Webinar: Miss the moment, miss the market | Payments Dive

  00:00 

Megan, welcome everyone and thank you for joining us today. I'm Megan Billingsley, and I'll be moderating today's session. Today we're diving into a really significant shift in the business software industry, the rise of vertical, specific SaaS platforms, and the pivotal role embedded payments play in their growth. Before we get started, I have just a few housekeeping items. Please note that the slides will advance automatically throughout the presentation. To enlarge the slides, click the enlarged slides button located in the top right corner of your presentation window. If you need technical assistance, click on the Help widget located in the bottom left corner of your console. We encourage you to submit questions at any time throughout the presentation using the Q and A widget at the bottom of your console. We will try to answer these during the webcast, but if a fuller answer is needed, or we run out of time, it will be answered later via email. Please know that we do capture all questions. Joining me today are two experts working at the intersection of software and payments, and I'll let them introduce themselves. So, Ian, why don't you start? 

01:02 

Thanks, Megan. I'm thrilled to be here. So, Ian Hillis, I lead product for our platforms, line of business within Worldpay, now part of Global Payments. I've been in the software-led payments industry for over 10 years now, across a variety of roles, and again, really excited here for today's conversation. I just have strong conviction in the future of software platforms, notably vertical, focused ones, and really motivated to continue playing a role to enable their growth. Thanks for having me. 

01:29 

Thank you. Anne. Also joining us is Candler Rich, who will be offering the investor perspective. So, Candler, I'll have you give a brief intro. 

01:37 

Thanks, Megan. I'm a vice president here at Centana Growth Partners. Centana is a growth equity investment firm focused on innovations for the financial services ecosystem and at the stages that we invest software platforms are commonly either thinking about layering and payments for the first time, or maybe they've had the opportunity to start with an early version of a payments monetization layer, but they're thinking about how they can further optimize those for the next stages of growth and value creation, and excited to talk about some of the lessons learned and how we've seen that drive value from our seat on the investor side. 

02:15 

Excellent. Well, thank you both for joining us today. We have a lot to talk about, so let's get right to it. Ian, I'd like to start at the beginning when we talk about vertical specific SaaS, what do we actually mean, and what's driving companies, particularly SMBs, toward these platforms in such numbers? 

02:31 

Great, great starting point. So, let's first start with just the difference between vertical specific software and more generic or horizontals and other terminology there. So, I'll use some examples. If I woke up tomorrow and wanted to start a storage unit business, I'd have a couple of options. I could go seek out software that spends a lot of time thinking about the jobs to be done within storage unit. I need to go find a series of land to hold my storage units. I then need to have renters who will be able to rent these storage units. They're thinking about each of the flows within that specific sub vertical simultaneously. There are other more horizontal ones that will do more common things, like reservations or billing or scheduling and CRMs across all of that. So, what we've seen is an increase towards that vertical specific nuance around all of that, and the day the data would play that out as well. So, what we've seen from a measurement perspective is SMBs in the US using vertical, specific software to run their business. Starting in 2018 around 34%, we remeasured that in 2022 and that was coming in and around 48% and then again in 2024 at 62% so nearly doubling in that time period. We're at a massive inflection point. And if you think about the why behind that again, it's as an SMB, you wake up with a lot of jobs to be done over the course of the day, engaging the software that can speak your language, understand those nuances and cater to that is more likely to be adopted, and we're seeing increasing specialization within these niche sub verticals that can speak the language of that underlying SMB and bring all of these things together under one roof. And so, as a result of that, these vertical specific software platforms are really becoming high traffic, high trust environments for those underlying SMBs. 

04:20 

Excellent and Candler from your vantage point, what would you add to that? What makes vertical platforms so well positioned to expand into things like payments? 

04:28 

Yeah, I would agree and say it really comes down to the domain expertise, both from the actual software design, but oftentimes the teams building it are coming from folks that have been business owners or practitioners within that specific vertical and you're able to take kind of an inch wide, mile deep approach versus the mile wide, inch deep approach that some horizontal software vendors may be taking. And really the best vertical SAS solutions are those that understand the acute pain. Pain points of their customers, and are able to kind of build their solution with their customers over time in a way that horizontal businesses structurally can't or may not choose to, because it's outside of the scope or the prioritization of how they think about the delivery of their software. And so that depth of domain, expertise, process, knowledge, network effect. It really kind of exasperates why vertical SaaS is both well positioned from a structural perspective around software, as well as why they're well positioned to layer in payments and add more to really have the SMB leveraging your platform for more beyond just the software. So, if you make payments, a natural part of that experience. You're very well positioned to capture additional opportunity beyond the software side, within financial services and payments monetization. 

