1055. Insights: What happens when embedded finance grows up? With Pleo and Mastercard

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1:58Hello and welcome to Fintech Insider Insights. I'm Benjamin Ensor, Director of Research and Strategy at 11FS. Back in December, we explored how embedded finance helps small businesses gain control and visibility over their finances. If you heard that episode, great, because we'll be building on a few of the themes we covered there. But if you didn't, don't worry, you don't need it to follow along. But if you enjoy this one, we do recommend going back afterwards. It's episode 1022. So in this episode, in partnership with Plio, we're taking the next step and asking what happens when embedded finance stops being an add-on and starts becoming core infrastructure.

2:35To help me unpack this, I'm joined by two great guests. First of all, we have Yepe Rindam, co-founder and chief executive at Plio. It's great to welcome you back onto the podcast, Yepe. For those listening who might not know, can you tell us a little bit about Plio and why you started the business? Absolutely, and great to be back in the show. Yeah, so with Pleo, we've actually been around now for 10, 11 years. Before Pleo, I used to be a CFO of a growing business. And I was just incredibly frustrated about enabling the business to buy all the things they needed to work, no matter if that was subscriptions or travel or hardware.

3:18it caused an enormous complexity in the business on how to buy it, which carts to use, what to do with the receipts. And for me in the finance team, I just completely lost track of what was going on in the business and spent way too much time on manual processes. So that's essentially what we decided to solve with Pleo. So Pleo is the product you need as a small or mid-sized business to have good controls around who's buying what, have full visibility in real time in what's being purchased and having incredible processes where most of things, collecting the receipts, categorizing it, applying a cost center and so on, happens absolutely automatically and connects directly with your accounting system.

4:05So with GLEO, we serve more than 40 ,000 businesses in Europe now, smaller businesses and up to a few thousand employees is where we have our focus. Fabulous. Thank you. I'm also delighted to welcome Tulsi Narayan, Executive Vice President of Commercial and New Payment Flows Europe at MasterCard. I'm going to hazard a guess that all of our listeners have actually heard of MasterCard. But Tulsi, perhaps you can tell us a little bit more about your role there. Super. I'm very excited to join you, Yepe, on this very critical topic and key movement that we see. So taking a step back, in MasterCard, about two years ago, we brought together our commercial card proposition, whether it's a physical card, the virtual card program, our tools that we use around the account payable, account receivable side, our cross-border business, both the remittance disbursement capabilities into one business unit.

5:06And I lead that business unit for Europe. And really the focus is on delivering seamless payments into the supply chain, making business transactions more digital. And what my team really does is deliver a host of innovative solutions into the market and working with a number of partners to drive up adoption and usage. And at the core of this is one simple idea. You know, payment tools, you know, they can't sit in isolation. They need to be embedded into the point of need and to enable that seamless business process because payments are an enabler to a business process. It's not an end in itself.

5:52So really, the core purpose is to work with ecosystem partners, like we have done in the past, to bring some of these innovative solutions into the B2B space and drive up usage and adoption. Fantastic. Thank you. Well, welcome to you both. So let's get started. And where we'd like to start is let's explore a little bit about what happens when embedded finance stops being a sort of optional, nice to have, when it moves from something that improves the experience to something that businesses depend on, something that becomes sort of a crucial part of their processes. So, Jepai, I'd love to start with you.

6:34I mean, to what point did you start feeling that the embedded services that you were delivering to small businesses were shifting from something that customers were sort of trying out to something that was becoming sort of fundamental to how they were running their businesses, something they were relying on every day? Did that happen sort of for the customers as a whole or does it sort of, is it something that happens with each customer as you bring them on? They hit a point where you're like, aha, now they get it. Yeah, it's a good question. I think these types of changes are very led from how we act in our consumer lives.

7:14And I think as consumers for a while, we've been used to having, you could say, financial services available wherever we go. So, you know, it used to be so that we needed to go into a bank physically or, you know, we needed to go into a bank virtually to do any financial service. But over the past, let's say, 10, 15 years, we've been used to financial services being on our mobile phones. We can wire money to our friends on the go. We can buy stuff, tap our phones and so on. And when you start getting used to that, you tend to also want similar experiences in a business context. And I think that's why we've seen a lot of change in the demand for embedded finance, because our customers, they also expect that they can do financial stuff in their current workflows in their business lives.

8:05And that's sometimes, you know, dealing with stuff on the go from a phone, or it could be, you know, issuing a card or approving a purchase or paying an invoice within an accounting system. I think it's very led by how easy things are as consumers. We now expect the same in a business context. And that's no matter the country, really, no matter the size of business, this is really what people want. Thank you. What sort of takes your customers by surprise? Do you ever find that they have sort of expectations when they first become a client and then actually gradually as they start making more and more use of Plio, more and more use of sort of embedded finance, that they're sort of taking surprise, surprise.

