Payments Unlock Embedded Finance

The real moat is not payments itself, it is what payments unlock next. For a vertical SaaS company, taking payments gets the company inside the customer’s daily money flow, which creates transaction revenue, makes the software harder to rip out, and gives the platform the raw data and repayment control needed to launch higher value products like loans, cards, and bank accounts.

• Payments is usually the first fintech product because almost every SMB already needs to collect money. In vertical software, that often means the platform can mark up processing, for example buying at roughly 2.2% and charging a standard 2.9% plus 30 cents, creating revenue without selling more software seats.
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• Once the platform processes payments, lending becomes much easier to underwrite and collect. Shopify Capital repays from a share of daily sales, and Toast Capital repayments flex with card sales. That is the practical meaning of sitting in the flow of funds.
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• This is why pure payments is getting commoditized. Internal research across 200 to 300 vertical software companies found about 80% already offered embedded payments, while only about 20% offered other financial services. The next layer of differentiation is lending, banking, and issuing built on top.
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The next phase is a stack where software companies make payments feel bundled in, then use payments data to offer capital exactly when a business needs inventory, labor, or expansion. As software gets cheaper to build, the durable value shifts toward owning money movement and the financial products attached to it.