05:51 

Now, Ian, you offered some eye-opening numbers behind the growth of vertical specific SaaS over the past few years. Can you offer any more data about where vertical SaaS is headed and the size of the market opportunity here? 

06:03 

Yeah, so again, the macro picture is really compelling here. What we're seeing is the markets projected to more than triple over the next decade, and that's outpacing most horizontal software categories. So how does that show up? That shows up in the fundamentals? So, in general, vertical specific software delivers stronger margins and their horizontal peers. And again, if you think about the why, well, lower churn, higher retention across all of that. Again, this is a very high traffic, high trust environment. It has become the system of record for that underlying SMB. They're getting customer data, your employee data is in that, so you become really closely interlocked for running your business within that software platform simultaneously. The number of things that vertical software platforms are able to provide within that environment continues to expand. So we'll continue to talk a little bit about payments and broader embedded finance, even outside of finance, the number of things that have traditionally sat outside of that may be more in horizontal offerings, think about mar tech or sales tech have increasingly become embedded within this environment, so you have a greater share of wallet happening at the same time, and then certainly, with those dynamics comes pricing power and other elements across all of that. So really, at the end of the day, when you're embedded in a business core workflow, switching is not just inconvenient; it is massively disruptive, and investors have priced that in with meaningfully higher valuations. I think that's something I can learn to speak much more effectively than I can, but this concept of a system of record is really important for this dynamic. 

07:32 

Yeah, and I would just say that, you know, while there's been such a significant amount of growth in vertical software, I'm often shocked from the seed at how much Greenfield there really still is out there, and specifically across entire industries that maybe are in more SMB focused verticals, where they're still very, very early innings in terms of the shift from offline or fragmented tool sets into more purpose built vertical platforms, that really presents an opportunity to find new emerging leaders within those categories. The other thing I'd add is just from the investor lens, every investor, regardless of stage right now is sitting around their committees asking themselves about what does terminal value look like in a new AI forward world, and how is AI going to impact various aspects of software across the board. And I think the general kind of consensus is really that folks that are more verticalized, folks that have deep, proprietary, industry specific data, industry specific process knowledge, network effects, deep integration and categories like that, are well positioned for both the defensibility aspect of what could come with AI from development tooling or the large models going and building solutions on their own. And we really feel that a lot of the vertical solutions are well positioned to do that, and layering in additional feature sets like payments just makes you stickier and hard to hard to replace. 

09:02 

So, it seems clear that there is a lot of real momentum behind the shift toward vertical specific platforms. So now I'd like to focus on the payments piece. And why are embedded payments such an important piece of a SaaS platform, and why do they fit naturally into the vertical SaaS model? 

09:18 

Yeah, great question. So, let's start with the premise that hopefully no one disagrees with, if you are running a business, you have to get paid, otherwise it'd be a questionable business. So that has to happen somewhere, right? That could be through cash, that could be through check, that could be through digital payments, as I'll call them, and that includes card payments, and so historically, from a car payment perspective, if you rewind the tape, even 20 years ago, in some certain interests, you had a standalone terminal where you'd swipe a credit card, went off to the networks, went off to the issuer, comes back, you get paid as an SMB. Now let's imagine a bar as the night goes on. Maybe your bartender has one or two. They fat finger the number from the bill. If they look. Over at the point-of-sale system, someone's job back in the day was to reconcile those things. Look at all the receipts. Does it match what the orders were taken through? And someone had the brilliant idea to merge those two and connect them from a data perspective. So that was integrated payments. Embedded payments take that next step further, where all of this is taking place within that software environment. So if you're in the restaurant setting as a customer, you're probably interacting with a waiter or waitress, but if not, you're a tablet and being able to engage with that while it's doing the other elements of the software platform across all of that. So it's not just a point of sale taking the order and a separate terminal taking that payment, but one unified, consistent flow for the consumer, for that SMB, running the business across all of that, and payments data is a key piece of that, and understanding how the business is doing. So, marrying that customer data, employee data, and the transaction data all in one place becomes a really powerful tool for that SMB, who doesn't have a lot of extra time in any given day. And so the other element that's at play here is, while embedded payments is important, there's an element of that right to the embedded payment, and not every platform has that natural claim to be the payment. And so if you look at something like healthcare, where is that patient paying for his or her visit? Does that happen at the time of service with a card present terminal across all of that? Is that happening as part of a scheduling link that went out to confirm your report? Your appointment. Those are sometimes two different software offerings, from the CRM to the scheduler, and you might have different rights to that payments flow, and that's an interesting dynamic from the embedded payments perspective. But I think holistically, all of this data coming together in one spot, the key piece of what makes embedded payments so powerful, 

