Payments are the Proof: Embedded Finance is Already Here

Payments are the Proof: Embedded Finance is Already Here

By Todd Ablowitz, CEO and Co-founder

The concept of embedding financial offerings such as payments and lending into software and other services is a hot topic among business thinkers right now. Some articles are highlighting it as the trend that is likely to define the coming year.

While we agree completely that it’s likely to continue to transform industries in a visible way this year, it’s important to note that embedded finance is already here, proving its value. And banks are becoming aware that the trend is a benefit to them as well – those that enable these capabilities today will become the industry juggernauts through 2025 and beyond.

As this article from Andreessen Horowitz points out, payments acceptance is the beachhead where the embedded finance opportunity first established itself. There, the concept has already irrevocably changed the business landscape. Companies like Square, Stripe, Shopify and Lightspeed POS have forever altered the way consumers and businesses alike view payments.

And it isn’t just for big tech companies. Well over a thousand software companies have adopted embedded payments by becoming payment facilitators, and there are many more that can take advantage of the opportunity.

There are numerous reasons to do so. Payment facilitators are known for driving a better experience for their customers. They can develop payments solutions tailored to their industries, because they have control over factors like underwriting, onboarding and funding. And by adding payments to their platforms, they consolidate vendor touchpoints and position themselves as a unified provider.

The economics of becoming a payment facilitator are also a significant driver behind many software companies’ decision to embed payments. They take more of the payments processing fees for themselves, rather than sharing with third-party payments companies, and many claim those fees as top line revenue. Payment facilitators have the potential to grow faster because that higher take rate also comes with less friction in onboarding new customers.

All of these factors can lead to huge increases in valuation. In just one powerful example, Stripe announced a valuation of $95 billion in March – a massive increase over its $36 billion valuation less than a year earlier, one that made it more valuable than any bank in the euro zone, according to Reuters

As more and more software companies realize these benefits, it is clear that an increasing number will follow suit. We’re in the first inning of a long ballgame. Infinicept is at the forefront of enabling this embedded finance future, starting with payments. Even for much smaller companies and startups, embedded payments can be implemented now. That’s the subject of a future post. Stay tuned!