Marcel Mansfeld, co-founder and CPO of ToolTime, joins the Embedded Finance Review podcast to share how his company transformed from a digital workflow solution for German craftspeople into a comprehensive embedded finance platform. After raising €55 million and serving over 20,000 customers, ToolTime launched ToolTime Pay to address payment friction in the traditionally cash-heavy craft industry. This in-depth conversation reveals the strategic decisions, technical challenges, and customer insights that guided their embedded finance journey from concept to successful implementation.
Building Embedded Finance Products for Vertical SaaS Companies
- Start with product maturity first - ToolTime waited until they had established core ERP functionality before adding financial services, ensuring their primary value proposition was solid
- Customer base size matters - With 20,000+ customers, ToolTime had sufficient scale to make embedded finance viable since most sales happen within existing customer base rather than new acquisition
- Resource commitment is significant - Embedded finance requires dedicated product teams, ongoing customer service, and long-term maintenance that diverts resources from core product development
- Regulatory considerations - Adding financial products means navigating compliance requirements and following specific rules for digital payment processes
Payment Methods and User Experience in B2B Embedded Finance
- Bank transfers dominate European B2B - Despite offering card payments, bank transfers represent 98-99% of payment volume, with cards only capturing 1-2% of transactions
- Mobile-first payment experiences - Integration with email invoices and one-click payment buttons improves collection speed and reduces friction for busy tradespeople
- Industry-specific payment behaviors - Higher transaction amounts in craft industry (renovations, installations) make card payments less suitable compared to traditional bank transfers
- User experience trumps technology - ToolTime prioritized seamless workflows over technical solutions like open banking APIs that create authentication friction
Open Banking vs Embedded Banking: Strategic Technology Decisions
- Authentication challenges with open banking - PSD2 requirements create user experience friction that doesn't align with less tech-savvy customer segments
- Integration limitations - Open banking APIs don't provide the same level of balance integration and project efficiency tracking that embedded accounts enable
- Customer trust factors - Traditional craftspeople prefer familiar banking relationships and are hesitant to adopt new authentication methods or bank switching
- Technical flexibility advantages - Embedded banking platforms like Paymi offer more customization options for building industry-specific financial workflows
Revenue Models and Monetization Strategies for Embedded Finance
- Transaction-based pricing structure - ToolTime charges 1% on bank transfers (capped at €10) and percentage fees on card payments for transparent cost structure
- Value beyond payment processing - Primary monetization comes from automated invoice reconciliation, payment tracking, and dunning processes rather than pure transaction fees
- Peace of mind positioning - Customers pay for complete workflow automation that eliminates manual payment tracking and reduces time spent chasing receivables
- Revenue diversification benefits - Embedded finance provides additional revenue streams beyond core SaaS subscriptions while strengthening customer retention
Customer Success Factors in Embedded Finance Implementation
- Customer-driven product development - ToolTime's 50,000+ customer insights database guided feature prioritization and payment method selection
- Industry-specific pain points - Addressing cash flow challenges where unpaid invoices can threaten small business operations creates strong customer value proposition
- Integrated workflow benefits - Seamless connection between project documentation, invoicing, payment, and financial reporting reduces administrative overhead
- Gradual feature rollout - Starting with basic payment processing and expanding to automated reconciliation and dunning allowed for iterative improvement based on user feedback
Future of Embedded Finance in Vertical Software Markets
- Expansion beyond payments - ToolTime plans additional financial services including business accounts for supplier payments and potential lending products for project financing
- Generational shifts driving adoption - Younger craftspeople more open to embedded financial solutions compared to traditional banking relationships
- Market consolidation trends - Vertical SaaS companies increasingly need embedded finance to remain competitive as customer expectations evolve
- Long-term strategic advantage - Deeply integrated financial services create switching costs and differentiation that pure software solutions cannot match