How vertical SaaS platforms are reshaping business operations and the critical role of payments | Leaders in Payments Podcast

Welcome to the Signal, powered by the Leaders in Payments Podcast, where we are cutting through the noise to reveal what truly matters in payments and FinTech. Hello, and welcome to the Leaders in Payments Podcast. I'm your host, Greg Myers. Joining me today is a very special guest, Brad Pinneke, the VP of sales at Worldpay, now part of Global Payments. So, Brad, thank you so much for being here and welcome to the show. 

Great. My pleasure and I'm really looking forward to talking with you. 

All right, this episode is part of our signal series, where we're cutting through the noise to reveal what truly matters in payments in FinTech. Today we're going to explore the rise of vertical SaaS, why these platforms have become so central to how small businesses operate, and how embedded payments is changing the way software companies drive growth, retention, and customer value. We'll also look at what separates the platforms that do this well from the ones that don't, the challenges they face as they expand into financial services, and how AI could shape the next phase of opportunity. So, Brad, before we dive deep into this, can you walk us through your professional journey and how you got to Worldpay, now part of Global Payments? 

Yeah, absolutely. I have probably a little bit of a unique background in that I started really working for a couple ISVs that we would, probably say are perfectly set for the Worldpay environment. And so, I always tell people I really spent more time on that side of the table than I have been on the payment side. But I've now been with Worldpay for a little over 12 years, got my start, and one of the ISVs we actually developed one of the early on integrated payment processing tools. And so, I've been around payments for probably more than 20, 25 years right now. 

Okay. Well, most of our audience will be familiar with Worldpay, which obviously is now part of Global Payments. But just for context, can you give us sort of the 50,000-foot overview of the company and maybe sort of where you and your team fit into the broader organization? 

Yeah, absolutely. Like you said, probably a lot of people have heard of Worldpay, but I think they look at it a little bit differently than maybe I do from my line of business. So, Worldpay has traditionally been known for servicing really large merchants, and that's been across the globe, hence the name. And it's been through several acquisitions that we've gotten to where we are today. But Worldpay does payment processing, acquiring all over the world. And the part of the platform I work on is called the platforms business. And so, what we do is we service software companies. We help them either embed or integrate payment solutions into their application. And that's a unique part. And so, while we're very large, that's a very boutique part of the global now Worldpay business. 

Okay. And your specific role, you're running the sales organization for that group, right? 

Yeah. And actually, I run the business development side of the sales organization. So, we are out in front of talking to partners that are looking to monetize or have some kind of payment adoption within their application. 

Oh, great. Okay, well, let's dive into the discussion. So vertical SaaS has grown significantly over the years, as you well know. What do you think has driven that growth, and why has the model become so attractive across so many different industries? 

I think for me it starts the fact that industries don't run horizontally. And so, if you just take that as a pure statement, it makes sense that vertical SaaS has really started to catch on. And that's been, maybe as recent as the last five years, but probably 10 years overall. And I think one of the challenges has been those horizontal applications just; they're really designed broadly. And so, their applicability is very broad. And they usually fail to capture critical parts of a vertical SaaS company, and that's they often miss industry-specific workflows. They also are not always up to date on regulatory and compliance requirements. And then really last is sector-specific data models and terminology. I mean, we call people merchants, they call them practices, they call them customers, they call them all kinds of things. So, when you think about that, it really makes sense that vertical models have come about. And then I think the other couple points are that a lot of analysis around this is businesses really prefer industry-specific software, and that partly because it mirrors how they operate. And if you think about just that statement, operating how they operate really instead of a generic platform that might even require heavy customization is really a growing trend and quite popular today. And I think if you want to understand, what does that translate to them? I think three key things are one, it's faster implementation, less customization. They have a higher day one value. And then the sentiment is the software that feels built for me and not adapted for me. 

Right. So many of these platforms, as kind of we're talking about here, have become truly the day-to-day system that these small businesses use to run their business. And I often call it their operating system. So, how did these vertical SaaS companies evolve into this mission critical role for these small businesses? 

Yeah, I think again, there's a couple of parts to that, but I think the recent driver has been really late digitizing sectors. So, if you think about healthcare and construction and real estate and financial services, and then even SMB heavy industries, they've really come to the table kind of late. And so, because of that, that's really kind of driven this mission critical role, where before they were probably pen and paper or spreadsheets or something that wasn't quite so operationally embedded in their solution. And then I think the other thing is just with the reason it's so mission critical is that you know a lot of the software companies are looking for really strong retention value props, and the cost of switching systems traditionally was very expensive. And so, I think every software company is trying to figure out how do I become embedded in these mission critical workflows. And then importantly, how do I reduce churn? I mean, that's a key ingredient when you talk about SaaS companies. And I think there's just been natural expansion paths for these vertical SaaS companies, and part of that's been the ability to move upstream or downstream in workflows.  they might start in the SMB sector, but the work stream allows them to move up to enterprise. And then we'll talk about later is that adjacent payment, or adjacent modules, think about things like payments and compliance, and even analytics are becoming part of that mission critical. And then the other thing is that multi-product or SaaS products that embed and offer adjacent platforms tend to grow faster and retain better than single product or horizontal ones. And then one last point, which is really a key one, so save it for last, is that this model is really attractive today in capital markets. If you think about the dynamics of money today, because of the valuation reset that's occurred, a lot of MA activity has shifted towards these vertical platforms. And part of that's just predictable reoccurring revenue versus a one-time upfront payment, the high net retention value that they bring. And then maybe not number one, but close is just a clear path to profitability. 

Yeah. Before we leave talking about the platforms and start talking about payments and other financial services,  one thing that I've kind of noticed just in being involved in this, not from a point of selling anything or any services, but it seems like a lot of the people who started vertical SaaS software companies were once that small business that had the problem in that vertical, whether it's roofing or, like you said,  whatever that vertical may be, field services,  healthcare, they felt that problem and then they created the software. Are you kind of seeing that too? 

Yeah, I think that goes back to the point I made earlier. Workflow streams tend to mirror because a lot of times those individuals as software developers built it from experience. They themselves were in property management, or they themselves were in retail. And so, because of that, they really understand the need and especially how they want to work aligned with how that company works. And so, I think that's the maturation and why we see such a big impact today. 

Yeah, totally agree. So once a platform becomes central to the daily operations like we're talking about, where do payments start to fit in naturally into that workflow? 

Yeah, I mean, I think some of that is that you're just starting to see that one, customers, merchants; they really expect it to be native. Like they don't want this bolted-on approach that we've seen in the past. And so, I think that's where you're starting to see that. And the customer expectations have really greatly shifted. And because of that shift, they really prefer an end-to-end platform versus stitched together stacks that we've seen in the past, which was really common, right? And just some examples of that that may not hopefully resonate is that I think about the concept of one login, right? One system of record instead of multiples, one support layer that they're dealing with, and then ultimately, one source of truth for money plus operations. When you start to marry those two together, having that single source is ultimately the key to some other things that they face, like reconciliation. And then I would say for like SMBs and mid-market, payments are super complex. And so, bringing that complexity out and embedding in the solution is super, super critical. And I think also compliance too.  You're starting to see PCI compliance and fraud ramp today. So, understanding the compliance landscape and having software not only bring you know expertise of their provider, but expertise down within the product is important. And then I mentioned this already, but reconciliation seems to be one of the most time-consuming processes for most small businesses in the mid-market. And so, if you can operationally support this and remove this burden by embedding it, I think it's a big leg up today. 

Yeah, absolutely. So embedded payments and embedded financial services obviously have a big impact on a lot of different areas, but let's talk about three retention, monetization, and overall customer experience. So why do embedded payments and financial services have such a big impact on those areas? 

Well, I think that also points back to when we talk about the valuation aspect. So embedded payments and monetization of that really starts to let companies look at themselves differently, whether they're in it for the long haul or they're in it to sell to somebody else and go start a new product. But I think if you think about lifetime retention, retention leads to key statistics, such as NPR, where you're trying to value, what's the value of that merchant to me long time? And monetization and embedding really plays a massive role in that, and that they are likely to keep working with the software company. So, removing an embedded product is not easy to do. And so, there's a win for the merchant and that they get all these benefits, but then for the software provider, it makes it harder for them just to go shop for those benefits when they're stitched together technologies. 

What about the customer experience? What do you feel? I mean, obviously the single sign-on is a big deal, but what other areas really affect that customer experience? 

Yeah, I think back to a couple of other points. When you have somebody that natively understands how your business operates, then they're really thinking about user interface as they put it out to the market. So, their expertise combined with having the customer also, be the voice of their product really provides an overall user interface. And then I think if you look traditionally, a lot of times you feel like you exited the software to go make a payment. It felt despaired. It felt like, wait a second, did this switch on me? And so, when that happens, I think people, there's a trust value that's hard to build back up. And then the customers start to wonder what is going on. So, when you embedded the flow and it looks like you've never left the application, the customer interface is really smooth, I think you're starting to feel like a trust issue, which again is a really massive part in retention and eventual lifetime value of that customer. 

Okay. So, let's switch the lens and talk about a little bit from the small businesses side. So, when the vertical SaaS platform, when they truly get payments right and it's a well-oiled machine, what are the biggest benefits for those small businesses that are using that software every day? 

Yeah, I think we'll probably go over some things I've already said, but now you think SaaS now runs their core business workflow. And it's not just software tasks anymore; it's part of their core application, which includes all the way down to payments or embedded finance. I think customers today expect an end-to-end platform and not having it be disconnected tools as we've talked about earlier. And that expectation comes with deeper, deeper expectations that today it might be payments. Today it could be embedded finance. Tomorrow it might be banking as a service. You're starting to see people layer on insurance and payroll and all the things that were always adjacent but not connected are now starting to become part of their workflow. And then I think just payments themselves, they really dramatically improve retention and long-time value. Vertical SaaS made money flow unavoidable. Think about that statement. Like money flow wasn't really thought about when you developed an ERP solution, right? It was all about the other aspects of inventory control or POS. And so, moving that money became such an unavoidable part that embedding it really solved a traditional problem today. And then the other thing is once you embed it, payments unlock valuable data. And then with valuable data comes today, and we're hopefully talk about this, is the ability to leverage that data through AI tools. And so, then the last thing is just investors and buyers together, reward platforms that control both these workflows and funds together rather than despair it. 

Okay. Well, what do you think separates platforms that truly build payments and financial services into the fabric of their offering from those that maybe just kind of tack it on? 

Yeah, I mean, I think first, one, when you think about modern SaaS today, payments used to be a fake feature, right? And today they're not. They're infrastructure and strategy. And so, when you think about payments being the strategy and the infrastructure supporting that strategy, it really starts to look and feel differently, and especially to their customers. And so, you want to make payments feel invisible, right? And I think that's a big part of it. And I think, look at a separate module instead of this natural step is a cornerstone of embedded payments. And I think the UI, back to kind of some points before, when you have a natural flow of checkout to settlement to reconciliation, and that all feels and looks similar, and they go to one place, I think you're starting to see a real change. And then customers just need platforms to kind of close the loop on business activity. And when you think about it from that way, then it shows that embedded payments just not only drive retention, but they're tied to workflow, and they're tied to customer satisfaction; they're tied to employee satisfaction. And all those things turn into a better experience for both the software provider and their end customer. 

Yeah, I think that end customer too, just kind of putting myself in their shoes, it's got to be a huge time savings too. I mean, I think about the plumber that comes to our house. We have used the same plumber for years, and he accepts cards, and he has it on his phone or iPad, whatever it is. And it's like it's all integrated into what he does. And but you think about the guy that doesn't do that, how much time he probably spends trying to figure out who paid, what they paid, all those kinds of things. I would think, like from a small business perspective, the huge time savings of having this all in one place has to be enormous. 

Yeah, I think that's part of the concept of a native workflow, right? That's the term I use where, before it didn't feel like a native workflow. It felt very disparate. And then, we only know the front end of that. What happens, your plumber comes out, it's a great example. He comes out; he takes a payment. Now what happens in the back office? How do they reconcile that payment against their bill? How does how do they get funded from once they do the reconciliation? How does that work downstream through the entire process? And that's where you're really starting to see the SaaS company having that right to provide the customers with a really phenomenal experience. And I think,  when you think about those companies that haven't digitized right to that point, like the efficiencies that they get and the flexibility, I think that's the other thing, too, is that before, like the flexibility was always really tough, right? Like, oh, do we take a check? Do we take a credit card? Or are there other forms? And I think payments service, what they begin to do is service what I consider edge cases, like multiple payment methods. What happens if they want to split a payment? Or how do they deal with other things that happen? And how do you deal with industry-specific rules? So, we think about places where there's escrow or whether there's maybe co-payments in some of the industries, all that complexity starts to narrow down when you standardize and provide that flexibility of an embedded solution. 

Right. So as these platforms expand beyond software into payments and financial services, like we've been talking about, what are some of the biggest product go-to-market and integration challenges that they face? 

Yeah, I mean, I hope I have a good one for here because I think this goes back in my career. But their biggest go-to-market challenge is selling money, not selling software, right? Like you think about, this is the number one challenge we even see still today with companies that they know how to sell their software, but what they don't know how to do is sell money. And we don't think of it that we think of them as selling payments, but selling payments is selling the entire flow of money. And with that comes the number one challenge, which is how do we build customer trust and how do we moderate the sensitivity over risk that comes with that? Software buyers aren't super forgiving. So, while your software may have an issue, the minute you have an issue with their money, I think now you've got a serious issue, right? Where and I think that's one of their biggest challenges. And so that that's not just a go-to-market challenge, that's a product challenge too. Like, how do we make sure? And it's also a selection challenge. How do we go out and find a partner providing those services to us that is really strong in the industry and has guaranteed uptimes and make sure their platform doesn't go down, in addition just to the software platform. And then I think, payment spires are even less forgiving. So, when you think about combining all that to software, now it's a joint challenge that they have. And I think the other thing is just the psychological aspect of that, right?  They're going to look at reliability, they're going to look at compliance, they're going to look at quality far more than they ever did in the past. And I think if you look at kind of some of the commentary in the industry, it shows that trust, not pricing, is probably more of a factor today and when they're talking about payments conversions. It may come across as price, but it manifests what they're really saying is that it's a trust issue. 

