Super Apps, Embedded Finance, And the Future of Payments

For Payfacs and ISVs, the all-in-one platform is becoming essential for survival.

You don’t need me to tell you the world is changing rapidly. The expectations held by consumers and businesses are skyrocketing, and the race to meet those expectations will bring us to a whole new level of service across multiple industries.

Super apps are a great example of this, and they’re starting to cross the divide from consumers to business.

On the consumer side of things, we see the super-app concept growing in popularity in the U.S. market. Whether it’s Meta adding features like marketplace and peer-to-peer payments to its platforms, Uber expanding into food delivery and courier services, or Google and Amazon integrating everything you need in one place, there’s clearly an appetite for the convenience of these tools.

Business-to-business platforms have a clear next step in the evolution toward becoming super apps: making payments and access to capital seamless through embedded financial services.

Payment companies hold the keys to innovation through their rich first-party data. The data, a direct line to consumer behaviors and preferences, lets them revolutionize their offerings beyond traditional processing. For small and medium-size businesses (SMBs) burdened by the complexities of financial management, the allure of a super app is undeniable—a single platform that not only processes payments but also seamlessly integrates financial services.

Yet, the transition from a traditional payment processor to a super app requires more than just technological innovation. It demands a deep understanding of customers’ business ecosystems and a commitment to solving their unique challenges.

As we delve deeper into the role of modern fintech and the strategic use of first-party data, it becomes clear that the path to becoming a super app is within reach for payments companies willing to embrace change and drive innovation. As payments companies venture into this space, they’re redefining their role—moving from background processors to front-and-center solutions providers.

Blurring Lines

SMBs seek efficiency amid the complexity of juggling multiple vendors and solutions. Vertical software introduces simplicity and integration, embedding financial services to streamline operations, payments, capital access, and financial management.

The integration of embedded finance into vertical software is not just a value-add. It’s becoming a necessity. This evolution toward integrated solutions paves the way for payments companies to become more than service providers—they become strategic partners in the growth of SMBs.

Payments companies, leveraging industry-specific needs and first-party data, can customize their services, enhancing vertical software functionality and strengthening their relationships with SMB customers.

Modern fintech has made it possible for payments processors to analyze and use first-party data in real time, crafting personalized experiences that resonate with the needs of SMBs. From tailored financial advice to customized payment options, the potential to enhance the customer journey is immense.

Moreover, this shift toward data-driven, embedded payment offerings challenges the traditional role of financial institutions, positioning payments companies as direct competitors in the financial-services space. By bypassing the need for external financial services, payments processors can keep SMBs within their ecosystem, fostering loyalty and driving revenue growth.

The strategic use of first-party data not only differentiates payments processors in a crowded market, it also signals a new era of financial services, one where the lines between technology and banking blur, creating a seamless, integrated experience for businesses

Transforming Business Software

One significant difference between consumer and business super apps is specificity. The advantage of verticalized payment facilitators (payfacs) and independent software vendors (ISVs) lies in their ability to understand and anticipate the needs of their specific market segments. By focusing on a certain business vertical, these software providers are able to stay much more in tune with the needs of their customers.

Furthermore, the predictive power of their first-party data enables these companies to build sophisticated recommendation engines. These engines can push real-time, personalized product recommendations—from additional software tools to financial services—directly to users. The potential market for such recommendation engines is vast, with projections reaching $54 billion by 2030.

By embedding financial services into their offerings, verticalized payfacs and ISVs are not just simplifying transactions. They’re transforming the very nature of business software. This evolution positions them not merely as service providers but as indispensable partners in their clients’ success, paving the way for a future where every software platform could potentially become a super app in its niche.

Embedding financial products into super apps simplifies their development by offering a direct route through pre-built application programming interfaces (APIs) and managed services. This approach allows developers to concentrate on user experience and core features rather than navigating the complexities of financial processing and regulatory compliance. Here are some examples:

• API Integration Made Simple: Financial-service providers supply ready-to-use APIs for integrating diverse financial services, such as payments, insurance, and capital, with minimal coding required. This abstraction not only eases integration but also ensures secure, efficient app-to-service communication.
• Delegated Security And Compliance: Adopting existing financial services means their inherent security and compliance measures—aligned with standards like PCI DSS—become the provider’s responsibility. This significantly lowers the security and regulatory compliance burden for developers.
• Enhancing Core Offerings: By leveraging existing financial services, developers can accelerate their super apps’ time-to-market and focus on perfecting the user experience. This strategic focus on the app’s primary value propositions ensures seamless integration of financial services, enhancing the overall app utility without the need for in-depth financial or regulatory expertise and ensuring that the financial services are seamlessly woven into the app’s broader offerings.

The Future of Embedded Finance

The shift towards super apps marks a transformation for payments companies, driven by the confluence of first-party data and fintech innovation. This evolution is not just reshaping how SMBs manage finances, it’s redefining the essence of business software—integrating comprehensive financial services seamlessly into platforms.

Looking ahead, the future of payments is intrinsically linked to embedded finance, promising a landscape where operational and financial management converge. For payments companies, embracing this shift towards integrated, user-centric solutions is essential for sustained relevance and growth in the digital economy.

—Namrata Ganatra is chief product officer and chief technology officer at Pipe.