Embedded Finance News - QED, Citi Pay, Mastercard: The Takeaway

A monthly round-up of the biggest stories in embedded finance and why you should care
Angela Bao
Angela Bao
June 6, 2023
The Takeaway June 2023

Every first Tuesday of the month we compile some of the most important and interesting embedded finance and fintech news stories and tell you why they matter. Find last month’s issue of The Takeaway here.

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QED closes $925 million in capital for fintech startups

VC firm QED Investors closed two new funds totaling $925 million, one for early-stage fintech startups and the other for growth-stage fintechs. The early stage fund, which QED announced was “oversubscribed,” has $650 million and the growth fund has $275 million; both funds are marked for fintech companies primarily in the U.S., United Kingdom, Europe, Southeast Asia, and Latin America. With the two new funds, QED now manages over $4 billion.

The Takeaway: VCs still see opportunities in fintech, with focus on profitability and niche

Venture capital fintech funding may have slowed significantly since 2021, but QED’s announcement shows that there is still opportunity for pragmatic fintechs. Under the current economic environment, the focus for VCs has shifted from “growth at all costs,” said QED managing partner Nigel Morris, to profitable growth.

In a separate interview with PYMNTS, QED partner Amias Gerety said there is still opportunity for fintechs “at the edge” that have found their niche markets, especially if they partner with other financial institutions. Gerety stated that some established fintechs have successfully scaled and essentially become the incumbents they once replaced. As a result, their tech may not be as cutting edge as it once was – which means that there is room for newer, more innovative fintechs.

Gerety pointed out fraud prevention as one area of opportunity, but ultimately being able to “delight” the customer will determine success.

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Future of embedded payment and AI

OpenAI’s ChatGPT has been making headlines - and now generative AI may be making its way to business payments. Payments company Stripe has already integrated ChatGPT into some company workflows, and OpenAI will use Stripe’s payment processing to charge its users.

Predictive AI is already being used by many fintechs in areas such as compliance, risk mitigation, and fraud prevention; it has also been used to improve payments authorization rates by as much as 10%, said Aeropay CRO Andrew Gleiser to PYMNTS.

The Takeaway: AI can be leveraged for business-to-business payments.

Generative AI like ChatGPT won’t have as much of a direct impact on payments, but it can be used to improve the overall customer experience, especially in the B2B finance space. Andrew Gleiser, chief revenue officer at Aeropay, believes that one potential use case is to integrate AI into a merchants’ payment portals. The AI could then source compliant information to the merchant about their customers, such as average order volume and purchase cadence. That information can then be used for marketing purposes, since the merchant already knows who their ideal customer is.  Companies should investigate whether Chat GPT is appropriate for its operations and assess corresponding risks.

Citi adds new embedded payment options to POS

Citi Retail Services announced a new suite of Citi Pay products that can integrate into retailers’ existing payment platforms. 

The first product is the digital-only Citi Pay Credit, which is their first foray into digital-only payments. The card lets retailers offer promotional pricing and provides real-time credit and authorization during the checkout process.

The second is Citi Pay Installment Loan, which will be rolled out in the coming months. The Citi Pay Installment Loan is their buy-now-pay-later model that will let customers pay for purchases in installments ranging from six months to 60 months, depending on the retailer.

The Takeaway: Embedded payments offer the flexibility that consumers want.

Citi conducted a study that found that 85% of American consumers want retailers to offer more flexibility with payment options. The COVID-19 pandemic spurred the adoption of e-commerce and digital payments, but consumers were nevertheless excited to shop in store again.

Despite the current decline in retail sales caused by inflation and high rates, retailers are looking at ways to remain resilient and invest in the future – that means meeting the consumers where they are. Embedded payments solutions can remove any potential payment friction, which can help improve the customer experience and help retailers close more sales.

Mastercard expands embedded finance partnership for Europe

Mastercard has expanded its partnership with Italian open finance company Fabrick, which Mastercard has been working with since 2019. Under the new partnership, the two companies will develop embedded finance solutions for businesses, financial institutions, and fintechs in Europe.

The Takeaway: Embedded finance solutions provide a seamless customer experience.

In the press release, Mastercard country manager Michele Centemero stated that the expanded partnership stems from their goals to “deliver a seamless experience for their customers in their time of need.”

Consumers want to stay within their favorite brands’ ecosystems, instead of having to jump around multiple platforms. Businesses that adopt embedded finance solutions can provide that desired, seamless experience to their customers.

Visa teams up to provide embedded finance solutions to B2B SaaS companies

Visa has teamed up with British embedded finance company Weavr to accelerate the adoption of embedded finance solutions among B2B SaaS companies. The partnership will allow Weavr to offer embedded finance solutions that are integrated with Visa capabilities.

The Takeaway: B2B is ripe for embedded finance revolution.

The complexity of B2B payments space has left it reliant on laborious manual processes, which means it is ripe for innovation. Especially for B2B SaaS companies, adding embedded finance solutions makes sense. The purpose of SaaS is to make their customers’ lives easier; adding embedded finance can benefit SaaS customers by making it easier for them to manage their business’ needs.

Wondering how embedded banking could help your business? Contact Treasury Prime — we have a true multi-bank network, the deepest bank core integrations, and extensive compliance experience. Read more about our $40 million Series C Funding and why Tearsheet named us the Best Banking as a Service company for the second year in a row. Talk to the best embedded finance team in the industry.

Related embedded finance content:

Harnessing the Power of Embedded Banking to Build New Revenue Streams

How Embedded Finance Can Benefit VC Portfolio Companies

Case Study: Growing Tuvoli's Embedded Banking Platform

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