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One strong signal that embedded finance is moving from the early adoption to mainstream phase is that large, traditional corporates are beginning to embrace the concept and allocating resources to embedded finance projects. One outstanding example is the creation of Metro Financial Services, a separate embedded finance innovation unit that was started by Metro Group. Metro Group it’s a leading international food wholesaler that is headquartered in Düsseldorf (Germany), operates across 30 countries, has relationships with around 17 million customers and generates a yearly turnover of 29 billion Euros per year.
The group has previously launched new digital innovation projects, such as DISH, a hospitality POS solution that already serves over 260.000 users in 16 countries. In 2021, the group decided to enter embedded finance by creating the separate METRO Financial Services unit, which was set up to combine innovative financial solutions with the industry-specific needs of the hospitality sector. Already in 2018, while I was working at SME neobank Holvi, Metro was already engaging in finding suitable banking partners to serve their SME clients, as they recognised that small businesses operating in the hospitality sector are underserved in regards to their banking needs. By setting up its own inhouse financial services unit it seems the best route to market was indeed to build instead of buy or partner, hence we invited the CEO of Metro Financial Services, Michael Zyber, to talk about their embedded finance journey from idea to execution:
- What makes embedded finance attractive for large corporates
- What key enabling factors should be in place to ensure success of embedded finance projects
- How to find the right embedded finance suppliers
- Why talking to customers is key when developing embedded finance propositions
- How large corporates can leverage their existing assets to maximise the impact of their embedded finance solutions
By following an iterative approach early on and testing ideas with customers, Metro quickly realised that creating an entirely new financial services offering and enforcing clients to switch to the new offering would hurt the adoption of the product. The main reason for this is that most of Metro’s small businesses clients already have their banking product set up, including underlying accounting workflows. In the episode, Michael and I agreed that trying to change entrenched user habits is often very challenging or near impossible, especially for established clients. That’s why Metro decided to lower the barriers of adoption by launching a Metro FS debit card that initiates a direct debit on the client’s existing bank account.
This is an interesting approach that other embedded finance players should analyse closely, as it exemplifies an evolution of the simple decision tree that I introduced in one of my last blogs: