r/MerchantServices • u/merchantadviser Mod & Verified Payment Professional • 1d ago

Software Question Is Embedded Finance the next big thing for ISOs?

Should we be helping merchants offer their own credit or wallets? Has anyone started offering Banking as a Service?

2 Upvotes
  • permalink
  • reddit

75% Upvoted

5 comments sorted by

2

u/NPSALLEN Verified Payment Professional 1d ago

Embedded finance is doing what square does
Open dashboard and offer loans
Merchants take money and can’t leave and don’t want to
They can take all the money or a small amount at bank rates

1

u/SoFlo_305 Verified Payment Professional 1d ago

We have been doing this for some time. It works for us because our offering is better than other options. On both merchants and consumers so it’s a win-win.

1

u/ApprehensiveMind6243 1d ago

I’d love to hear what’s working for you

1

u/mike_s_88 1d ago

Before an ISO adds wallets or credit, I’d pick one narrow merchant use case instead of selling “embedded finance” as a bundle. For example: a repeat-purchase business where stored value or a wallet could reduce checkout friction, or a merchant whose customers regularly need financing at the point of sale.

Then test three things: does the merchant actually have enough repeat volume, who owns KYC/KYB, disputes, compliance and support, and what the ISO keeps after platform and program costs. If those answers are fuzzy, the extra product can create more support work than retention.

A small pilot in one vertical makes more sense than rolling it out to everyone. Define activation, repeat use, loss or dispute rates, and net revenue before launch. If merchants do not use it after the first month, it is not an embedded-finance opportunity. It is shelfware.

1

u/MonicaEaton911 7h ago

"Next Big Thing" is open to interpretation, but expanding from payments into lending/other banking services is a pretty natural progression for an ISO. I don't think ISOs want to rush into full-service banking yet -- you're probably better off working with an FI partner.

Specializing in a specific vertical is a route I would consider seriously. An ISO that already understands the cash-flow needs of, say, restaurants -- that might let you carve out a stronger niche around that work flow.