Tokyo FinTech
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Tokyo FinTech

Software companies are becoming payments companies

“Software companies are becoming payments companies”, according to Richie Serna, Co-Founder & Chief Executive Officer at Finix, during a webinar held recently by the company.

Finix made headlines in February, when the payments infrastructure software-as-a-service (SaaS) company announced a Series B round of USD 35m at an undisclosed valuation, led by Sequoia.

Finix’s thesis is that it can more efficiently enable vertical SaaS companies servicing specific industries to take their payments facilitation function in-house, thus taking a larger share of the payments pie that would otherwise go to the likes of Square and Stripe, for example.

To illustrate this, Richie walked us through the “Paymens Layer Cake”, the different levels of infrastructure and relationships that are required to effect a payment, and are compensated at different levels.

Taking a page out of the company’s pitch book, Boston Consulting Group is predicting that payments through software vendors will grow at about four times the rate of traditional providers until 2027.

The business case to take the payments facilitation in-house is simple — additional revenue, and operating profit. There is an additional ~3% of revenue on the table, of which — based on the Payments Layer Cake — up to a third could be captured as operating profit, after compensating everyone else in the value chain.

So why haven’t more companies taken this function in-house already? Richie cites large software development teams at Uber and AirBnB, with hundreds of developers just focused on building out the payments functionality (which might well include more functions across the stack). This requires significant upfront investment, incurs ongoing maintenance and has also a noteworthy time-to-market that medium-sized players could not absorb.

Richie suggests it makes sense to consider taking payments facilitation in-house when Gross Merchandise Volume (GMV) crosses USD 50m per year, with more than 100 merchants on the respective industry-specific SaaS platform.

The end result would be the elimination of (for example) Stripe and Square as existing payment facilitators through the vertical SaaS vendor, backed by Finix’s technology. Finix does not take basis point charges, there is a software license fee, and a per-card fee for handling on the platform.

An interesting technology, to say the least, in particular in the context of this week’s news that Stripe has raised a USD 600m Series G round at a valuation of USD 36bn. As Jeff Bezos used to say, “Your margin is my opportunity.”

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Norbert Gehrke

Norbert Gehrke


Passionate about strategy & innovation across Asia. At home in Japan. Connector of people & ideas.