11:41 

Yeah, I think that last piece is pretty important around the right to the payment. And oftentimes, the first question we encourage folks to ask, if they haven't gone down this track yet, is not just, should we be embedding payments, but do we actually have the right to that payment in the first place? And oftentimes that's answered by understanding how close to that particular transaction point in time you are, as well as the data layer and impacts that you're able to feed into the payment side of the ecosystem as well. The other thing I'd add is just, you know, the volume, frequency, ticket, size, all of that may differ depending on category that you invest in. It looks a lot different for a roofer business, roofing business that does, you know, one or two deals a month, but they might be five to 30k size transactions versus a, you know, the restaurant example Ian, Ian gave, that's much more high frequency, low ticket size amounts. And so, understanding kind of where you sit within that frequency versus check size range matters a lot in terms of how you think about embedding payments and the right way to approach it. It's really from our lens, amazing to see sometimes in growing businesses, how much GMV may be flowing through or around their solutions that they haven't really tapped into yet. And oftentimes that's the very clear demand signal that an investor will see, particularly on the early stages. And think of huge kind of value creation opportunities, how do we go out and capture more of that flow? Are we, you know, the right party to be capturing more of that flow? And what's the right balance of business model that Ian can walk a little bit through around? What's the, you know, the balance between economics that we want to capture, which risk we want to take on support, we want to provide staff, we want to hire and things like that, but Ian can hit more on some of the models that exist across this landscape. 

13:34 

Excellent. Thank you. So once a software platform decides to pursue embedded payments, they have a few options for structuring it. So, Ian, could you walk us through the available models, as Canler just mentioned, and how the choice of model affects revenue opportunities on one side and required investment and costs on the other? 

13:51 

Yeah. So, this is the question, right? And I think this is where a lot of nuances is lost in a decision like this. So, you mentioned two sides of the grade. There's a revenue side, and there's an investment side, and that investment side actually often gets overlooked, believe it or not. So if you think about the the models on a spectrum from left to right, really the differentiation, and I'm going to name three of them, but there's a lot of gray in between that, and you can have variations across all of that on the far left would be what we would call a referral, or even an ISO model across all of that, where software platform is sitting there and they partner with someone like global payments, they do the integration. You're able to have integrated or even embedded payments across that, but from a sales, service and support perspective that is oftentimes managed by the payment service provider. And so if the SMB has a challenge with something they can call one 800 global and have conversation to take that burden off of the software platform. So from a revenue share perspective, a. That looks different than another model, like payback as a service, which is kind of the next middle model, if you were where you've got the embedded element, the data, the transactions, the onboarding are happening within that software platform environment. The sales, service and support now sit with the software platform, but the payment service provider, like global now sitting in the background, holding that merchant risk kind of white label. So that software platform will label this software platforms payments, but in the background is the payment service provider holding that risk and doing all of the onboarding in a white labeled fashion. So you move up, that's a little bit more of the revenue share coming from that payment opportunity, because you as a software platform have taken on additional elements of that. Now remember that investment part of this equation. That means you have to have sales, service and support people that can speak that language, understand the nuance of payment, so it's not just yay more revenue, which is oftentimes how we see that you there's an investment, and you have to be able to support that effectively. I've seen that fail, and we'll talk a lot more about some of the nuance there. The last one is our kind of wholesale pay factor offering, payment facilitator offering, and that is where the software platform essentially becomes its own payments company. They are registering with the networks. They are standing up a risk function. They have to hire a CRO there's a lot of compliance elements of that. They're managing, underwriting and beholden to that merchant risk there. So that absolutely has the highest revenue potential, but very significant investments are required to stand that out, both one time and ongoing. So you really need substantial processing volume and this to be a strategic part of your go to market and day to day, to offset the minimum costs and the prioritization that this will need to take within your organization. So three primary models, lots of nuance in between all of that. So I would encourage folks to think about that from an ROI question, not just a revenue question, where payback looks great on paper until you factor in the chief risk officer, compliance team and dedicated support staff, that calculus might look a little bit different. 