8:54There are things they're sort of underestimated or didn't expect. Do you find your customers are surprised ever? I think the first thing that comes to mind here is they're often surprised how easy it is. Particularly businesses that have been around for a while, they are sometimes used to installing software and changing processes as being something you need to plan for and something you need to hand carry. With Playo, you really can get started in principle just a few hours. We issue cards on the go on your phone. You don't need to wait for them to arrive by email. well, setting up your governance and your accounting integrations is just incredibly easy.

9:39And you don't really need any support in doing that. And if you do, you know, we have people around to help you. It is super easy to do it. And then I think the second piece that comes to mind is that, yes, you know, we help you save time, we help you be compliant, we help you collect your documentation and do all of that. But there are also advantages in being a part of a product with 40 ,000 other businesses. So we would, for example, help you benchmark your spending against the norm. We have AI-generated spend guidelines and we check each purchase, whether they seem reasonable or whether they seem too expensive or whether they are in breach with your policies.

10:23and we can only do that because you're with a group of other customers and we know exactly what's reasonable in each situation. Tulsi, there's a sort of paradox here in the sense that as finance gets embedded, it becomes sort of easier and easier for the customer and you can get to the point, you know, where as a consumer, actually particularly with embedded payments where you almost take it for granted, it just works, it just happens in the background and yet the paradox is it's actually of course incredibly complex and there's a huge amount of work going into making those payments flow particularly when they're cross-border payments particularly when you know they're complex payments and so on how much of a challenge is that that you've got you know on the one hand this this sort of delightful simplicity that's being delivered to customers but on the other hand there's actually quite substantial complexity in the background, you know, making sure that the payments are in fact secure, that there's no fraud and all of the complex processes that actually happen in the background.

11:25So firstly, if I think about where embedded payments, you know, where they started and where they're going, often, you know, they get platforms going to embedded payments thinking I'm solving for a single use case, I'm going to just embed it. And, you know, it's like a technical integration, which fundamentally there is a technical integration, yes, but there is a lot around payments. And that's where I'd just like to dig a little on that complexity piece, because payments is an end-to-end service, right? So there are operational things and, Yepe, you alluded to some of them, you know, there is a service element to it, there's a compliance element to it, there's a fraud element to it.

12:05All of those things need to be thought about when you think about embedding payments. That's one. Or even, and when you think about B2B, they're often very complex, like you said, because there are multiple parties, they're often cross-border, you know, there are effects aspects related to it, and there are multi-jurisdiction regulations attached to it as well. That's why when, you know, the successful embedded payments cases are where they've thought about scale, they've thought about what needs to be, We're prepared for scale and resilience at the start rather than just a technical integration.

12:42So when a player gets into it, you need to think about it more holistically, I would say. And to your point around the consumerization, that's what we want to drive. If you think about consumer payments, the trust element, the payment element is there. It's not that it disappears. It's just in the background. You expect the payment to get you to the end outcome. You don't want to worry about the payment. You just have the trust that the setup with the partner, the platform will make sure that money goes from A to B to serve the purpose, right? Whether it's cross-border or domestic, you know, that just happens.

13:20And that is where we want to get embedded payments to, because that drives up usage and ease of, you know, the easier it is to use, you know, that drives up better usage, more use cases come up and that drives up better adoption. Right now, you know, we are coming from a world of fragmentation, legacy systems. I think embedded payments, and I've been in payments for 20 odd years, mostly in commercial payments. This is a big step change in terms of how that experience is going through a big shift. Having the right partners, embedding payments into the business flow so that trust is there, but it's seamless, you know.

14:04And you don't worry about the payment that happens. It gets you from A to B. So that's where we want the ecosystem to be. I really like that point you make about firms or sort of businesses starting often with a single use case and then maybe gradually discovering far more benefits than they perhaps initially imagined. Yephei, have you seen that? Have you seen a sort of shift in the things that are driving customers to sort of talk to you, to look, to try and get more things embedded into their other platforms and systems. Has that changed over time or is it still the kind of same motivations?

14:47I think certain things have changed over time. I think the one thing that often comes as a surprise to our customers is they see the benefits of our product, but they almost predict that they're going to use it in the same way as they did prior to this product. So as an example, they would have most purchasing done by the management team or maybe someone in the responsibility of procurement. And then they adopt our product and they see both on one side how easy it is to enable more people to buy, but also how safe it is and how transparent it is. And then suddenly fast forward one year after, there are five times as many in the company that actually are equipped with a way to buy stuff, no matter if it's owning a subscription or buying tools online or going to a company event, and then they do that on a company card instead of paying out of pocket.

