Podcast: What Comes After Payments

Podcast Summary

• Every small business has four timeless money jobs: get paid, manage money, pay others, and get financed. "Embedded finance" covers all four; "banking as a service" only covers one. Platforms should plan around those jobs, not around product categories.
• Payments is just the starting point. What comes next is vertical-specific: e-commerce platforms skew toward managing money, construction platforms toward paying subcontractors, laundromat software toward capital. Pick the wedge where your customers feel the most pain.
• Expect 2–5x revenue per customer versus payments alone, plus longer retention. Optimize for activation rate first; per-unit pricing comes later.
• Build it into the core product, not as a bolt-on iframe. Successful embedded finance is default, invisible, and relevant. To win, it has to be better than Amex. Better than Chase.
• The build is no longer the hard part. Platforms can move along a spectrum from one line of code that delivers a full money hub to deeper custom control on the same infrastructure.

Transcript

Introduction

Joshua Silver: Hi everyone, and welcome to The Payments Strategy Show. I’m Joshua Silver, Founder and CEO of Rainforest. We help software platforms embed payment processing into their core product to grow revenue and improve customer retention.

I’m here today with a good friend, Itai Damti, Co-Founder and CEO of Unit, a market leader in embedded finance. I’m really happy to have Itai join us on the show to share insights into how embedded fintech can help vertical SaaS companies, including how to sequence fintech products and maximize revenue.

Thanks so much for joining me on the show.

Itai Damti: It’s good to be here.

How Unit identified the embedded fintech opportunity

Joshua: Tell us a little bit about your background and what first inspired you to start Unit. How did you identify the opportunity in embedded fintech for vertical SaaS companies?

Itai: Thanks again for inviting me. Excited to jam today.

I have been a founder for 18 years. Unit is my third company, all in fintech, so I keep going back for the same kind of pain. I have built companies out of Tel Aviv and Hong Kong, spent some years in San Francisco, and I am now based in New York City, here in our Tribeca office with the team.

What prompted us to start Unit was looking at the environment around us in 2019, about six and a half years ago. This was my second company together with my co-founder.

We saw that software companies were trusted by millions of people. They had flywheels of data, distribution, and trust. In many cases, they also saw fund flows.

Back then, we saw a new form of innovation in fintech, which we called fintech 2.0. This was not the typical Venmo-style company trying to do something the big banks already did. It was more like Toast, Shopify, Gusto, or Uber expanding from their core software services into storing money, helping people and businesses spend money with cards, and giving loans.

We thought thousands more companies would do this over time. We did not fully know the extent to which vertical SaaS would become an important topic, but we definitely saw how companies serving nonprofits, construction companies, e-commerce businesses, and other verticals could do it.

Those companies have a natural leg up and a bigger right to win than the Venmos of the world because they have customer relationships, trust, data, distribution, and fund flows. They process payments with companies like Rainforest, and they want to extend into more forms of money management and help their businesses do more with their money.

We also thought the tooling available to them at the time was very poor. You saw companies like Galileo, and maybe some banks with APIs, but nothing was complete. Nothing was easy to get started with.

So our goal was to turn software companies into winners in financial services. How we do that has changed and evolved over the years, but that was the genesis of Unit.

Today, we serve more than 100 companies and help move more than $60 billion annually across credit, banking, and other forms of money movement.

How the embedded finance landscape has changed

Joshua: That is great scale. You mentioned that how you do it has changed. You have seen the evolution over a number of years. How has the landscape changed, especially in the last few years, and where do you see it heading?

Itai: Embedded finance started as a very futuristic idea. Even fundraising was hard in 2019, because we were trying to convince people that software companies would become more central to financial services.

The story has evolved in our favor. Today, people can see that many companies have the ambition to create more value in financial services.

But there is a clear distinction between the first four or five years at Unit and what is happening now. In the early years, we saw early adopters building with great effort and great conviction. These were unique companies.

Look at the companies that launched financial services first, even outside of Unit: Toast, Shopify, Uber. These companies dedicated tens of millions of dollars at times, hired dozens of people, and developed core expertise in fraud, customer support, and compliance.

When we first built Unit and served the initial demand, we saw companies with that same level of conviction and willingness to invest. They knew a lot of things became possible if they had money features built into their products.

The first four years of Unit were defined by those relationships. Companies like HoneyBook, Wix, AngelList, and others built on Unit.