16:57 

Yeah, I would echo that and say that, you know, I think there's a common misconception in the industry that as you grow and scale in GMB amount, you naturally move along the spectrum that Ian was talking about to something more sophisticated. But really there's no single right answer for any specific business, and it's certainly not only tied to the volume and it's important for both the management teams of the companies, the partners they're working with, as well as the investors around the table, to be very intentional about the tradeoffs of the model that you're picking and what it might mean to get more economics relative to hiring a new risk team, hiring a payment specific owner, depending on kind of which model you're in. And so you know, one example of that is there are plenty very large publicly traded companies that are still in the earliest stages of an ISO reseller model, because they simply don't feel the priority of putting in large risk functions, underwriting functions and support teams to go manage a full a full pay fact model, despite doing significant amount of GMB. And the other thing that you'll see happen sometimes is as you go further in the stack, sometimes it limits how you want to think about growth, because your underwriting model and how you approach something internally might be limited, or you might purposely want to govern it differently than a outsourced third party provider may may approach it and so that can impact, sometimes the staging you're on and how you're thinking about the tradeoffs growth of the business versus the risk that you're undertaking when underwriting the underlying SMB customers. 

18:35 

So the first step then for a software platform would be to determine which model is right for them, but once they choose this and start down the path of integrating payments, what are the common pain points or hurdles they often underestimate about deployment and ongoing operation? 

18:50 

Ian, yeah, so even five years ago, the technical integration element would have been a significant part of the conversation, and that's no longer the hard part, I think in general, across the industries, APIs, SDKs have made this a lot more accessible, the widgetization of certain elements, to be able to take that, put it inside your environment. And then, in fact, most recently, kind of real time processing. We're seeing software platforms that are leveraging agents to grab APIs, scan documentation, and very rapidly put these things in their environment in a compliant way. So, that's no longer the hard part, and that's not where we see most of the failures. The real challenge here is around the go to the market. And so, you have a software platform with a well-honed sales team really good at selling vertical subscription licenses, got marketers that are capable of telling that story. You have support people capable of engaging around all of that. However, you now have introduced this new, fairly complex payment offering. What's the difference between level two and level three? Data and interchange, yield as a result of all of that you're getting at a really new. Balance elements that most existing employees inside a vertical software platform don't understand. And so not only is there kind of a head of payments expert consideration across all of this, but when you go out to market, the wrong way to think about this is, I have a payments product over here. Happens to sit inside my vertical software I have an XYZ offering over here. How do you unify those things, despite different vocabulary compliance elements, if a salesperson that needs to talk to both the value prop of the software, inclusive of this highly complex offering across all of it, so without that intentional effort, I think most platforms see modest adoption from their existing merchant base and new sales offerings, but the platforms that really invest in that payment specific go to market reach dramatically higher rates, and that's just not a financial benefit that comes across all that we've talked about stickiness, of the underlying customer, ability to cross sell and things like that. So, all of that compounded by the sub vertical complexity. So, a restaurant platform has to think about different batch cut off requirements than a roofing contractor who's caring about modality and portability of the latest step, payments. All these nuances matter, getting really tight on that go to market, even before you started that integration is where I would encourage a lot of people to think through this, and where we see people fail to launch sometimes, 

21:21 

I would echo that and enhance, probably on the post sales side of the function as well, which is really around kind of onboarding and driving the adoption of payments, whether that's a new customer you sold the entire suite to with payments for the first time, or that's trying to upsell the customer on payments to Add that to their existing solution that you're already working them with. And you know, the vendors that don't do this, well, have too much of a set it and forget it type mindset, and kind of assume that there will be a natural pickup and adoption. But really, you have to keep in mind that there's a change management aspect oftentimes on the other side of the equation here where people are already doing something for payments, existing, no matter how manual that may be, and you're really trying to affect change in terms of how they're handling a critical internal function to their financial operations. And so it can be quite sticky if you get them to do it, but from a post sales perspective, it oftentimes is a new muscle folks have to exercise in terms of getting customers onboarded and understanding, hey, how do you use payments? How should you think about reporting and tracking? What does this mean for refunds and chargebacks and all of these things that your partner can work with you on, but just making sure that you're getting kind of the actual adoption, because that can have material impacts in terms of both the stickiness of your solution as well as the additional modules and financial services that you're able to sell across your base. 