You mentioned earlier in the conversation, so we're not going to close out without talking about it. And of course, it's AI that comes up in almost every interview that I do, but it's becoming a bigger part of the conversation across software, vertical SaaS software, and basically everywhere, right? So, how do you see AI accelerating the opportunity for vertical SaaS platforms going forward? 

Yeah, you saved a big one for last. I mean, I think honestly, you could probably do an entire podcast around AI, but I've tried to think long and hard as AI has been such an important role today. And I think there's a couple ways I look at it, and there's probably lots more, but I'll give you kind of more of my ideas. But I think one thing is that AI turns vertical SaaS into the system of record, which turns it into a system of action. So, what do I mean by that is that historically, they've primarily recorded and organized the work. Now you're able to optimize and perform the work better yourself. So, if you think about things like, it automates scheduling and underwriting and reconciliation and compliance checks, where before those were such manual tasks that that has a massive impact on both speed and efficiency for payment exception and acceptance. And this move helps SaaS but spend from the IT budget towards much larger labor and operating costs. So, they think about the cost of converting or think about the cost of acceptance. It's always, what don't I know? What are the costs that I'm not used to facing today? And I think AI helps kind of help them conquer that and understand it better. And then I think the second big one for me is that it just dramatically expands revenue per customer, not just features.  It's not just adding capability; it's expanding monetization at the surface level. And I think that's the part you're starting to see come out in AI. And I think you're going to see continued growth around that is how do we better monetize and how does AI help us do that? And I think, if you look at some of the leading investors, they see this as kind of the third wave of vertical SaaS growth, with cloud being the first and then embedded fintech being the second. I think what you'll see happen is that AI replaces and augments a labor-intensive role today. New pricing models emerge, based on usage or outcomes or managed workflows. I think AI helps capture that where that was difficult and the amount of time it took to kind of get that information, by the time they got that information, they just didn't execute on. So, I think back to that execution point. And then the last one I'll leave is that AI plus payments really supercharge vertical platforms. It gives them a unique, we talked about all their abilities, today and why embedded is so important, but now it gives them a unique opportunity to now level up even further. And I think when you combine AI with embedded payments and financial data, what I see platforms gaining the most is just real-time insight into business health. I think before it was always something reactive. We'd look a month later and go, how do we do? And by that time, it was sort of hard to act on that data. Number one for small businesses, actually all businesses, is predictive cash flow and risk modeling. I mean, AI tools are amazing. And then the last one I'll leave is thinking about automated pricing and some of the fraud detections, and then even downstream collections. Those are, especially the fraud detection, if you look at the AI value prop today, it's really strong around all of them, but really fraud detection stands out. 

Yeah, I think the fraud one is huge. I think the one before the very last one where you talked about sort of the real-time insights, I mean, I think that's a game changer for these small businesses. I mean, as a small business owner myself, it's kind of like you said, looking at what happened in the last 30 days is great. But if you can have something that helps you figure out going forward, things and insights and those kinds of things, ways to make more money, save more money. I mean, to me, and given that it's all embedded into the software, and you've got all that payments data, I mean, it just to me it's a huge game changer just from that sort of insights perspective. 

I completely agree.  

All right. So, before we go, one final question. If you take all this content that we've talked about, all this great insight you've shared. What is the one key takeaway that you hope the audience remembers most from this conversation when they think about embedded payments? 

Yeah, I think the challenge for me is coming up with one key one. I think there's probably several, but if I had to isolate it out, I would probably leave the audience with this that one; you're not in this by yourself. I mean, if you think about everything, there are consultants, the payment providers, and your software provider. If you look at all the learnings and the expertise that span just those three entities alone, let alone AI going out and searching in the public sector. Right now, I think just remember as you're going through this, whether the topic is compliance or the topic is pricing or the topic is, hey, I need somebody to write the code for me, and can an AI tool do that? I think you realize that there's just so many people out there to help you. And if you employ help and you do it diligently, then I think the experience is only going to be enhanced. 

Okay. Well, I think that's a great way to wrap up the show. So, Brad, thank you so much for being on the show today. I know your time is very valuable, so I really appreciate you being here. 

Thank you, Greg. Fully enjoyed it, and I hope the audience does as well. 

Okay, and to all your listeners out there, I thank you for your time as well. And until the next story,