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1、Fintech and the future of softwarein EuropeDriving growth with integrated payments and embedded finance IIIts been over a decade since Marc Andreessen wrote that“software is eating the world”accurately predicting that most industries would be disrupted by software.Now,there are more than 20,000 soft
2、ware companies globally,and the market is highly fragmented,with specialised offerings for thousands of lines of businesses and industries.Given the increased access to and consumerisation of cloud-based software solutions,businesses of all sizes now run the majority of their operations using softwa
3、re-as-a-service(SaaS)offerings.The market is no longer greenfieldcustomer acquisition and retention are more challenging,so software providers must find ways to differentiate and deliver more value to their customers.To differentiate in the market,boost retention,and create new revenue streams,many
4、software companies have turned to integrated payments.In fact,over 40%of leading software companies in Europe offer payment facilitation,and 75%of European small businesses(SMBs)have their method of payment acceptance integrated with one or more of their software tools.SMBs increasingly expect B2B s
5、oftware platforms to provide integrated payments.We set out to discover the next opportunity for software companies.In our research with Edgar,Dunn&Company,we explored the most pressing challenges facing SMBs and insights to inform how platforms can stay ahead of industry trends.Our findings show th
6、at in order to stay competitive in an increasingly crowded market,software providers should look to complete their core offering by adding integrated payments and embedded financial services.Enhancing platforms with expense cards,monetary accounts,and lending creates powerful“all-in-one”solutions to
7、 help SMBs grow and run their businesses in a single place.Terms used in this reportSoftware or software as a service(SaaS):providers of cloud-based applications offered on a subscription basisSmall to mid-sized businesses(SMBs):organisations with fewer than 1,000 employees that use software(SaaS)so
8、lutions to run their businessesIntegrated or embedded payments:payment processing that allows businesses to accept payments directly within their existing software,made possible by payment facilitation.Read our guide to payment facilitation to learn more.Embedded financial services:lending,credit,de
9、posits,and other banking processes offered seamlessly through non-financial products(namely software),made possible by banking-as-a-service(BaaS)tools.Read our Introduction to BaaS to learn more.A note on methodology:To understand the needs and challenges of small businesses with regard to payments,
10、financial services,and their software vendors,we surveyed over 1,000 small to medium sized businesses based in the UK,France,Germany,and the Netherlands.These businesses represented a range of industries,size,and tenure(see appendix for a full breakdown of the survey audience).We also spoke with lea
11、ding software vendors in Europe around their plans and expecta-tions for integrated payments and embedded finance.3In the next 12 months what are the main priorities for your business?Key challenges facing European SMBsTodays growth-oriented SMBs run their businesses on multiple software solutions a
12、nd are seeking ways to minimise vendors,manage their funds,and expand their reach.By offering integrated payments and embedded financial services,software vendors can become mission-critical“one-stop-shops”for SMBs,providing powerful solutions to help SMBs grow and run their businesses.Small busines
13、ses in Europe are prioritising growth.Our research revealed that small businesses are prioritising the growth of their businesses over cost cutting in the next 12 months.Fifty-seven percent of small businesses in Europe report that growing their customer base is their top priority,with 35%reporting
14、that they plan to expand their geographic reach and introduce more products and services.By contrast,only 44%named cutting costs as their most pressing objective.Small businesses in Europe run their operations on multiple SaaS solutions.The majority of small businesses in Europe(75%)subscribe to at
15、least one SaaS solution,with 75%of those businesses using more than four solutions.Nearly half of them(47%)use seven or more software tools.Interestingly,small businesses in the UK use fewer solutions(62%use fewer than six)than their small-business counterparts in the Netherlands,where 53%use seven
16、or more solutions,indicating that they are using multiple point solutions.Total EuropeN=1,0160%20%40%60%Growing our customer baseReducing costsExpanding our geographic reachIntroducing more products or servicesHiring more employeesStreamlining operationsIntroducing new technologies57%35%35%34%44%26%
17、25%How many cloud-based or software-as-a-service tools does your company use?Total EuropeN=1,01625%5%15%35%25%28%19%13%6%4%5%UKN=25025%5%15%35%33%29%17%11%3%4%3%GermanyN=25525%5%15%35%19%31%20%15%7%3%4%FranceN=26025%5%15%35%25%26%18%14%7%7%3%NetherlandsN=25125%5%15%35%24%24%22%11%8%3%9%Fewer than 34
18、-67-1011-1516-20More than 20Dont know4Small businesses in Europe are willing to pay more to use fewer software solutions.Although most small businesses in Europe use more than four software tools,75%would prefer to consolidate to a few trusted vendors or a single vendor.In fact,62%are willing to pay
19、 more for a one-stop-shop solution that could support all their business needs.Small businesses in France(75%)are most willing to pay a premium for a consolidated offering,versus their multiple-SaaS-using counterparts in the Netherlands(53%).Small businesses in Europe have already combined payments