15:50So, and the benefit of that is, of course, the process, but the benefit is really also that employees feel really appreciated by not having to pay out of park and not having to go through these manual processes, but being trusted with company money and relieved from the pain of expensing that I think we all know, right? Because we're all business people and it's a standing joke that no one wants to do the expense reports. But it comes across as a real benefit for the employees. That's really interesting, isn't it? Because in essence, that's about sort of delegating decision-making, you know, down in the organization and not controlling everything centrally.

16:28Do you see any differences between the sort of younger businesses that become your customers, you know, the sort of born digital businesses and maybe, you know, some more traditional firms, maybe family firms, maybe they've been around for 40 years? Yeah, we certainly do. And I think that the benefit of our product is you can go in the direction of a more enabling mindset and a more, let's say, trusted mindset where some of the younger companies, technology companies, and let's say fast-moving industries are probably in that camp. But the beauty of our product is you can actually also go in the other direction, which is you want to enforce more control and you want to enforce more rigor and be in the loop of what's going on instantly.

17:15So, you know, companies that have a slightly more conservative mindset or sometimes it's also North versus Southern Europe, you know, they use the product more to drive rigor, cost control, and these types of things. They being the northerners or the southerners? Typically the southerners, and then the northerners being slightly more on the trustful side, and the southerners being a bit more on the controlling side. Interesting. Tilsy, I want to come back to some of what you were talking about earlier. Go ahead. No, I was just going to give a quick data point to support that because we often see, you know, in SMEs also, some of the biggest withdrawal items are cash.

18:02And that's because, you know, they tend to give cash to their employees because there's no other way to control the spend per employee. So they've got to delegate the action, but they can't delegate the spend tool. And I think that's where, you know, Playo, for example, comes in with those sort of solutions that are fine-tuned to an SMB's mindset. So I think that's where, you know, we are, Payments by itself is getting innovated through all of these platforms that are answering these questions, which means that, again, you know, different tools get used more because it's enabled in these platforms, you know, with the right levels of control, data, reconciliation, all of that.

18:46And totally agree with Yuppe on that. Thank you. Tulsi, I wanted to come back to you on the thing you were talking about earlier about sort of some of the cross-border payments and some of the sort of larger enterprises and so on. So some of what we've been talking about is mostly in the context of smaller businesses. But of course, you know, the bulk of global transactions by value is actually sort of big, you know, big corporations, governments, and so on. Are you at MasterCard starting to see the same kind of benefits coming from larger corporations embracing embedded finance. It always feels to me that that's been slower for some good reasons and maybe some not so good reasons, that actually small businesses have been much faster to adopt embedded finance than larger corporations.

19:33Is that what you're seeing, Tulsi? Very much so, because, you know, the larger corporations have a lot of systems already in place that are legacy systems. Now, legacy systems optimize their workflow, right? but they don't necessarily do interconnectivity or enable that end-to-end. So you have monolithic systems that do one same thing really well, and they have business processes around it. But the moment you need to take things across, and when Yepe introduced why he got into this space, it really struck a chord because, you know, when you have to shift things between one system to another. So, for example, Europe is a really interesting case in that because our problem is not digitization.

20:17We are digitized, but it's fragmentation. So you have a lot of fragmentation in the process because there are a number of legacy systems optimizing one part of the flow. And where embedded payments, what happens now is there's a lot of manual workarounds. You know, there's, you generate invoice in one, you reconcile somewhere else, you know, somebody's chasing payments. Often that falls within the CFO's team and they are out doing that rather than really thinking, am I optimizing working capital for every single transaction that I'm taking out? You know, they do it for the big spend, but are they doing it everywhere?

20:53So, you know, that's what happens when data is siloed, processes are siloed. And whilst big organizations are working towards how do I harmonize across and have that end-to-end piece? And that's where, you know, payments getting embedded into the place where business processes happen so that there is a seamless flow of data, the reconciliation, the controls, the insights that come out of these things can be used. So you're not just optimizing your biggest transactions, you're optimizing everything that goes out of your, you know, that's going, that's in the account payable to the extent that you can.

21:34So the CFO, the account payable office becomes more empowered to take the right decisions. So legacy systems have those problems, where we see embedded payments making an even bigger impact in those organizations because actually there are a number of people who are chasing this, you know, the fact that this is so fragmented and picking up the pieces. There's manual workarounds that are there, etc. So we see a bigger impact with the bigger organizations, I would say, because they're shifting away from something to something new. So there's a bigger potential impact, bigger gains, bigger gains to be had.

