0:06
Welcome to the Payments Journal podcast. I'm your host, Rimma Katz. Something fundamental is changing and how merchants choose and stick with platforms. Worldpay’s 2026 Merchant Insider Report reveals that expectations have shifted in ways that are reshaping loyalty risk and competitive advantage across the board. Today, we're unpacking what's driving this shift and how to interpret the tension between experience and retention. But before we dive in, let's do a round of introductions. Matt, we'll start with you first.
0:40
Hi. Good morning. Matt Downs, President, Global Payments for Platforms.
0:46
Thanks, Matt. Don?
0:47
I am Don Apgar, I'm a Director of the merchant payments and acquiring practice here at Javelin Strategy and Research.
0:54
It's great to have you both here. To kick things off, the 2026 Merchant Insider Report shows that customer expectations around payments have shifted from nice-to-have to mission critical. Matt, what's driving that shift and how are leading platforms responding differently than those falling behind?
1:11
Yeah, we just put out we've been putting out this report, and one of the emerging trends that we've seen it coming for a bit, is that 85% of small-medium businesses say that software is more important now than it was looking back like 3 to 5 years ago. You know, I've been in software led payments going on almost two decades. It's hard to say that out loud, but, you know, we've been studying the trend. And if you go back to like 2018, about 40% of buying decisions that included payments in software as a bundled package. Post-pandemic that climbed up to call it 55%. Fast forward to 2027, a record 70% of the time of business is switching out payments. It's actually going to come with the bundled software. So, what's driving that increase? Businesses are spending candidly more on software. In the report you’ll see about 18%, in the reality that integrated workflow is really what's driving it. More and more software is going niche and helping small businesses across the spectrum serve. And that's what's fueling the appetite, you know, for these bundled package decisions.
2:21
Yeah, we're seeing the same in our research. You know, merchants want a holistic platform that they can run their business on. Combined with the fact that consumer expectation with regard to ease and frictionless and being able to buy and make a payment have significantly increased, as you said, not only from what we call the Amazon effect, but also post-pandemic. And business owners today are just looking for an easy to use, all in one package of software and payments together that they can run their business with it and just deliver a superior customer experience.
2:55
Yeah, yes, you'll see in the report. But about 43% now say payments is extremely important. It's not just about getting paid. They're thinking about cash flow to that small business. Most importantly, in that report and get into it. It really talks about consumer experience, experiences what's driving it, where is demographics are changing. Don, you and I were talking before this lit up, about how 20-somethings that like to spend our money, right. Like they're using different ways. And these businesses need to meet those consumers' user expectations were they are.
3:27
I'm sure there were so many takeaways from this research. And one of the most surprising ones in this year's report, I think, is that the payment experience is actually the number one driver of retention. Friction is still a major churn signal. Can you unpack that tension and what it means for merchants?
3:45
Yeah, I mean, the report shares that 82% of small-medium businesses would actually switch platforms for a better payment capability. So if you're a software provider, not only do you need to really think about the workflow that you're supporting that business, but you're going to want to think about how do you end-to-end think about payments, right? We've been talking about, I've been leading the PayFac business now 16 years, and we all actually own the trademark. We're a major player in the space. And it all started out with easy onboarding, and I’ll tell you what, onboarding is just a bit of it. You know these businesses are expecting payments to be invisible. I give the Uber example right. Everybody knows it. You know you can't really start and stop where the transportation app starts and where it stops. And in the financial experience starts and stops, right? The driver doesn't worry about you being a good rider and being able to look at the overall user who was a rider, they don't worry about how they are going to gas, right, because they can go get an instant payout. So it really kind of created this invisible, frictionless experience. That's what we do at scale. But if you're a software platform, the days of just being able to settle and pay out just aren't enough. They want deeper workflows. They want faster money. They want to make sure that reconciliation seamless and that you're making their day to day operations easy because they want to think about the dry cleaning process or the pizza that they got to make and serving their customers. Or maybe they're a lawyer and they just they want to not worry about. Do they get paid for recently supporting a client? It just needs to work. And any place where that frictions popping up, it's an early indicator that churns on its way.