20、acceptance with other software tools.Citing the benefits of easier reconciliation and fewer vendors,most small businesses already use integrated payments offerings from their software providers.Most small businesses use payments tools that are integrated with the software solutions they use for acco
21、unting(e.g.,Quickbooks,Xero,Freshbooks),CRM(e.g.,Salesforce,Hubspot),or ecommerce(e.g.,Shopify,Squarespace).Larger businesses are more likely to use integrated payments than smaller businesses(only 42%of solopreneurs and 57%of small businesses with two to ten employees use integrated payments).Inter
22、estingly,the country with the highest percentage of small businesses using integrated payments is France(82%),with the lowest percentage in Germany(70%likely due to the persistent prevalence of cash and invoicing payments in Germany).Among the small businesses that dont use integrated payments,they
23、report that it is because their software tools do not offer integrated payments or they do not know how to set up the integrated payments.Small businesses are dissatisfied with their existing financial service providers.SMBs in Europe rely on banks for 70%of external financing(versus 40%in the US),a
24、lthough there is an estimated 400B bank loan funding gap.Not surprisingly,the main challenge European SMBs cite regarding their finances is obtaining 75%of small businesses in Europe have their method of payment acceptance integrated with one or more of their software tools75%would prefer to consoli
25、date to a few trusted vendors or a single vendorIs your payments solution(how you accept payments from your customers)currently integrated with one or more of your software tools?Total EuropeN=1,0160%20%40%60%80%100%Dont knowNoYes17%8%75%5business loans,with reconciliation and accounting and dealing
26、 with multiple service providers to manage funds,pay bills,and collect payments close behind.Sixty-two percent of small businesses in Europe are willing to pay more for faster access to working capital(small businesses in France being the most willing,with 69%willing to pay for faster access).Small
27、businesses would value financial services from their software providers.Fifty-three percent of small businesses report being very likely or extremely likely to consider banking services(e.g.,deposits,withdrawals,bill pay,and transaction tracking)if offered by their software vendor.When asked what is
28、 most important to them when considering a vendor for financial services,the top three responses were ease of use,trusted brand,and integrated with existing systems.Cost,customer service,and fee transparency were the least important.Software vendors can leverage existing relationships with SMBs and
29、past data to provide personalized financial services along with familiar,easy-to-use experiences.These priorities,combined with the insights above,paint a strong picture that software vendors are uniquely positioned to improve customer experiences and deliver significant value with embedded finance.
30、1234/5PayrollInsuranceForeign exchangeBanking services(deposits,withdraw funds,pay bills,and track transactionsBusiness loanBusiness credit card8%12%15%8%10%18%9%9%15%11%11%14%30%33%34%31%30%28%53%45%36%50%49%40%Not likely at allExtremely likelyTotal EuropeN=1,016If your cloud-based or software-as-a
31、-service tool offered any of the following financial services,how likely is it that you would consider those services?6The evolution opportunity for software companiesIn the early days of software as a service,subscription revenue alone was compelling.Recurring,high-margin subscription revenue was a
32、n investors dream.But as the SaaS industry became more competitive,software companies needed ways to differentiate and increase customer value:they needed to evolve beyond SaaS 1.0.To diversify revenue streams,ambitious companies looked to payment facilitation.Now,most platforms have evolved to SaaS
33、 2.0,complementing recurring subscription revenue with revenue share or transaction fees on integrated payments.The next stage of evolution for software companiesSaaS 3.0is embedded financial services.By offering banking services like lending,software companies can deliver better experiences than tr
34、aditional banks and move toward offering a true one-stop shop to small business customers.They can also unlock powerful new sources of revenue by charging additional fees or capturing interchange revenue,a fee that accompanies card transactions.In fact,it is estimated that software companies can inc
35、rease their revenue 25x with embedded financial services.7Integrated payments are table stakes.Given the prevalence of integrated payments40%of top software companies across the UK,France,Germany,and the Netherlands offer some form of payment facilitationambitious software companies must have integr
36、ated payments on their roadmap(if they dont offer them already).Software providers that serve specific industry verticals are especially primed to benefit from offering integrated payments.Vertical software tends to have a“winner-takes-all”dynamic,in which the software provider that best serves the
37、needs of an industry can become the dominant solution and solve multiple business needs for an organization.Horizontal software solutions that serve a wide range of industries will likely have a strong integrated payments use case if they support functions that offer functionality proximal to paymen
