Software-Embedded Cards for Midmarket
Matt Brown, partner at Matrix Partners, on emerging trends in fintech and AI
The real advantage sits in customers that are big enough to generate meaningful interchange, but still too small to squeeze that margin away. Mid sized merchants usually have an ops or finance person who wants cards instead of checks because cards are easier to track, reconcile, and control, yet they still lack the leverage of an enterprise buyer that can force ACH or negotiate rates down hard. That combination makes issuing economics unusually attractive.
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Very small businesses often still run on checks, cash, or basic transfers because payment volume is low and workflows are informal. Enterprises sit at the other extreme, with treasury teams, procurement rules, and enough scale to demand lower fees or push suppliers onto cheaper rails. Mid market businesses are the band in between where card convenience matters most.
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In card issuing, each swipe creates a pool of fees shared across the issuer, network, bank partner, and infrastructure layer. In B2B, the application on top of the stack can keep a much larger share than in consumer payments, which is why software companies serving business spend can turn card volume into a meaningful revenue stream.
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This is why the strongest fintech products increasingly bundle cards with software that already runs a business workflow, like invoicing, expense management, bill pay, or vertical operations software. The software earns distribution, then payments and issuing monetize the money moving through it. Brex, Ramp, Shopify, and vertical ERP style companies all follow versions of this playbook.
The market is moving toward more specialized card products embedded inside business software, especially for verticals where spend is frequent and back office work is still messy. The winners will be platforms that own the daily workflow of these mid sized businesses, because once the card is tied to approvals, accounting, and reporting, payment volume becomes durable and much harder to displace.