Author: Callum Gracie, Founder, Gia AI
I run an SEO agency with 42 clients across trades, construction, and service businesses. I also co-founded an AI platform built for service businesses. So I spend most of my time inside the tools my clients use to run their operations. What I keep noticing is that these tools have quietly become financial products.
The scheduling app now sends invoices. Next, the invoicing tool processes payments. After that, the payment system offers lending. In other words, vertical software platforms have evolved into full financial operations systems. Yet nobody in fintech seems to be paying attention.
The pattern hiding in plain sight
Consider what happens when a plumber signs up for a job management platform. Initially, they want to schedule appointments and dispatch technicians. However, the platform quickly nudges them to activate quoting. From quoting, they move to invoicing. As a result, invoicing enables integrated payment collection. Before long, the platform processes every dollar that flows through the business.
This is not a theoretical progression. ServiceTitan followed exactly this path and IPO’d at a $9 billion valuation in December 2024. Fintech products now represent roughly 25 percent of its revenue, and gross transaction volume runs at around $62 billion. Toast did the same thing in restaurants, generating 76 percent of total revenue from financial services. Shopify exceeds 80 percent.
Meanwhile, the swim school booking system processing 10,000 direct debits per month is doing the same thing at a smaller scale. So is the steel distributor’s trade credit platform managing $50 million in receivables. Therefore, the question is not whether these businesses use fintech. It is whether fintech recognises them as customers.
The numbers say fintech is looking the wrong way
According to PitchBook’s Q1 2025 data, enterprise fintech captured 75.8 percent of total fintech venture investment. That is $5.6 billion in a single quarter, flowing toward companies that already have treasury departments and dedicated finance teams.
At the same time, the World Bank estimates the global SME finance gap at $5.7 trillion. In Australia specifically, SMEs are collectively owed over $115 billion in unpaid invoices. In the UK, 14,000 businesses close every year because of late payments alone.
Consequently, there is a massive disconnect between where fintech capital flows and where fintech value is being created. Three quarters of investment targets enterprise infrastructure, yet the fastest-growing embedded finance adoption is happening inside vertical software platforms that serve industries most fintech investors have never studied.
Why vertical platforms win on distribution
The economics explain why this matters. According to BCG’s 2025 embedded finance report, SaaS providers with integrated payments already account for 36 percent of SME acquiring revenues. By 2028, that figure is projected to reach 45 percent. Furthermore, platforms with embedded payments see 2.5 times lower customer attrition than non-embedded competitors.
The acquisition cost advantage is equally significant. McKinsey’s research found that the cost of acquiring a qualified SME lending lead through embedded channels is 15 to 20 times lower than through traditional banking. In addition, vertical software companies spend half as much on sales and marketing per dollar of revenue compared to horizontal platforms.
This happens because of workflow embeddedness. A swim school that runs class scheduling, parent communication, billing, and payment collection through one platform faces switching costs estimated at 10 times higher than horizontal solutions. Similarly, a trades business managing jobs, quotes, invoices, and payments through a single app is effectively locked in. The fintech layer rides on top of operational dependency.
For example, Xplor Technologies serves 78,000 customers processing over $36 billion in payments across 20 markets. Most of those customers are childcare centres, swim schools, and recreation facilities. They signed up for class management software. They stayed because moving would mean rebuilding their entire payment infrastructure.
What this means for fintech builders
The opportunity is not to build another neobank or payments API. Instead, it is to recognise that the distribution problem fintech has spent billions trying to solve has already been solved by vertical software.
Andreessen Horowitz calls this the defining trend: SaaS businesses with embedded fintech increase revenue per customer by two to five times, with margins three times higher than pure software subscriptions. The average vertical SME customer spends roughly $1,000 per month. About $200 goes to software and $800 goes to financial services. As a result, whoever owns the workflow owns the financial relationship.
The embedded finance market sits at approximately $146 billion in 2025, with projections reaching $454 to $690 billion by 2031. However, more than 80 percent of that remains untapped. The companies that capture it will not be the ones building better banking infrastructure. They will be the ones that understood a booking system, a dispatch tool, or a project tracker was a fintech product all along.
Callum Gracie is the founder of Otto Media Group and co-founder of GiaAI. He works with SMEs across multiple industries and is building AI-powered tools for service businesses.