would be cumbersome, but we are open to exploring new solutions like card-as-a-service offerings from companies like Adyen or Stripe.

Lars Markull: Thank you, Michael, for sharing your journey and insights about Metro Financial Services. I learned a lot, and I believe our listeners did too. For those who want to reach out to you, what's the best way to connect?

Michael Zyber: You can connect with me on LinkedIn under Michael Zyber or Metro Financial Services. I'm happy to answer any questions or connect with others in the industry.

Lars Markull: Amazing. Thank you for being the very first guest on the show. Until next time.

Michael Zyber: Thanks, Lars. Bye.

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