What is changing now is related to the idea of “crossing the chasm.” In many markets, the first 10% of customers are dedicated, maniacal visionaries. They are willing to invest a lot. Then you have the mass market.

In embedded finance, companies are moving from that initial set of convinced leaders into the mass market.

Now companies ask very different questions. First, they ask: what should I build? It is not just banking, like the Shopifys or Ubers of 2019. It might be: should I build bill pay instead of banking? Should I process payments, launch capital first, and then expand into other forms?

The products being built have evolved.

Second, companies expect solutions to be much more plug-and-play. That is very different from what happened in the past. People are more pragmatic. If you work at a company that competes with Toast, you want something more packaged. Companies want to experiment, test, and validate, but they do not want to do it with massive effort.

That is what has changed.

Banking as a service vs. embedded finance

Joshua: If we had this conversation four or five years ago, we probably would have introduced Unit as a leader in banking as a service. You have championed the term embedded finance. What is the difference between banking as a service and embedded finance?

Itai: Banking as a service is a narrow term because it talks about banking.

When we think about money as consumers or businesses, we think about products like Bill.com or Venmo. These are not banking products, per se. They are ways to store and move money.

We wanted to change the conversation from banking, which is narrow, to a broader question: how do you help people and businesses with the money tasks they have?

The term “banking as a service” also does not really describe what is being built. If you think about Uber, you think about getting from A to B. You do not call it “rides as a service” or “cars as a service.”

I prefer terms that are demand-centric rather than supply-centric. When we think about what is actually getting built, we think about embedded financial experiences that are delivered in context and help end users.

Joshua: So we are not just talking about DDA bank accounts and cards linked to them. We are talking about the broader umbrella: lending, bill pay, and all these other primitives.

Itai: Exactly.

What should vertical SaaS platforms build after payments?

Joshua: Many platforms start with embedded payments. It is probably the most developed flavor of embedded finance and has been around the longest. But payments are really just the beginning.

From your experience, what comes next after payments? How should platforms think about the revenue opportunity and choose among the many products under the embedded finance umbrella?

Itai: It is important to start with the catalog: the taxonomy of what is possible.

We think about four money jobs that every small business has. There are precisely four, and small businesses have had these same money pains for hundreds of years:

1. Get paid.
2. Manage your money.
3. Pay others.
4. Get financed.

Every small business needs these everywhere, in every part of the world, at every point in history.

So at Unit, when we think about the catalog, it is not just banking or “manage my money.” It is also: how do I pay other enterprises? How do I pay my vendors? How do I allow employees to get cards and spend? Many people spend with Ramp cards today, and they know there is a lot you can do around control and helping businesses manage themselves.

The four money jobs are timeless.

We see payments as money in. Rainforest covers that first leg, which is the most obvious place to start. It is natively integrated into many products at this point.

Then the question is: what comes next?

Do you want to drop an entire money hub on an end user? Or do you identify a wedge within the other three levers: manage my money, pay others, or get financed? Does one of those seem like a better fit for your industry?

I wish I could give a universal answer, but it is very vertical-specific. I can give examples that demonstrate the different heat maps for different industries.

For a vertical SaaS company serving e-commerce businesses, the heat map may skew toward “manage my money.” Shopify Balance is an example. It allows sellers to spend on marketing or inventory from within their Shopify Balance, using cards and controls.

For a construction software company, the heat map may skew toward money out. Construction has many large, lumpy payments, often in the form of checks at worst and bank transfers at best. Many construction businesses have a vast network of subcontractors and sub-subcontractors. They need help moving money from the general contractor to other parties.

For companies serving laundromats, capital may be the strongest wedge. Owners often want help expanding, buying more equipment, or opening a new location.

Companies need to see the heat map clearly. You need to understand what your end customers care about. From there, you can use that wedge to provide more financial services and eventually open the full spectrum of financial services to your users.

Joshua: That is a helpful framework. It depends on the vertical, where you have a right to win, and how complex each of those four money jobs is.

The revenue opportunity from embedded finance

Joshua: What realistic expectations should vertical SaaS leaders have? What kind of revenue uplift are you seeing among top-performing platforms? And what are the ancillary benefits, like reduced churn, better customer satisfaction, and improved stickiness?

Itai: Revenue expansion can range from doubling revenue per customer relative to payments alone, to 5x that component.