5:18
You know, that's really interesting, Matt, because embedded software, you know, when merchants invest in a software platform that runs their business and handles their payments, it gives them transparency into their cash flow and business metrics. It's really hard for merchants to make that change once they load in their menu or their inventory or whatever their operating platform is. So, it's great that the software in this embedded platforms create the stickiness, but that really speaks volumes to say that merchants will still change if there's friction as much as they're invested in, and as much inertia as there is that's preventing them from switching. The one thing that will cause them to switch is friction. So that's a really insightful takeaway from the report.
6:00
I want to spotlight a stat that you just shared with 82% of merchants saying that they'd switch platforms for better payment capabilities. What specific gaps or friction points are pushing them to that tipping point?
6:13
Yeah, I think it's they're looking for that seamless experience and when we say embedded payments is probably worth to stop and to explain what that is, right. Integrated payments is just the payment application, right.Actually,y accepting the payment, the software effectively allows that software to when the payments are transacted. It pushes that data back into the software to say, hey, here's the transaction, here's what reconciled it. Embedded payments is about the full workflow. So, whether you're on the consumer side, the small medium business side, whether it's merchant boarding, whether it's the ability to take different types of payments from its ability to see those payments, reconcile it, maybe natively work and chargeback right out of the software. There's a term out there - the vertical operating system, and the concept is - the cutting out vertical that small businesses, they spend more of their day in that software than they do in anything else. In the days of having to pivot out and go and looking at your online banking portal there, or log out and you log into your merchant processor and look at their form of their reporting. They want it all seamless right there on that software. So that is the definition of embedded payments that they can get the full experience without ever leaving that vertical software. It's compelling that I give the Uber example and that's just one example. But this is being done at scale around the globe so that concept of seamless flexible for reconciliation. And if you've missed part of that design, you're set up to lose. Right. And we're doing some things to be a little self-promoting. We've got some AI technology around dispute management in the platform. Like we're helping our partners think about future proofing. And that's always a dangerous statement. But we're trying to think about how do they differentiate from their competitors by creating a more richer both payments and embedded finance experience right there natively with software.
8:02
Yeah, that's so true, Matt. I mean, the number one most expensive resource in an SMB is the owners time. And a lot of us don’t realize how much of a time owners burn through non-business hours trying to reconcile from bank statements to credit card statements, to payments received, rate payments, going out to suppliers and having all that data in one spot is such a huge efficiency save. That's what a lot of what our research is showing. That's driving especially SMBs into an all-in-one embedded platform, because it kind of connects the dots and it removes a lot of the friction in trying to reconcile between different platforms, different statements, etc.. It's definitely gathered a lot of momentum.
8:47
Yeah, it's just got to work, right? Like they don't want to think about it. They're busy, worried about running a business. And that business has got different problems, and it shouldn't be payments for sure.
8:59
That's exactly right.
9:00
2026 Merchant Insider Report highlights that nearly every merchant now values embedded finance capabilities. Matt, so where are platforms meeting expectations today and where are they still missing the mark?
9:13
Yeah I think look embedded finance has been on the horizon. New technology, new providers, as well as some of the banks that have been on for decades are now opening up and seeing this opportunity. The reality is we as merchant acquirers have been horizontally enabling these businesses for years. But these vertical SaaS companies have really diligence and understand what are the unique challenges within that particular business. And that sets them apart. So, if you think about it, if you're a small business, we'll use the example of an attorney's office. You know, they got trust accounting. They got to have multiple accounts, right. Depending on the transaction targeting how they fund it, they have to have separation of funds. They may need the ability to charge a convenience fee on top of the transaction. You start counting all that up on the payments side. That same intimacy is important on the banking side. And if you're a traditional brick and mortar bank where you might understand some of the fundamentals, you actually only own the DDA side of the equation by taking both the payments piece where you're deepening receivables, pairing it with finance products, you can create really, really different experiences. And again, your brick-and-mortar branch doesn't have both sides of the equation. Even some of the bank acquirers that have both sides to go to put that together and create a really seamless experience. It's hard. Merchants are starting to see that right. And as merchant acquirers, we're in great shape, right? Because we've got KYC. You understand the business. We're in their financial flow. We can help platforms really understand the financial efficacy of that business. And what is the ability to lend them money. What is the ability to provide them a commercial card for procurement, etc.. So, the stat and the book say 99% of merchants actually say embedded finance capabilities are something that they're willing to consider. And again, some of the large platforms have proved the use case here at Worldpay. Again, I'll be a little self-promoting. You still have a piece of technology called the Embedded Finance Engine. It's an orchestration platform that allows software companies to create these experiences with minimal development or go to market effort. It's four lines of code and a piece of HTML, once they're up in the orchestration layer, it allows them to pull multiple products in and create those very specific use case experiences.