22:50 

Got it. Thank you. Between choosing the right model and overcoming implementation challenges, there's clearly a lot for software platforms to navigate when it comes to embedding payments, so it would stand to reason that choosing the right payment partner is critical. Ian, what should they actually be evaluating when considering prospective partners? 

23:09 

Yeah. So I think what you've heard from Candler and myself, so far as payments are complex and the wrong way to approach partner selection, maybe I'll start with the wrong way first, and we'll get to the right way is just to look for the fastest integration path. And well, here's the out-of-the-box offering. It is going to work for 80% of your use cases. 80% of the use cases are the easy ones. It is the 20% that really makes your offering worthwhile and keeps you in this game. And so what you need is someone who's been there before, who understands the nuances on the sub vertical by sub vertical level, because they've seen that, and they partner with software platforms who have faced similar challenges, solution through that, and created offerings that can be applicable to those nuances and unique use cases across all of that. These nuances vary by industry, so I talked earlier about a batch cut off timing for a restaurant that's going to be important and different from that of a roofing contractor, and the funding flows in health care, where you're going to have things like partial off are different from education, and the compliance that's going to take place in something versus Child Care against retail is different. So I think what it boils down to, you want a partner who's worked across these verticals that can bring a playbook with you, partner with you, think about how you bring these go to markets together and really achieve the maximum result of what you're trying to achieve, not just the 80% glide path across all of this. Scale matters a lot here too. We're talking about risk. We're talking about compliance. You want someone with the scale that can think through and has seen many challenges before and has subsequently solved them in this world of AI. The amount of risk at hand here from fraud and other instances and attack on the surface area is increasing. And again, scale really comes into play, where you can have deep. Markets to invest in this, see this across the span of a variety of use cases and ensure that you're getting that protection you need. So really look embedding payments is not a one-time event. It's an ongoing program. The best partners are the ones that are going to bring you go to market resources, dedicated success managers, payments expertise that's deeply grounded in scale and complements what the ISD and platform already has, and that can truly be the difference between 20% adoption of this offering and 90% adoption of this offering. You heard Cameron talk about what those economics can look like and how that manifests from an investment perspective. Those are vast differences. 

25:40 

Yeah, Candler, what is the investor perspective here? 

25:43 

Yeah, I'd say on the partner selection side of it, like the thing investors will be focused most on, from a risks perspective, is a focus on overall dependencies within your stack, both from a payment stack, a banking stack, or whatever it may be, and so understanding what would happen if one of those relationships changed, what would happen to your business? Would you be able to accept payments? Would you be able to still service your customers in the way that you have been and have promised them? And so, there's always debate around, depending on the staging of you of your business, and how much flow you're seeing through it, does one provider make sense for everything? Do you have backup options? Is there concentration risk in a specific relationship you have with the payments or a banking provider? How risky is the profile of that business? How have they set up their support function for you, their uptime, their underwriting philosophy, disputes and chargebacks, how all of those things are handled, kind of go into the evaluation of the investor risk mindset, of what would happen if something changed here, and how critical is this functionality within your stack. So as you think about partner selection, I would echo what Ian said about vertical focus and somebody who really understands your market, in addition to kind of the more traditional evaluation of how you would think about a payments provider, because in payments, things go wrong, and that happens, and it's a lot bigger of a deal than an end customer, if they didn't get a piece of revenue that they were expecting, or they didn't get a paycheck today, or whatever it may be, and it's very important on the partner you choose To make sure they have the right track record and depth to match the commitment that you're making to your customers. 

27:28 

Lots to think about there. Thank you, and it really underscores how important it is for a software platform to find the right payments partner for a whole host of reasons. So now let's talk about post-deployment. Once a software platform is up and running with payments. What's the right framework for evaluating whether that integration is actually working? 

