Payfacs Continue to Expand Financial Inclusion, the Heart of Embedded Payments

By now, the idea of software-led payments has reshaped the way we think about payments so much, it may be easy to forget how revolutionary it really was.

The rise of embedded payments opened the door to offering even more financial services through software platforms, and the space has since become the darling of the fintech sector. Last year, investment in embedded finance companies tripled and the market is expected to grow to $7.2 trillion by 2030, according to Dealroom.

The reasons for this – the advantages for the companies offering the services – are well known. Software platforms can offer more value to the users on their platforms and tap into a new revenue stream. And partnering with software providers means financial service companies can distribute their services more easily.

While all this is true, the model works because it has tapped into a deeper need: financial inclusion. And this is continuing to expand with every evolution of the business model.

For many small and micromerchants, software-led payments can mean the difference between offering consumers an array of convenient payment options and turning away business. That’s because for many decades, for many small and micromerchants, electronic payments were a barrier too high to cross at all.

Traditionally, financial services companies found these smaller businesses too difficult and expensive to reach, considering what are often modest payment volumes. For the small businesses themselves, the cost of payments infrastructure was steep and the process complicated. These factors combined to keep digital payments out of reach for many.

In the early stages of what would become known as embedded payments, Payfacs provided a crucial link between legacy payments providers and these underserved businesses. Typically software-driven companies, Payfacs entered the payments space to solve access problems across a variety of industries and circumstances in creative – and compliant – ways.

The Payfac business model was built specifically to streamline underwriting, onboarding and customer service. Software platforms used it to make payments easy to both access and implement for their merchants.

At the same time, the vertical SaaS space has continued to grow. Wherever there is a specialized business need, you’ll find a software platform to meet it. Even a business as small as a professional dog walking service can find an app to help them manage their operations.

As the segment has matured and new infrastructure has arisen to serve it, becoming a Payfac has become far easier for these software companies. Companies like Infinicept offer solutions to help Payfacs manage risk, expedite underwriting & onboarding, and monitor transactions that significantly reduce the costs and resources typically required to operate a payfac program.

The Payfac model is making it easier and more seamless for small and micro merchants to accept payments quickly. Payfacs are rapidly gaining steam as a way to expand access to digital payments and continue the mission to greater financial inclusion. They’re reaching even further into the market for merchants that might otherwise be left behind.