11:33
Yeah, we're seeing a full-on battle unfold in the market between fintechs and legacy regulated banks. You know, as evidenced by the flurry of bank charters from a lot of the fintech brands that have grown significantly. And you know what fintechs have to your point is, is the data, right? When a merchant is running on a SaaS platform, right, that fintech has got all the data. They're inside the merchant's business. They know when the when the ebbs and flows are, when the peaks and the valleys are, you know, not only what products the merchant might need, but when they might need them. And so, as fintechs get into banking and are able to deliver all that from under one roof, that's really going to put a dent in the legacy banks' ability to maintain relationships with their depositors. We see banks, especially on the acquiring side, getting into the software and offering software services, etc. but they're not doing a good job of leveraging the data that the software generates. And so just being able to bolt on the software or to a bank account is not the same level that the fintechs are bringing through their embedded finance model. So, it's really going to be interesting to watch that in the market heat up. I think we're going to see a tipping point in 26 and going into 27.
12:48
Yeah, Don, at the end of the day, increased competition equals usually drives innovation in the small business wins. Right. So whether it's more legacy banks and some of them to use that term. You can innovate around right when you got scale or whether it's some of the more moderate fintechs, as they all think about how to get their piece of the proverbial pie. Right, this is a gigantic addressable market to kind of go after at the end of the day, it'll spark innovation, better use cases for these small businesses, solve needs, and those businesses will win. So, it's pretty exciting. And I still think it's early innings.
13:35
Oh for sure. And this has been a long time coming up through the market. And it'll be like to your point, it's not at the boiling point yet, but it's getting there.
13:36
I kind of want to see, you know, you've covered so much ground in terms of the research that you showed some really great stats. Do you want to leave any final key takeaways or final thoughts for the listeners out there?
13:47
Yeah, I think now is the time. I think you got to take a position. One of the large alums, maybe they start with an a is out, at scale, saying that they can solve for orchestration. So I think if you're a SaaS platform, right, AI is probably everything that you're thinking about and talking about on a daily basis, I think this Merchant Insider Reports got some great data and is done at scale as Global Payments processes for over 6 million merchants around the globe, $3 trillion. So, we've got to reach, and I think if you peel back this piece of material, I think you'll see that now's the time to pick a path. And I think both embedded payments and more specifically embedded finance, you got to pick a lane and go, because I think it's going to get hyper competitive out there. And if you want to provide to all of your clients and, you know, drive that net revenue retention and ability to grow, I think now's the time. And, to be a little self-serving, you should definitely make sure you're talking to Global Payments now.
14:45
I think that's right, Matt. You know, the wait and see period about well, let's see how this evolves. Let's see how this rolls out. Let's see if fintechs get any traction. That period. We've been waiting and seeing that period for the past, well at least five years, maybe longer. And so, I think to your point, we're at the we're at the tipping point where it's now it's either you're in the game or you're not. Pick a lane and build a product, or, you know, decide that you don't want to be in that business.
15:11
Yeah. And our motto has always been better together, Don. We find the best of the partners, bring them together. But I would tell you, at the rate that AI is going to move, either you better serve your customer, or your customer is going to find a way to serve themselves. The technologies we're seeing in production. So now is definitely the time to pick a lane, and get after it.
15:29
Those are great takeaways to end this on. As you can tell, there's a lot more insights to look through in Worldpay’s 2026 Merchant Insider Report, which you can access via the link below in this article. Matt and Don, thank you so much for sharing your insights and perspective and thanks to everyone for tuning in today. Be sure to subscribe and stay updated on the latest Payments Journal episodes, and don't forget to share this podcast with your friends and colleagues.