Modulr Comments on how Fintech Is “Driving Next Evolution” of Vertical SaaS Businesses

Modulr, a Payments as a Service API Platform for digital businesses, notes that they’re seeing the rise of the infrastructural Fintech. The company claims to have “front row seats” to see how Software as a Service companies (and customers) are adding various financial services to their main product offering.

The Modulr team writes in a blog post that “switched-on” software-as-a-service (SaaS) firms are embedding financial products developed on payments infrastructure – including loans, payment cards, and complex supplier and payroll flows. These solutions are being added directly into service providers’ vertical software so that they can benefit from “new market opportunities that this brings.”

While commenting on how Fintech is “driving the next evolution” of vertical SaaS, Modulr notes in their blog post:

“While consumers of services in horizontal markets (i.e. products that more or less serve multiple industries without much customization) often pick and mix from multiple software vendors, those consumers of services in vertical markets (i.e. specific services only for a particular industry or sub sector) tend to prefer software that’s purpose-built for their specific industry and use cases.”

According to Modulr, this presents vertical SaaS firms with “an opportunity to grow the revenue per customer by making their product stickier.” Products may become so “indispensable” with this approach that that it would mean a significant investment to actually switch, Modulr’s blog post added. And that’s “even if they’d want to switch considering how easy it would be to have all their business tools in one place,” Modulr noted.

The Fintech firm continued:

“Layering on financial products by offering native integrations of financial services is a very effective  lever – increasing the lifetime value of a customer, without increasing the cost of acquisition.” 

However, Modulr claims that the “secret” lies in embedding the Fintech, instead of merely reselling it, as this can increase overall margins and also assists you in providing a suite of products that “really resonates with your vertical.” Modulr further notes that “it makes for a more seamless customer experience, through a familiar, trusted and branded interface, rather than redirecting customers to a strange third-party site.”

Modulr also mentions that Fintech infrastructure providers have made it even easier for vertical SaaS companies to embed different financial services into their core product offering.

Modulr points out that payment processing might be the “logical first step” on the embedded services “ladder.” However, firms are now able to layer various financial products and services – like lending, cards, payroll– into their product offering, based on the requirements of their particular vertical market, Modulr explained.

Modulr also pointed out that digital commerce marketplaces “challenged with attracting merchants and retailers away from the competition can now harness the power of fintech to provide a full suite of market leading financial solutions, including payment accounts, cards, Faster Payments, Direct Debits, Payment Initiation via Open Banking, Confirmation of Payee, 24/7 access and instant notifications.”

Modulr further notes that you may pass on this functionality to merchants as a brand new service. Alternatively, you may use it for internal purposes in order to enhance the control of funds and to effectively manage treasury and reconciliation. The company suggests that digital commerce marketplaces may use Fintechs such as Modulr to manage their end-to-end physical and virtual card issuing programs.

(Note: to learn more, check here.)

As reported in January 2021, a new service by Revolut now provides an anti-fraud feature in partnership with Modul.

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