38、t transactions(e.g.,accounting,CRM,website-building,ecommerce,or e-signature software).There is an opportunity to offer differentiated integrated payment experiences.Given the increasing rate at which software companies are integrating payments,payments experiences need to be differentiated,helping
39、customers get paid faster in more ways while also reducing the challenge of managing fraud and reconciliation.Differentiated payments experiences are end to end,including streamlined onboarding,powerful reporting and analytics tools,flexible payment methods,dispute and refund management,and quick ac
40、cess to funds.Software platforms can lose customers to other providers if they have lengthy,cumbersome setup processes for integrated payments,do not support the range of payment methods their customers need to accept payments,and make it hard to manage the challenges of fraud and accounting.Platfor
41、ms can further differentiate with value-added services,like recurring payments,invoicing,alternative payment methods,including“buy now,pay later,”and digital wallets like Apple Pay and Google Pay.Software companies must choose a payments partner that will enable these differentiated experiences on a
42、 global scale.Having a one-stop-shop solution for SMBs is driving this shift towards facilitating payments and offering financial services.The management system has to be core,with new features being built around it or integrated with it.Animesh Chowdhury CTO Goodtill by SumUp“Partnering with Stripe
43、 has allowed us to make a meaningful impact on small businesses by reducing payment times and helping the small business economy grow at an even faster pace.Julian Keenaghan CTO Xero“8Software companies can edge out the competition with embedded financial services.Edgar,Dunn&Company found that 73%of
44、 platforms in Europe have plans to offer financial services within the next two years,with 18%planning to within the next 12 months.The main motivations are increasing customer demand and accelerating new revenue streams.Even more so than integrated payments,there is a first mover advantage with emb
45、edded financial services.Although small businesses might be likely to have multiple ways to accept payments,that is far less likely the case with vendors for banking and loans.Further,the software vendor that becomes the“operating hub”for the small businessproviding an all-in-all solution that inclu
46、des the SMBs payments and financial operationsis unlikely to get unseated.For those software platforms that havent yet considered embedded financial services,the time is now.If you can fix your customers pain points with technology,you have the foundations of a scalable business.By partnering with S
47、tripe,our customers are able to set up and accept payments within a couple of minutes.Our largest restaurant chains have been able to go from zero to a world-class online ordering and payments solution in days.Conor McCarthy CEO Flipdish“We think,What is creative work?and What is admin work?for our
48、customers.We believe that all administrative work should be completely automated so that hoteliers can just think about creative work that adds value to their guests.Thats why we got into embedded finance.Richard Valtr Founder Mews“9To learn more,visit Stripe for Platforms or reach out to us at The
49、bottom line Most software companies have already integrated payments into their product offerings,helping growth-oriented SMBs streamline operations and consolidate vendors.But forward-looking software providers are also adding financial services to evolve into complete one-stop shops for small busi
50、nesses.With integrated payments and embedded financial services,software companies can become indispensable to their customers and also unlock powerful growth opportunities.As software companies consider their roadmap plans for the year ahead,they should prioritise embedded payments and financial se
51、rvices.How Stripe can help Stripe empowers software businesses and platforms to build and scale integrated payments and embedded financial services with less overhead and more opportunities for growth.Stripe abstracts away the complexity of payment facilitation so companies can get to market faster
52、and expand to new markets with lower up-front and ongoing costs.With Stripe,software businesses can offer more than 40 local payment methods and support subscription and in-person payments with Stripe Billing and Terminal.Stripes banking-as-a-service APIswhich include Stripe Issuing,Capital,and Trea
53、surylet any business,from fintech startups to established platforms,embed financial services directly into its existing software.10AppendixTotal EuropeUKFranceGermanyNetherlandsN=1,016N=250N=260N=255N=2510%10%20%30%40%5%11%19%30%18%17%4%10%15%33%18%20%3%11%16%33%18%18%3%10%22%26%19%20%9%15%22%25%18%
54、11%12-1011--1,000More than 1,000Total EuropeUKFranceGermanyNetherlandsN=1,016N=250N=260N=255N=2510%10%5%15%20%25%21%12%12%13%10%16%1520%15%10%15%8%16%16%23%10%12%14%8%17%15%20%12%13%13%10%16%16%22%12%14%10%15%16%12%Less than$400,000$400,000 to$799,000$800,000 to$1,499,999$1,500,000 to$7,9
55、99,999$8,000,000 to$15,999,999$16,000,000 to$80,000,000More than$80,000,000Total EuropeUKFranceGermanyNetherlandsN=1,016N=250N=260N=255N=2510%10%5%15%20%25%1%8%7%14%9%8%10%11%16%15%2%3%14%17%7%6%13%11%12%15%2%10%5%15%6%8%10%12%19%14%1%5%7%11%6%11%13%11%21%15%1%14%4%16%16%5%4%9%14%17%Agriculture and
56、Food ProcessingCommunication and Information TechnologyEducationFinancial Services and ConsultingHospitality,Entertainment and TransportInformation TechnologyManufacturing and constructionReal EstateWholesale and retail tradeOtherHow many employees does your business have today?How much revenue has your business generated over the last 12 months?In which sector does your business operate?