Embedded Finance Unlocks Value for Underserved Small Business Sectors

The rise of embedded payments is helping to change the business models of legal and financial services companies, accounting firms, nonprofits and logistics operators, to name just a few verticals.

For the payments processors serving those firms — and partnering with independent software vendors (ISVs) and other providers — helping them offer customers the payments options where and when they want them is essential.

In an interview with PYMNTS, Adam Gray, chief transformation officer at Stax, said “as an industry we are always trying to serve new markets — and for embedded payments, there are historically underserved markets that we’re seeing growth.”

These small to medium-sized businesses (SMBs), he said, are embracing technology and software, and are looking to consolidate their vendors, which means that their technology providers must serve as “one-stop shops” for ways in which they can lower costs and focus on their core specialties, without worrying about integrating payments into the mix. 

In the meantime, many of those companies must handle complex transactions where, for instance, law firms set up trust and operating accounts and real estate firms handle split transactions day to day. Nonprofits, to name another example, are also faced with razor-thin margins in an uncertain economic environment, which in turn means that they need to find the best ways to keep donors and customers engaged.

There are several moving pieces, and technologies at work in the background that Gray said, “touch that transaction, from the time of capture all the way through settlement and funding.” For Stax, verticalization helps bring those disparate activities in-house, so that data can flow freely across all touchpoints.

No matter the vertical in which a company is engaged, a few fundamentals apply. It’s critical, Gray said, to be “closest to the consumer where they want to make the transaction — whether you’re collecting payments in the field or at the fundraising event, you want to be able to do it right there,” and from the point of view of the consumer, “not have to navigate to another page to do it. The ideal consumer experience is one that when I go to make the payment, I don’t realize I’ve left a platform or I’m using a different piece of software. It should all feel like one unified experience.” 

He noted that tokens are being used more extensively in a broad range of payment use cases, particularly with subscriptions, and have been streamlining payments, as the consumers’ information is stored, and protected, and gives higher authorization rates as transactions are sped up.

The tokens, he said, are improving a broad swath of payment interactions, ranging from eCommerce checkouts, to tap to pay to in-the-field services where payments can be tapped on a mobile device. 

Read more: Payments Move From Checkbox to Strategic Differentiator for ISVs

“Your HVAC firm,” he said, “might be moving to a subscription model — where they come and perform maintenance on your units twice a year. You’ll want to pay and set up a token through their website,” or make a payment as they show up and make sure customers’ air conditioning units are ready for the summer’s heat waves.

Beyond the commerce benefits of the tokens, he told PYMNTS, “security and fraud prevention have to be top of mind for everybody involved in the interaction with consumers today.” He added that Stax, which collects and leverages data used as ISVs link with SMBs to enable payments, is using artificial intelligence (AI) and machine learning to safeguard that information.

Looking ahead, he said, the next few years will bring “new chapters of innovation for us and the industry. Embedded payments and ISVs have been growing at such a rapid rate as an industry and [payment processors] are catching up. The ability to verticalize bring all these tools together is going to lead to new ways to innovate.”

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