As regular readers know, embedded finance in vertical SaaS is a recurring theme for me. Two things happened in the US that potentially can indicate where our journey in Europe will follow.
Rainforest Raises $29M for Purpose-Built Embedded Payments Platform
First, there's Rainforest, the embedded payments platform that just closed an oversubscribed $29 million Series B round led by Matrix Partners. CEO Joshua Silver's comment about being "purpose-built for software platforms" versus competitors like Stripe Connect that were "initially built for merchants and then retrofitted for the SaaS market" signals something important about market maturation. Rainforest has grown revenue by more than 10x since their last funding round, processing billions in annual volume.
90% of US SaaS Companies Expect Embedded Finance Growth Beyond Payments
The second piece comes from Flagship Advisory Partners, which just released part two of their comprehensive SaaS embedded finance survey. This research was actually discussed at Vertex: The Vertical Software Conference, which Rainforest and Matrix Partners co-hosted.
The survey of 100 North American SaaS platforms reveals some fascinating insights:
The Current State: While 90% of vertical SaaS companies accept card payments, most are leaving money on the table. Nearly 60% generate less than 40% of their profits from embedded finance, suggesting significant untapped potential.
The Future Vision: The bullishness is unmistakable. Ninety per cent of these companies expect their embedded finance profits to grow over the next three years, with 35% expecting it to outpace their core business growth significantly.
The Product Roadmap: More than one-third plan to roll out business lending, payment card issuing, or consumer lending (B2B2C) within three years.
European Embedded Finance Providers See Similar Traction
While these developments are US-focused, the trend is unmistakable: the evolution from embedded payments as a nice-to-have revenue stream to embedded finance as a core value proposition. I have discussed the European equivalent providers in the past, and it appears they are experiencing similar traction, suggesting this isn't just an American phenomenon.
Rainforest funding (Crunchbase), Embedded Finance Survey Part 2 (Flagship Advisory)