You can look at reports from public companies like Toast and Shopify and see how they think about the different levers.

I can talk about the questions people need to ask, though I cannot give one final answer. The first question is: in the heat map of my customers, what do they care to get from me? What seems like the hot area that could generate demand and that people would actually use?

Then, within that area - capital, payouts, or managing money - what are the monetization levers?

If you want to help businesses store money in your product, there is an excellent interest monetization lever.

If you want to help businesses pay bills, you may not be able to store money for them long term, but perhaps you can monetize individual payouts. If a company pays 50 bills per month and you charge $5 per bill, that is $250 per month from that business.

It depends on the type and timing of financial services you want to offer. Each product comes with a calculator of some sort.

At Unit, we make those calculators open source so companies can input the number of merchants they serve, the size of those merchants, and the product they are thinking about offering. Then we can estimate the monetization opportunity and the size of the pie, and companies can choose how much they want to keep.

Retention is another big point. The 2x to 5x opportunity is a combination of direct monetization and increased retention, which is very important.

In different industries, those levers play different roles. But in all cases, we have seen that software companies launching financial services can expect to retain and keep customers for longer.

Why attach rate matters more than micro-optimizing price

Joshua: We talk with customers and prospects a lot about shifting focus from per-unit revenue and expense to attach rate. You cannot make money if customers do not use the product. In my experience, usage usually trumps micro-optimizing individual rates.

I have seen platforms fall into two buckets. For some, embedded finance is an afterthought: maybe a referral model or a bolt-on feature. Others make it a core product function and see much higher attach rates and monetization.

From your perspective, what steps should platforms take to move from bolt-on afterthought to core product functionality?

Itai: This is the billion-dollar question of embedded finance… and of embedded payments, embedded accounting, embedded insurance, and every embedded product.

The key test is: is a customer who is exposed to your financial services offering worth more than a customer who is exposed to your product without financial services?

That is the question you have to ask.

I agree with you: it is better to seek activation, which is a fairly binary number. Are these customers getting value from payments? Are they getting value from capital? Or are they not?

If they are getting value, there are many ways to optimize over time. If they are not, optimization will not help.

So we think about activation - the percentage of customers activated - as the North Star for the deployments we serve.

Bolt-on usually means iframe. Some companies adopt payments as an afterthought. If embedded finance sits outside the core product, or outside core flows like creating an invoice or accepting a payment, that is a sign the company may not be taking it seriously or thinking in an integrated way.

Those are signs that companies are externalizing embedded finance.

We provide solutions that allow companies to externalize it. But in my opinion, the playbook that makes some companies successful and others less successful is embedding it inside the product.

I think about successful embedded finance as default, invisible, and relevant.

Default means the more you can make embedded finance feel like the default payout destination, the better. In the case of a loan, once you accept a payment, a default repayment flow can be triggered. If you make it so the end user does not have to choose, compare, or think too much, you make it easier for them.

Invisible means you should not make people feel like they are switching bank accounts on a Tuesday afternoon. No small business is going to stop its life, close its Chase account, and adopt what you call your new banking offering. You might instead position it as: here is a balance you can manage inside our software; you can get paid into this balance and do useful things with it.

That invisibility is important.

Relevant means it is not just another account. It is not Chase inside your product. It is something that makes your software better, and your software makes the financial product better.

For example, imagine software for managing a nonprofit. The nonprofit has chapters. If the number of cards or balances inside the money zone corresponds to the number of chapters, if spend can be associated with a single chapter so accounting is cleaner, and if people added as employees in the software are automatically added to the financial services offering, that is a connection people will buy.

It needs to be better than Amex. It needs to be better than Chase for you to have the right to win.

Joshua: Worthy competitors, 100-plus-year-old companies. That is where you have to be better.

How to think about investment, maintenance, and ongoing effort

Joshua: As platforms add embedded finance products into the core platform, how should they think about the investment required? There is the initial build and integration, but what about ongoing maintenance?

I have seen some companies overestimate the burden and assume it will be huge. I have also seen it go the other way: “We built it, and now we will never have to touch it again.” How should platforms think about ongoing maintenance, costs, and risks?

Itai: In nine cases out of 10 in my career, when people misestimate, they underestimate the effort.