27:46 

Ian, so I'll give you the real quick answer, and then I'll explain it a little bit with some nuance. The primary KPI we usually look to is what we call a tax rate. So, what percentage of your existing merchant base, or what percentage of new sales actually use these embedded payments functionality? That's the baseline for the value that you're leaving on the table. And there's so much that goes into that, how it's presented. And as you track that, I think it's important to track that by cohort and do some AB testing across that. What's the default take rate when payments is a part of the standard onboarding conversation, you'll see some software platforms offer tiering models across all of that, you will see some platforms mandated its default. You don't have the option not to do this. It comes with it. Those are the ones that see the highest one. And sometimes that could be scary for a software platform. You may not get a new software subscription as a result of that decision. You do a cost benefit of how many more do I have to get, or how many fewer Am I capable of taking, given the revenue I'll make up from the payment's lens, and there's interesting calculus to be done there. So really, getting from passive to active adoption requires that type of investment. And the strong partner here is going to be one that has a specific playbook for migrating your existing book onto this new offering, minimizing friction in that process, maintaining continuity for that underlying customer, and making the transition seamless. So again, I think it's attached rate, but then very rapidly you're going to start getting into ARPU conversation. So average revenue per user, customer churn rate, and all of these feeds into NRR. And I'd leave it to Candler to talk about that from the importance of an investor's standpoint. But this feeds all of those things and all a key part of a successful embedded payments operation. 

29:32 

Yeah, we'll look at a lot around second order effects of how the payments is impacting the core business. So, for example, adopting payments, driving customers to adopt more modules and other features within the platform. Again, kind of a stickier, centralized platform that they're going for everything. Do payments result in stickier customers and they churn less because this is more critical part of the function. Do. They process more volume over time. A lot of the payments, a lot of the best platforms, won't just see that as a revenue stream, but it said kind of a platform, platform engagement. Piece of this is now kind of a new piece of insight and data on how folks are actually using your your platform from a day-to-day basis. So as Ian mentioned, I think attach rates and understanding those on a cohort level, is probably the number one thing we will look at, because that'll tell you how quickly that you're ramping Am I able to apply what a historical cohort of customers that looks like x to a new customer of cohorts that will also look like that existing profile, to understand how we think about future growth prospects within the business and how those customers are likely to behave. And to give an example of that, like we have looked at portfolio companies and existing companies in the market, where we'll segment by GMV size, what retention looks like at those profiles. And as an example, we've seen in a number of instances, if you're able to hit a certain amount of GMV that a customer is paying you within month three, month six, month one, whatever it is, you might actually see different levels of retention. So for example, in one case, there was kind of a very clear line where at month three, if you salt at least 25k or more from an existing customer in GMV, their retention profile was going to look, even though it was an SMB based business, was going to look more like enterprise retention rates of 90% plus, and they're materially using you and sticking over time, whereas the subset of the base that never got to that 25k GMB Mark might be retaining at 50 or 60% or something even worse, or on par with what you would expect for the SMB world. And so that's a very important finding from kind of a board and management level, because it puts into back what we said earlier about the importance of onboarding and getting those ramp curves going. Is that like, Okay, well, if we put a lot of time, resources and effort in terms of making sure people get to that 25k in three months, we're going to see much stronger retention profiles across our entire cohort base. So those are the types of things that we'll look at and try to support management teams on as they think about attach rates. 

32:20 

Excellent. Thank you. So we're going to open it up to audience questions now, and just as a reminder, you can submit a question using the Q and A widget in your webinar viewer. If we don't get to your question today, someone will follow up via email. So, we'll start with this one. Ian, I'm going to send it your way. You talked about the spectrum of models, from referral to wholesale pay fac for a platform that's just starting out. What's the most common mistake you see in terms of model selection? 

