Why Software Companies Will Need to Become Payments Companies

By Will Kohler at Lightspeed Venture Partners — read the original.

Highlights

• we’ve been investing in companies building the infrastructure to drive the digital economy. And one of the most exciting and dynamic areas of that economy is the $2 trillion payments industry.
• By unbundling the payment technology stack, Finix offers a flexible and scalable solution that avoids long term lock-in with existing third-party providers while bringing more controls in-house.

  Kyle: Unbundling

• It’s no small feat to provide the infrastructure that allows software companies to elegantly add payments.
• We believe every software company will eventually need to build or acquire its own payments infrastructure. Without Finix’s APIs, replacing a payment platform like Stripe would require a small army of talented payments engineers.
• A recent report by J.P. Morgan notes that US market penetration is less than 10 percent and integrated payments should continue to grow at 2X the market for years to come.

Connections

• Unbundling — Kyle’s own margin note on the Finix pitch: the thesis is that the payment stack gets taken apart and resold in pieces.
• Payments — the “every software company becomes a payments company” claim, which by 2020 was the standard embedded-fintech argument.
• Stripe — named as the incumbent whose replacement cost is the moat Finix is trying to dissolve.