We have seen more than 100 companies do this initially on what we call the custom version of Unit: the involved version, where we give them the Legos, APIs, and white-label components, and they build.

Building any financial services offering: cards, loans, balances: has three components you must not underestimate:

1. You have to build it.
2. You have to market it and drive adoption.
3. You have to serve the end user when they have a question, dispute something, or need help.

The bad news is that all three are iterative and ongoing. You cannot expect to reach a promised land where the build is done forever. You cannot expect to reach a promised land on adoption. And you cannot reach a promised land on service. There will always be demands on those fronts.

Companies should be very clear about what they can do. I think about it as three legs: build, market, and serve.

For most companies, that is too much.

We have seen many companies buy the airplane and try to fly it. You have probably seen this in payments, too. Companies think they have the sophistication or willingness to control more, but then they end up defaulting to easier solutions or not taking full advantage.

We have seen companies take off. We have seen companies offer lending to their customers and later discontinue the product. We have seen some companies invest for years and eventually decide it is not for them and shut down the product.

All of this informed a very different implementation option Unit offers in 2026 called Ready to Launch.

Ready to Launch is a Unit-managed offering. Whether you offer bank accounts, money-out solutions, or capital, it is yours to name and position. But Unit manages the program end-to-end: the build, the marketing, and the service, with some help from you because you are exposing the products to your customers.

Joshua: To make sure I understand: with Ready to Launch, all compliance and risk management sit with Unit?

Itai: Correct.

Joshua: And from a technology perspective, instead of having Legos and building the contraption yourself, there are embeddable components and frames that make it simple to get started?

Itai: Exactly.

We do have components in that approach. But very commonly, a company that picks Ready to Launch puts one line of code in their product, and that one line expands into a full money hub.

You can control whether that money hub includes just money management, money management plus loans, or just loans. You can switch modules on and off.

The approach that 90% of our customers are taking now is that they want to buy the one-line version of Unit and have that one line live inside their product. Some are choosing to let us host the experience altogether.

That means customer communications, hosting, build, adoption motion, marketing, and customer service are owned by Unit.

You can still optimize the experience. We have APIs in the background so that even if you choose the low-lift solution, your code can pull transactions from the system. You can reward customers in any way you see fit. But you get a lot of off-the-shelf wisdom across build, marketing, and service.

Joshua: It took Stripe seven lines of code to process one payment. Now it takes one line of code to launch a full-blown money hub in 2026. Progress.

AI, systems of record, and systems of action

Joshua: These days, I think I am required to include AI in every podcast. We are starting to see platforms use AI to automate financial workflows: moving money, optimizing treasury, flagging cash flow risk, and more.

What does a platform need to have in place before it is possible to use AI that way? And how do you ensure your infrastructure and vendors can support those kinds of automations?

Itai: This is a big topic. Everyone is thinking and talking about it. Vertical SaaS leaders have their heads spinning from AI ideas, competition, and dynamics.

The best framework I have seen for assessing AI readiness is the distinction between a system of record and a system of action.

Tidemark, one of the prime VCs in vertical SaaS, published an excellent framework that helps you understand where you stand. Are you just a database, or are you a system customers go to when they want to accomplish work and automate their work?

Some vertical SaaS companies have positioned themselves extremely well over the years as systems of action. Many others are at a disadvantage because they are more like systems of record.

Salesforce is an easy equivalent. A CRM is a classic system of record, and there are a million tools that help people accomplish work on top of it.

Every vertical SaaS company needs to be more than the database. It needs to be the place customers go to do work. That is table stakes if you want to participate in AI use cases or the AI economy.

So my advice is: get your house in order. Participate in accomplishing meaningful work.

On the financial services side, we are seeing a lot of demand from companies that want to allow agents to store money, spend money on behalf of a business, and help with reporting and other AI use cases.

The best example I have seen from our customer base is a company called Hibyn. They serve e-commerce businesses by looking across all the shops where a merchant sells, aggregating information, and offering banking services and credit to help them grow. They serve hundreds of large and growing brands.

They built an AI agent that can answer questions like, “What is my marketing return this month?” That is based on information within the financial stack.

That is a read-only use case. They are now building agents that actually move money and help optimize cash. Agents are moving from being readers of information to writers into the lives of small businesses.

Having quality infrastructure that is AI-ready: infrastructure an LLM can code against and implement use cases with is very important. Having the primitives is also important.