32:47 

Yeah, great question. I think it really is. You see dollar signs, and you think top line, and you want as much revenue as possible. You're told you can make money by embedding payments. Why wouldn't I want to make all the money, which is a very logical initial approach to all those pieces. However, when you get to that decision process, what is often overlooked is you then need to think about, well, how am I going to support this offering and really maximize the uptake of it? And that's where I see a little bit of flawed logic of well; I already have a sales team. I already have a marketing team. How much harder could it be to infuse payments, talk tracks into that? For some software platform teams, it's not that hard. For others, it's incredibly complex, and unifying those two go to markets is incredibly complex across all of that. And so, I think taking a step back, really thinking hard about what it is you're trying to accomplish. What are you really capable of investing internally to drive the maximum success? Are you ready to take on sales, service and support for this is an honest conversation you should have with yourself and your teams, but that from a big mistake, common mistake, just chasing the red right out of the gate, thinking about everything else from an ongoing perspective and reframing as an ROI conversation? Yeah, information. 

34:03 

Excellent. Thank you. Can there also, in this next one, your way it was mentioned earlier, the concept of a right to the payment flow. Can you give a bit more insight into how a platform determines whether it actually has that right? 

34:16 

Yeah, great, great question. So, I'd say there's a few things we'd look at for this. One is, are you the system or the vendor where the price is set and the transaction is actually being finalized? Is it the point where there's an invoice being generated, collecting the payment and the billing, and are you actually at that kind of point in time from customer to vendor where you're seeing a transaction take place. Two is just how embedded you are within a core platform. And is this something that, are you a solution that somebody is going to be using on a day to day, hour to hour basis, or are you a solution that somebody is going to come back to you, you know, once a week, once a month, once a quarter, when they need you for some certain outcome? And. Um, lastly, a bit of who owns the end merchant relationship, or in customer relationship, depending on the stage of and profile of the market that you're sitting in. If there's another system that is more has more coverage over the merchant relationship, they're going to be in a better position on that payment. So maybe to give kind of an example to bring that to light, you might have two different businesses that are both operating in the same vertical. Let's pick field services as an example. Maybe there's one business that has kind of a customer acquisition model, which is where individuals go to find their plumber, their HVAC, their, you know, roofer services, and there's ratings, and they find and pick who can operate when. And it's kind of a booking portal engine. You might think on the surface of like, okay, well, they're going to go in and book through those. Maybe I own the right to collect the payment at the time they book. But in those industries, it's oftentimes the person that's going on site needs to scope the project, quote the project, sometimes purchase materials for the project, and execute the project. And it's not until that all takes place that that individual, through their kind of own application, back end systems and billing, will go through the payment process with the end customer, which in that case would be the purchase procuring or the person procuring their services. So that's kind of an example of how it could look depending on whether or not you're actually the system that's in place to have the right to that payment. 

36:31 

Perfect. Thank you. And can learn. I'll stay with you on this next one as well. How does a company stage affect how investors think about payments revenue? 

36:41 

Yeah. So this one is highly, highly dependent on the category of business and the stage of investor that evaluating it at the earlier ends of kind of venture capital and early-stage businesses, it's going to be much more of the mindset around what's the opportunity set here. So how much GMB Do you have potentially had access to you this right to win. Question of like, is there more we could be doing to capture and so thinking a little bit like, on the forward, of like, what does this mean from an overall like, Tam opportunity set, and how can we go after it and do that at the growth stages, as you move later, it's a lot of what we've talked about today around kind of the finding efficiencies within those programs. Maybe you're shifting between some of the models that Ian's talked about and which one fits the best for the profile of the business that you're working on, whether that be from a risk on, risk perspective, underwriting perspective, and obviously the ultimate economics. And then as you move later stage, you have kind of the at scale players, where payments revenue may even be analyzed and evaluated as its own kind of specific revenue line item, where you're hyper focused on net take rate, hyper focused on margin, hyper focused on risk, fraud, other aspect capital requirements that are kind of coming out of the program that you're running at scale. 

38:10 

Excellent. Thank you. The next question asks, what role do you see AI play in making embedded payments smarter or more differentiated going forward? Possibly you both have responses to this, but Ian, why don't you start? 