22:12Yep, one of the things that always sort of strikes me here is that there's sort of two changes going on here. Because on the one hand, there's this shift from the sort of manual processes to the more automated processes, you know, which couldn't be as simple as shifting from cash to cards, but there's all sorts of shifts from manual to automated. But then there's this other shift of sort of fragmented to integrated, you know, by embedding payments and other services into platforms like accounting platforms, and invoicing platforms, as Tulsi was just saying. You know, you get all of these other benefits.

22:45Can you even separate the benefits that you get from sort of moving from manual to automated and standalone to embedded, or are they just too tightly integrated and actually the benefit comes from all of it together? Yeah, I think that's right. I think it is about the experience. You want this to be convenient. You want this to be smooth. And a part of that is, you know, that things are automated within Playoo or Playoo Mastercard, but the other part is you're not working in dual systems and need to shift one to the other and import and export and so on. So I think that really goes to the experience.

23:23And then I think there's been a little bit of a pull in the market as well, because when Tilti and I and Mastercard and Playoo, we go to market and we have conversations with some of these bigger players that want to embed Playwind MasterCard into their interfaces. Of course, that's because they want to bring better experiences to their customers. But it's really also because they see that this makes their products more sticky. Suddenly, they may come from a one-to-few delivery model to one-to-many. So it could be that their accounting system applies to three, four people in an accounting function.

24:03but then you embed Play One Mastercard into it and then suddenly it becomes a one to 30, 40, 50 people in the organization. So more reliability on their service, more dependability on their service. And then of course also an opportunity to grow revenues with us. So there's been a real pull in the market recently for embedding services like ours. And I also think in the world of AI, everyone is thinking about how can we build mode around our product? and delivering connected services, it just becomes more difficult to find alternatives if you are relying on multiple services within one world. Yeah, that makes complete sense.

24:46Okay, this has been great. So we'll take a quick pause here. In the second half, we will zoom out and look at what makes this work at an ecosystem level and why trust standards and partnerships are crucial. So stay tuned. Over 40 ,000 businesses across Europe trust Plio to manage their spending. Now, platforms like yours can offer Plio's capabilities, cards, spend controls, and real-time visibility directly to your SMB customers under your brand and integrated with your product. Plio Embedded allows platforms to unlock a new revenue stream quickly without building from scratch, Solve your customers' biggest admin headaches, become indispensable, and earn every time they spend.

25:34Visit embedded.plio.io to find out more. This episode is brought to you by Indeed. Stop waiting around for the perfect candidate. Instead, use Indeed Sponsored Jobs to find the right people with the right skills fast. It's a simple way to make sure your listing is the first candidate C. According to Indeed data, Sponsored Jobs have four times more applicants than non-sponsored jobs. So go build your dream team today with Indeed. Get a$75 sponsored job credit at indeed.com slash podcast. Terms and conditions apply.

26:09Welcome back to FinTech Insider. In the first half of this recording, we looked at how embedded finances move from a feature to more of a foundation for many businesses. So now we're going to explore a little bit more about what makes it viable at scale. So, Tilsey, we talked about sort of embedded finance sort of gradually becoming sort of infrastructure.

26:33Does trust start to shift at that point? Because, you know, maybe initially it's around, you know, it's around the brand. It's around sort of relationships with people. Does that shift towards, you know, APIs, systems, standards? does anything change as companies become more dependent on sort of embedded finance? It's a great point. And in terms of, you know, let me start with the trust question, right? So what we are trying to do as a scheme, as a network, is to get the payment as seamlessly embedded into the flow as possible with our trusted partners, right? because as I mentioned, you know, payments is quite complex when you think about it end to end.

27:20So there's no one player who can deliver it. And from a trust perspective, as we've seen in the consumer space as well, the trust doesn't disappear. It just, or not that it shifts, you know, it just goes into the background. So, you know, once its payments are executed correctly, you know, that trust becomes implicit. You just expect that the payments go. And for that, it's critical that you have the right partners in place to make sure that every aspect of it is taken care of and that payments are embedded at the right point with the right controls. You get the right data, all of those things.

28:00So once that happens, you know, when you have that implicit trust in the payments, it just becomes an enabler to you getting your business results. And that's where you need it because payments are not an end in itself. You know, it enables a business outcome. And that's where we want to get payments into with that implicit trust so that people can focus on the business aspect of it, not the payment execution aspect. That should happen in the background, in a seamless fashion, in the way that your business needs it. And that's why, again, emphasize, you know, having partners like Playo who understand what are the controls, what do we need to have around the payment mechanism to enable usage at the right time, at the right point.