How ‘Embedded’ Payment Providers are Transforming Fintech

Behind-the-scenes payments providers could be moving Big Tech further toward financial services.

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Earlier this week, news broke that Currencycloud, a UK-based business-to-business (b2b) payment solutions provider had racked up $80 million in its latest funding round from a number of high-profile backers: Visa, Sapphire Ventures, Google Ventures (GV), the investment arm of the World Bank, French lender BNP Paribas and Japanese bank SBI.

 

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Following the round, however, Mike Laven–the company’s chief executive officer–used an interesting term to describe Currencycloud’s brand: invisible.

 

“We’re probably the most important business that you’ve never heard of,” he told CNBC. “But that’s conscientious on our part,’ he said. “We do not have a strategy where we compete with our customers.” Instead, Laven clarified to TechCrunch, “my brand is invisible.”

 

Indeed, Laven described the particular niche that his company caters to as “embedded finance”: providing payments solutions to companies themselves rather than front-end users; in other words, if apps like Venmo and Square are the kitchen sink, companies like Currencycloud are the plumbing.

 

And while Currencycloud may be one of the largest of these “embedded finance” companies, it certainly isn’t the only one; earlier this year, Visa acquired payments software startup Plaid for $5.3 billion.

 

Exactly what kinds of products and services do these embedded finance companies offer? And how is the integration of their products changing the face of Big Tech?

 

“The future of finance is one of collaboration.”

 

Michael Wasyl, managing partner at NYC-based corporate strategy firm DeerCreek., explained to Finance Magnates that the rise of these “embedded finance” companies represents an important shift in the industry: “in the past, fintech companies were only focused on building their own products and finding the best distribution channels to sell these products into,” he said.

 

In other words, Kanchan Kumar, chief executive and co-founder of Toronto-based b2b payments company Remitr, explained to Finance Magnates that “the early days of fintech were the ‘unbundling of the banks’.”

 

Kanchan Kumar, chief executive and co-founder of Toronto-based b2b payments company Remitr.

On a practical level, this meant that “young startups [were] looking to tackle problems very singular in focus.”

 

“Product development and technology weren’t necessarily the hurdle nor was adoption,” Kumar said. Rather, “regulation, compliance, and the actual ‘rails’ to make the system work was the real battle. Companies like CurrencyCloud and Plaid helped fintechs to navigate the red tape, getting superior products to market which is why we’re now seeing a ‘rebundling’.”

 

In other words, “we’ll soon begin to see feature sets specifically designed for brand affinity and user dependency, such as data visualization, stronger accounting and budgeting features, personalized customer service, and democratization of ‘luxury’ business features,” Kumar said. “The future of finance is one of collaboration.”

 

This is made possible by the ease-of-use that these embedded finance companies provide. Michael Wasyl explained that “the industry is beginning to evolve as fintech companies are finding it easier to integrate directly into the infrastructure of their target customers,” he added. “With today’s infrastructure rails being developed to support real-time payments and settlements, there is a major shift towards the reduction of manual tasks across operations.”

 

This could include, for example, something as simple as invoicing: “companies will shift their invoice processing towards automated processes due to the massive benefits of efficiency and cost,” Wasyl said, pointing to Param Network, a blockchain fintech company, has an e-invoicing platform that plugs into companies existing EDI systems and automatically processes and reconciles B2B invoices.”

Todd Latham, Chief Growth Officer at Currencycloud.

 

“This has shown to reduce invoicing cost by 80% and invoicing payment time by 10x,” he explained–and while invoicing may not seem like such a big deal in and of itself, this is just the tip of the iceberg.

 

For example, UK-based business-to-business payments solution provider Currencycloud offers 85 APIs, which, according to TechCrunch “cover areas like inbound money collection (helping clients get paid), foreign exchange, outgoing payments, digital wallet services managing multiple currencies and more.” To date, these APIs have been used to send $50 billion across 180 different countries.

Michael Wasyl,  managing partner at NYC-based corporate strategy firm DeerCreek.

 

And the company expects those figures to continually increase: “B2B payments is growing,” said Todd Latham, Chief Growth Officer at Currencycloud, to Finance Magnates.

 

Why is this? “Businesses have been terribly underserved by the payments revolution which has focused so far on the consumer,” Latham explained. “Banks and other financial institutions are beginning to see this and want to partner with fintechs, like us, that provide real solutions to make payments drastically easier, quicker and more transparent.”

 

“Embedded finance really will drive the next wave of fintech,” he added, “and we are excited to part of that movement.”

Embedded product offerings are simply to declutter the experience for the end-user

 

While most of these companies will not have direct interactions with end-users, their presence on the scene will affect the ways that users interact with the applications they are integrated with.

 

Kanchan Kumar explained to Finance Magnates that on a basic level, “embedded product services led to a more comprehensive product offering. With embedded products, the end-users can now settle accounts payables, check balances, monitor expenses, and manage multiple bank accounts all from within one application.”

 

“White-labeled solutions, or ‘embedded product offerings,’ are simply to declutter the experience for the end-user,” Kumar said.