Why Embedded Banking Should Move Beyond the Fintech Bubble

Filip Sobiecki

Nov 5, 2021 • 9 min read
Why Embedded Banking Should Move Beyond the Fintech Bubble with Lars Markull

Like open banking and banking as a service, embedded banking is service more commonly targeted towards other fintech companies.

However, it’s not just the fintechs out there that could use a way to integrate financial solutions.

Businesses in all different industries now need seamless financial solutions, and that’s where Weavr comes in. Weavr allows companies to embed banking and payments into products, platforms, or mobile apps. It targets industries such as education, health & wellness, and real estate to help them integrate financial services.

Lars Markull, Banking Lead at Weavr, joined this episode of Disruption Talks to explain more about embedded banking, where it sits in the market, the top challenges, and the benefits of using it.

What is embedded banking?

Embedded banking is the process of integrating financial solutions with a business’ platform or app through the use of APIs. It works as an umbrella term, encompassing different types of financial services, including payments, lending, wearables, contactless payments, card issuing, vIBANs, and bank transfers.

This allows companies to benefit from having integrated financial solutions on their platform or app without having to hire an entire team to implement it.

Filip Sobiecki: Could you give us a short personal introduction?

Lars Markull: I’ve worked in fintech since around 2013/14, but my background was originally in traditional finance in Frankfurt. I always thought I’d work in a bank, but I was seeing the first trends of the current fintech wave, so I got involved with that.

I did my master’s degree internationally and came back to Germany to work at a company called Figo, an open banking company. My focus was on non-banks in the fintech space who wanted to connect to a bank account, but I saw a need for those who were not connected to finance.

For example, we came across a property management place that wanted to connect to bank accounts to inform landlords when tenants have paid, and no one had built a solution for them.

When I left Figo, I started my own venture, but it didn’t work out. I started freelancing with a few start-ups and helped them integrate traditional banking.

What I realized was:

If a non-bank, non-fintech company wants to offer financial services, they need a provider that is really tailored to their needs.

I later learned about Weavr and was eager to join them.

How does Weavr work?

We are focusing on companies from various industries that use our APIs as building blocks to embed financial products into their offerings. As a broader concept, it’s like banking as a service, but it focuses on companies that don’t want to build big fintech teams.

We want to make the journey for the innovators, as we call our customers, as easy as possible, so they don't have to deal with compliance and regulations.

There are so many buzzwords to figure out. If you’re a cleaning company, for example, you’re probably not going to know about that. You don’t really want to hire three or four people to figure it out for you, so our technology takes care of all this.

What are your plans and expectations for 2022?

A lot of talk since 2020 has been about building better banking and finance, but we are still in a very early phase of this. I’ve seen over the past few months that industries are starting to pick up on the potential of embedded banking. For us, major growth in different areas is the plan. Typical start-up goals really.

We are growing different teams and are building more suitable products for certain industries to fit the demand that we’re seeing. Anyone who’s worked in a high-growth start-up knows that momentum is a very important thing. We are on a good track with our products. We’re seeing more demand and growth in all areas.

Nothing is set in stone, of course. You need to be very careful because things can change very quickly.

What do you think of the question “do we need banks?”

I think it’s a very important comment. Banks as we know them have changed.

Looking back, banks have traditionally done everything within the value chain. From having bank branches to consultations on every single product including mortgages, insurance, and investment products.

Then in the back office, there’s the compliance team, anti-money laundering. Everything was done by the bank. One reason for this was because of entry barriers, in the form of regulations.

In the past six or seven years, we’ve seen new entrants in the banking market. Some new banks are more technologically aware, but others want to focus on other areas, so I completely agree with that statement.

The next generation will bank with brands they like rather than traditional banks.

I also think that traditional banks might power these newer brands and may support them in different ways as a banking partner.

What are Weavr’s key areas of focus?

As I said, we’re focusing on non-fintech brands. We do sometimes work in the fintech space, but we are seeing clear demand from other areas. For example, we look at real estate, education, healthcare, and the future of work. If someone is coming from a completely different area, then we also want to serve them, but those are our main areas.

We need to learn and understand what we need to do to break into certain industries because it’s a competitive space.

Focusing on just a few industries is easier because if you try to address everybody at the same time, it becomes really complicated.

If you can focus on a specific area, it’s easier to be successful there, so we keep our key areas pretty focused.

Why do you believe embedded banking needs to get out of the fintech bubble?

We have interacted with a lot of companies that wanted to embark on the journey of offering financial products. For example, in Germany, we have seen certain companies in the early stage that struggle to launch their products because it’s complicated to integrate these financial services.

Solutions like ours help you get that off the ground with MVPs, testing and launching the products.

In the last couple of months, we have seen in the key industries we focus on that more companies are exploring opportunities to build and integrate financial products. So that’s what we are aiming for. We are looking to bring that to a higher level, with more use cases and focus industries for embedded banking.

What challenges do you see with embedded banking?

When looking at our company vision, we’re still a start-up at the end of the day. There are so many things that could go wrong, and one thing that’s a big challenge is that everything is taking far longer than we originally thought.

Another concern is always regulations and compliance, which can be tricky. This also ties into customer trust and perception. If one company does something bad or exploits customer data, it has a huge impact on the entire industry, and customer trust in embedded banking takes a hit. However, I think everyone is more optimistic about the space now.

What is your decision-making framework?

What I’ve seen over my career is that sometimes people jump in between collecting data and making decisions only to realize that something was missed.

I think you need to have a distinct separation between collecting data, evaluating it, and making a decision. Then you need to agree as a team when the data-gathering stage is over, so you know exactly when to move into the evaluation stage.

If you had a magic wand and could give all 12-year-olds a new skill, what would it be?

I think financial education is extremely important. 12-year-olds may be a bit young to get all the knowledge around finance, but it’s important to teach young people about finance. I think this will become a lot more important in the coming years.

This discussion is part of our Disruption Talks recordings, where we invite experts to share their insights on winning innovation strategies, the next generation of disruptors, and scaling digital products. To get unlimited access to this interview and many more insights from industry experts, sign up here.

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Filip Sobiecki

Senior Executive at Netguru and host of Disruption Talks
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