Show Notes
Not long ago, a concrete company and a takeout restaurant could end up running their business on the exact same software. Systems built for everyone, in practice, worked perfectly for no-one—and bending them to fit the realities of a small business was often frustrating or simply impossible.
Vertical software-as-a-service (SaaS) solutions emerged to solve this problem, quickly evolving from the exception to the norm. The reasons for this growth are largely self-evident: vertical SaaS enables rapid implementation with minimal customization. In many cases, merchants feel these platforms are built for their business rather than retrofitted to it. However, the operational benefits of SaaS are diminished if payments aren’t integrated into the solution.
In a recent PaymentsJournal podcast, Brad Pinneke, Head of Enterprise Development at Worldpay, now Global Payments, and Don Apgar, Director of Merchant Payments at Javelin Strategy and Research, discussed how embedded payments have become a critical driver of vertical SaaS—a synergy that will only strengthen as new trends and technologies reshape the landscape.
The Case for Embedded Payments
One of the most notable aspects of the rise of vertical SaaS is that it has largely been market-driven. Adoption has accelerated as industries not typically known as early adopters—such as healthcare, construction, and financial services—have come on board, despite heavy compliance and consumer protection requirements.
With the advantages of vertical SaaS now well established, these platforms will continue gaining traction and carving out new niches.
“POS systems were so generic that everybody had to customize it, and most merchants were finding that that customization wasn't possible because the platform didn't support the features that they needed for their business,” Apgar said. “Now that these features are being identified, it's created these micro-markets for POS platforms to be focused on the needs of specific business types, and payments are part and parcel with that.”
Payments are a logical addition, given that vertical SaaS solutions increasingly encompass nearly every aspect of a small business. A pizzeria’s platform, for example, may manage everything from payroll to inventory.
Yet few functions are as mission-critical as payments. This is why embedded payments and vertical software are increasingly in lockstep. By embedding payments directly into workflows, businesses can complete transactions at the exact moment a customer is ready to pay—whether when a service is completed or a product is purchased.
“I'll give you a great example from the last couple of years: field services,” Pinneke said. “In the past, the tech used to complete the job and then the office staff would send an invoice and the payment would arrive weeks later. Then, they have to reconcile that payment, take it to the bank, and cash flow was unpredictable.”
“Fast forward to today, where embedded technology comes into play,” he said. “The job is marked complete, the payment is scheduled instantly, the receipt is automatically sent out, and the funds are settled predictably. You're limiting the back-office intervention, which has huge impact to smaller businesses.”
Automatic, Not Forensic
One of the benefits of vertical SaaS solutions is the ability to deliver holistic business insights through a unified dashboard. Embedded payments extend this value far beyond checkout.
“The embedded impact is that things like payouts and fees and balances are visible alongside operational metrics,” Pinneke said. “In the past, you had the system of record showing one thing and then you had a payments portal showing something else and the reconciliation between those was tough.”
“That's a big part of it today—it's automatic, not forensic,” he said. “Forensic was such a big part of small business challenges; they just didn't have time. Now, the reporting reflects reality, not just an estimate, and that's critical for busine
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