Julio Gomez is the lead for industry relations and go-to-market strategy at San Francisco-based embedded card services provider Highnote. He is located in Boston. 

While embedded finance has been a hot topic for the last few years, the simple truth is that market segments do not all advance in lock-step. Platforms like Uber and DoorDash and retailers like Starbucks paved the way in terms of letting us conduct commerce while leaving our cards in our wallets.

But now, more and more industries are executing their digital transformation strategies, and the role of embedded payments in these automated workflows is critical to revolutionary advancements in productivity and customer experience. And the opportunity is massive.

So where will this adoption be concentrated in 2024? 

Let’s start with examining the industry characteristics that separate the fertile from the fallow. First, it helps if the processes being automated include a high volume and frequency of payments. Real estate, auto, and insurance purchasing are examples of the opposite – monthly payments don’t count.

Next, embedded payments are most useful when there is a wide range of payee types, payment schedules, and amounts. This complexity increases the value of payment automation. And with this complexity comes the imperative of establishing guardrails. Wherever the nature and amount of payments need to be monitored, modern payment capabilities are essential.

With these parameters in mind let’s examine the sectors that seem most poised to take off through embedded finance.

One of the most promising focus areas likely to be transformed is the spend management category. This sector encompasses both business payments to vendors and employee-initiated expenses such as travel and entertainment. Both sub-segments have been actively incorporating embedded finance, but with widely varying depth of integration.

For example, business payments includes accounts payable automation solutions, which increasingly include payments in order to close the “invoice to pay” cycle. But many simply offer a referral to an outsourced payment provider, so the integration with the solution’s platform (and thereby customer experience) is lacking. 

Another area ripe for development is fleet management. These companies have made great strides enhancing efficiency, safety, and analytics with robust platforms and innovative hardware. But there are so many payment connection points (fuel and EV charging, tolls, and maintenance) that there is a great opportunity to incorporate payment programs into these platforms. Only a few have introduced payment capabilities, so there is tremendous room for growth. 

Finally, there are the vertical platforms. Entire industries are being addressed by digital platforms designed to automate sector-specific workflows. For example, someone opening a new restaurant can buy a “restaurant-business-in-a-box” that automates and integrates everything from suppliers to staffing to point-of-sale systems. This is happening everywhere – construction, retail, hospitality, real estate, healthcare, and more. And integrating payments is a great value-add to these platforms.

These three areas are fertile fields for planting embedded payments. All three share the attributes of payment frequency, payment variety and the need for spend controls. They are also early on in the integration of payments into the emerging solution platforms. 

But how will some players outpace their competitors? It’s not enough to simply recognize the role of payments in the relevant workflows. Just as it is not enough to hand over the payments to a referral partner. Leading platforms need to understand the advantages in analytics, controls and customer experience that come from a truly integrated payments capability.

They also need new core competencies. A payments function involves insertion into the flow of funds. This brings with it a need to master the requirements (regulatory and otherwise) of payments operations. Just as the builders of a disruptive restaurant platform need to understand what a restaurant owner needs in order to operate, these builders need to understand payment mechanisms in order to light up embedded finance in their platform.

Of course, launching embedded payments does not mean becoming a payments company. But it does mean partnering with providers of key enabling services and technology. The good news is that the fintech ecosystem is a reliable and accessible one.

While the story of 2024 is yet to be written, we know that innovation shows no sign of slowing. And when it comes to embedded payments, it is surely accelerating.