COMMENTARY: Why Every Payments Provider Should Launch a Capital Offering

Trust is the linchpin of payments processing. Whether it’s business-to-business or business-to-consumer, people want someone they trust to help them facilitate their money movements.

This is why community banks remain resilient, even when grappling with stringent regulations and battling against giant global banks. It’s the same reason small businesses retain their customer base despite the presence of large chains. Similarly, software providers prosper when they cater to a niche industry.

When you’ve worked hard to build that level of trust with, and understanding of, your customers, it opens amazing opportunities not only to grow your business but also to serve your customers better by maximizing that relationship. In the world of payments, there’s no better way to do that right now than by adding an embedded capital product to the mix.

Today’s merchants are incredibly busy. They want to run their businesses as simply and efficiently as possible, which often means giving preference to platforms that solve multiple problems for them. While they rely on a provider’s software to process payments, the need for capital often comes up, making that provider’s platform one of the most logical and frictionless places to access it. Enter embedded finance.  

Traditional access to capital is slow and full of friction. Payments providers can help eliminate that problem. By leveraging embedded finance, businesses can seamlessly secure funds directly from processor’s platforms. This saves them precious time and lets them collaborate with a familiar and trusted partner, bypassing the hassle of screening and choosing among new vendors.

For a payments platform, incorporating financial services within its platform paves the way for a rapid expansion of its customer base. This boosts top-line revenue and introduces a lucrative revenue channel. Beyond enhancing gross payment volume, it reinforces the trust such platforms have already established with clients.

Payments providers have unique data and insights, allowing them to deliver financial access to merchants based on real-time hard numbers, not years of history and outdated models. The closer these providers are to their clients’ specific industries, the truer this is. Their understanding of merchants’ revenue trends makes it possible for them to offer better terms and customized offers that perfectly suit those merchants’ needs. 

Payment processors benefit from offering a very sticky product. Once a user adopts a platform, the convenience often outweighs the effort required in transitioning elsewhere. Embedded finance amplifies this advantage. By enabling merchants to manage more of their operations within a provider’s app, the provider increases key decision-makers’ engagement and motivates businesses to migrate their payments exclusively onto that provider’s platform, especially if they’ve been juggling between that provider and a competitor.

Super apps like Stripe, Adyen, and even Shopify make it easy for their merchants to get everything they need in one place, and they’ve benefited from it tremendously. Within their unique industries, payments providers have the opportunity to be the go-to. But there is one hurdle. Chances are, these processors are not Stripe, Adyen, or Shopify.   

Still, while these payments providers may not have the expertise in capital markets or resources to build a capital product of their own, they can partner with companies that have built trust in the finance space. That lets them offer a capital solution that provides great value with a low lift.

There’s a reason so many super apps are built on top of payments and digital transactions. Payments processors possess a wealth of data that can power a financial product, granting merchants financing based on their transactional activity rather than traditional financial records and credit scores.

Now is the perfect time for processors to capitalize on the relationships they’ve built with merchants. And now, thanks to fintech advancements and streamlined APIs, the process is easier than ever before.

—Yas Moaven is chief operating officer and chief marketing officer at Pipe Technologies Inc.