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Fintech brands predict the rise of embedded finance  

June 22, 2022

Homeowner making payment on Internet, paying bills
Jonathan Bennett, Chief Commercial Officer

Jonathan Bennett

Chief Commercial Officer

Thousands of delegates descended upon Amsterdam to be a part of Money 20/20 Europe last week, the flagship conference for the entire fintech ecosystem. While embedded finance, cryptocurrencies, the metaverse, and web3 featured prominently as themes during the keynotes and headline panel discussions, payments did get its fair share of attention as one of the pivotal pieces of the fintech revolution. Brands from every part of the payments value chain were out in full force, seeking alliances and discussing what is next in the world of payments.

One of the key themes of this year’s conference was interoperability. According to the Money 20/20 team, the growth and opportunities will come from dismantling walled gardens we are used to building and embracing the principle of interoperability by design. When every piece of infrastructure is a commodity, orchestration takes center stage. The payments engine will become the most critical piece of infrastructure for retailers, e-commerce brands, marketplaces, and payments organizations. Achieving interoperability on a technological level will translate into the rise of the orchestration layer in payments and financial software at large. The industry leaders unequivocally evangelized the adoption of open technologies and open standards to accelerate interoperability and standardization of payments infrastructure, not limited to Europe but across the globe.

Investments in Payments soar

According to the CB Insights “State of Payments Q’22” report[i], payment deals saw a record-breaking quarter with 261 deals, a 37% increase QoQ. The US led in total payment deals globally, with 87 of those deals, up 61% quarter-on-quarter, with a total funding of $3.3 billion. The top deal went to Cross River Bank, which raised a $620 million Series D at a $3B valuation. European payments funding reached $2.6 billion, up 73% QoQ, across 41 deals. Funding growth in Europe was fueled by an increase in mid to late-stage deals and a surge in mega-round funding. A huge share of this funding went to payments players checkout.com and Qonto. Asia meanwhile dominated exit activity in Q1’22 with 50% of deal share.

Bolt, a provider of one-click checkout to merchants, raised $355 million with an $11 billion valuation. In comparison, checkout.com became the third most valuable fintech firm after Stripe and Ripple with a $40 billion valuation. Revised valuations birthed nine new unicorns, taking the total number of payment unicorns to 77 globally. Thirty-nine unicorns are in the US, followed by 15 in Asia, 14 in Europe, and 6 in Latin America and the Caribbean.

PayPal follows Apple Pay Later

After Apple shook up the buy now, pay later market with news that it would now be a competitor to established firms, PayPal is introducing another buy now, pay later product to follow the 2020 launch of its “Pay in 4” [ii]installment program. The new offering, “PayPal Pay Monthly,” is designed to give customers a more flexible way to pay, the U.S. payments giant said. Instead of having to pay off purchases over a six-week period as before, “Pay Monthly” users can break down the total cost into monthly payments over a six- to 24-month period. Consumers can also use the product to make larger purchases. While PayPal’s “Pay in 4” program allows customers to pay for purchases between $30 and $1,500 (up from $600 at launch), the new program allows consumers to make purchases between $199 and $10,000, with the first payment due one month after the purchase is made. Customers will then make monthly payments until the purchase price and interest are fully paid off.

The rise of embedded finance and fintech-as-a-service

According to the Morning Consult “The state of consumer banking Q’22” report[iii], As embedded finance use cases proliferate and become more widely adopted, both traditional financial institutions and fintechs will face existential brand identity decisions. Consumers are accustomed to using nonfinancial apps to make payments. Over 40% of consumers report using Apple Pay, Google Pay or Shop Pay to make a payment. Nearly a quarter report sending payments directly through a social media app or using a BNPL service — both of which are examples of embedded payments. But the applications of embedded finance extend beyond payments to permeate every aspect of the financial services industry. Consumers can expect greater opportunities for embedded credit and lending, as well as insurance and investment, as nonfinancial services companies across industries build or buy the capability to offer these services. The discussions around embedded finance at Money 20/20 were focused on the invisible payment experience that can become integral, especially to web3 applications that are likely to become mainstream.

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The more consumers interact with companies without thinking about how their money travels from one place to the next or without having to go through onerous processes to finance a purchase, the more their interactions with their traditional financial services providers will feel outdated — or worse, they’ll stop interacting with them altogether. This doesn’t just apply to conventional banks and insurance providers, either. “Fintech” will become a meaningless term because of its ubiquity and role as a utility. For businesses, fintech is becoming part of their technology stack, while for consumers, it’s becoming part of their brand experience. Matt Harris of Bain Capital Ventures has described fintech as the “fourth platform,” predicting that it “will join internet, cloud, and mobile in the modern technology stack.” If the conversations at Money 20/20 are anything to go by, this revolution is already well underway, and consumers will be the ultimate winners.


[i] https://www.cbinsights.com/research/b2b-payments-tech-market-map/

[ii] https://techcrunch.com/2022/06/15/paypal-expands-its-pay-later-options-with-the-more-flexible-paypal-pay-monthly-service/

[iii] https://go.morningconsult.com/2022-Q1-PG6628A1-state-of-consumer-banking-report-thank-you-for-downloading.html

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