38:23 

Yeah, I can both probably talk for a full hour on this topic alone. I'll briefly touch upon what I mentioned earlier was we're seeing more and more software platforms leverage agents to bring this in in a much swifter manner, in a more effective manner, and so just that initial integration of it total game changer within the last six months alone. But I think the more interesting thing of what this means for embedded payments, for software platforms, for their merchants, and, their end consumers, really comes down to data, data, data, and data. So how do you generate insights from the product itself. And that could be from a software platform of time to board how I frame the payments offering within all of this, and being able to look at that and have prompted suggestions of if you tweak this and do this for this type of a underlying SMB price, differentially for this, I think you could get into merchant insights where you are saying you have segmentations of underlying customers, aka merchants, from that software platform, what are you seeing? What trends are happening? Where might you see better cross sell opportunities into broader embedded finance offering, given what that software platform already knows about them, you start coupling that data with your payment service provider data, and then, wow, that is a huge corpus of data from which you can start to infer and create more value for each of those actors across the system. And then subsequently, what are you showing to consumers? And so, the consumer at the end of the day, in many of these instances, interacting with it from a how do you want to pay? When do you want to pay? How might you reduce day sales outstanding as a result of all of these things? So, I think that. The insights generated from all these data can be better captured by agents, chat bots and such, can consume that and create prompts, nudges, or actually take actions to improve all of that. And then I think the last bucket is around this go to market concept around this is typically and this being an embedded payments program, a newer concept for most How can you take some of that complexity out, have it understand the AI, understand the nuances and that translate that into personas inside your company as a software platform where they can better understand how that infuses with their day to day jobs to be done. So again, lots of exciting implications on this one, but I think those are the three big buckets I'd point to. 

40:41 

Yeah, maybe the one or one or two I'd add would be which we're seeing broadly but certainly applies to models where you take on more of the support of responsibility. Is the impact that AI can have on support functions rapidly expanding right now. And so if you're operating in a payments function where you do go with the payback as a service, or full payback, wholesale payback model, you may be taking on more functionality or and responsibility around the support function, which can be heavily automated, and is going more and more in that direction, as well as how you think about underwriting at risk. And that's where a lot of Ian's elements of the data aspect are pretty critical. Is, do you have large amounts of data that you're able to leverage for underwriting decisions and the types of SMBs you work with? There are third-party providers that do that. There are third party payments providers that will be able to do that internally. And then over time, as you have more volume and you understand your business the best. There's plenty that you can draw on to think about the underwriting of risk components and how AI can impact those decisioning's. 

41:48 

Excellent. Thank you. We are just about at time, but before we wrap, I do want to ask each of you for just one parting thought, if a vertical SaaS platform is watching today and thinking about their payment strategy, what's the single most important thing you'd want them to take away? 

42:03 

It’s been a privilege being on with you both. This has been a phenomenal conversation. From a parting thought perspective, I would say, don't treat payments as a feature that you just turn on and hope that it works. I think that what we've seen with the 1000s of platforms we've partnered with and supported are that the platforms that really get the most out of this, whether it be adoption, subsequent revenue retention, they really treat it like a program and prioritize the Accord accordingly. They think carefully about the model they're engaging in the partner they've selected to help with this, how payments fits into the go to market motion that the software platform already has, and then thinking about it from an ROI perspective, not just top line revenue, and how all of this comes together with a unified go to market. So really, at the end of the day, the opportunity for embedded payments is very real, and there's a lot of success stories you can point to, but the execution element is the hard part, and that's where rubber meets the road, and that's the most critical element here. 

43:08 

Yeah, I'd say, whether you're somebody who's considering it for the first time, or somebody that's, you know, had a payments offering for some time, you know, understand your economics before you commit or before you change the scheme, understand your net take rate investors, you're going to be focused on net revenue, and not just what you're seeing from a top line GMB and gross revenue perspective. And those adoption assumptions and where you see attach rates will be critical to understanding kind of the long-term strategic value that payments can provide for you. Secondly, I'd say, if you're somebody who's you know, already using a platform, challenge the natural assumption that what you have is fine and good enough and you can't press more, to consider, hey, maybe it's time to think about upgrading the model. Maybe it's time to think about, do I move on from my incumbent? Maybe it's time to think about, Do I want to have a second or third solution in the loop here, whether that's for a diversification reason or resiliency reason or an economic reason, and so all things to be considering, and this is an ongoing decision. It's not a one-time decision that you set it and forget it, as Ian outlined. So that's what I'd leave them with. Just the platforms to get this right aren't just adding a revenue stream. You're really fundamentally changing the role and how you serve your customers. 

44:40 

Excellent. Well. Ian Candler, thank you both. This has been an incredibly practical conversation, and I know our audience is walking away with a much clearer picture of both the opportunity and the path forward. And of course, thanks to all of you for joining us. Have a great rest of your day. You too.