The more Legos you have, the more AI becomes possible, because AI is excellent at taking Legos, making sense of them, and assembling them quickly.

Rapid fire: true or false on embedded fintech

Joshua: I want to do one quick rapid-fire segment before we wrap up. I have three true-or-false statements about embedded fintech. Tell me quickly if they are true or false and why.

First: your payment processor is the same as your embedded finance partner.

Itai: False.

There are companies like Stripe and Adyen that want you to believe that should be true, and it makes sense why they would say that. But what we have seen in practice is that payment processing and embedded finance are specialized territories.

If you go with your payment processor’s embedded finance offering, you may just be checking a box rather than setting your business up for success.

For example, we spoke with a large public company about a year and a half ago. They process payments with one of the big companies, and that company locked them into exclusivity. The processor tried to convince them it had the right building blocks for embedded finance.

That company never launched embedded finance with the big payment processor because the offering was not ready or mature. Now they are opening things back up and looking at what the market has to offer.

The big payment processors make a real statement, but embedded finance is specialized, important, and difficult. You have to go to people who know the category.

Joshua: Second: platforms should wait until they feel completely ready to add embedded finance before starting.

Itai: True, but I would soften “completely.”

There are factors that undeniably affect readiness to offer embedded finance. I do not want to convince everyone they need embedded finance today, because that is not intellectually true in all cases.

I have seen companies sit on that decision for a year or a year and a half, then come back and do it the right way.

That said, I would encourage companies to err on the side of doing it earlier because competitive dynamics matter, and their scale can enable it.

Also, if you make embedded finance default for users, you get much more adoption. If you wait a year or a year and a half, you miss the cohort of customers you are signing during that period.

So companies should assess the opportunity and avoid moving too soon. But I have also seen many companies wait too long and come back with their backs against the wall, which is never the position you want to be in. Typically, it is either you or your competitors.

Joshua: So it is a Goldilocks problem: not too soon, not too late, just right.

Final one: platforms need to build their own compliance team if they want to offer embedded finance.

Itai: False.

Over the years, we have seen the cost of compliance for software platforms shrink from “some investment” to close to zero when it comes to delivering embedded financial services.

To give a simple example: you should never market on the dark web. If you are a vertical SaaS company offering financial services, some obvious responsibilities are on you.

But everything related to servicing, answering complex questions, building a complex product, driving adoption motions, and supporting the compliance of the embedded finance program should not be on your plate at all.

Companies can choose to do this with essentially zero compliance cost by putting it in the hands of experts through a managed program.

Joshua: I would add context. From Rainforest’s and Unit’s perspective, compliance has become more demanding internally. Banks are cracking down. There is more regulatory scrutiny and pressure than ever.

But we are the buffer for customers so they do not have to bear that burden. Internally, the bar has gone up; externally, the burden for platforms can go down.

I often tell platforms that think they want to own risk: make sure you understand what you are getting into. If you did it five or 10 years ago, the cost, scrutiny, and burden have gone up significantly.

Itai: That is very true.

A simple equivalent is software hosting. Everyone used to host software on-premise, then people moved to the cloud. Companies no longer have to spend time thinking about cloud infrastructure in the same way. Of course, AWS and Google Cloud do it for a living and obsess over those problems at scale.

That is the equivalent of what companies like ours do. We absorb a lot of complexity and give companies a much easier experience of building and scaling.

Closing advice for vertical SaaS leaders

Joshua: We are just about out of time, so I will let you have the closing word. If you had one piece of advice for vertical SaaS leaders when it comes to expanding their fintech offering, what would you tell them?

Itai: I already shared the system-of-action point, which is the generic advice for any vertical SaaS company.

In the context of money, I would say: cash flow is king for all small businesses. You would be very wise to lead with cash flow messaging and cash flow solutions.

If you are thinking about what really bothers your customers day to day, most of them are not thinking about AI. Most are not thinking about the sci-fi problems you and I may see. Most small and medium-sized businesses are thinking about staying in business.

You have to get into their heads.

When you think about embedded finance, it needs to be in service of staying in business. That means helping them manage money better, delay bills they have to pay, accept payments sooner, and get loans so that if they have an overcomeable cash flow crisis, they can take a loan and get past it.

Joshua: Very good. Itai, thanks so much for being with us. This was a great chat.

Itai: Thanks for hosting me.