Software companies have been moving into the payments space over the last few years in a major way. A number of vertical software companies have embedded payments functionality into their solutions – creating a better experience for end-users, businesses and their customers – and are capturing economics in the process. Other software companies have built payments solutions addressing vertical specific pain points. In doing so, they have been able to take market share from generic horizontal providers and open greenfield opportunities.
Catalyst has a wealth of experience backing businesses in this space (MindBody, ChowNow, Weave, and WeddingWire, among others). We believe we will see this trend continue to accelerate for years to come and are eager to partner with more of these businesses seeking growth equity capital.
At Catalyst, we employ a proactive, research-based approach to investing, targeting sectors experiencing outstanding growth. If you are an owner, operator or investor in a growth stage Vertical Payments Software company, we would like to hear from you. Please send inquiries and business plans to email@example.com & firstname.lastname@example.org.
(1) Boston Consulting Group’s “Global Payments: The Interactive Edition.
(2) Source: Company flings for Square and Adyen; Stripe processing volume are estimated.
Integration and is
• The Payment Facilitator (“PayFac”) model, whereby a software business
accepts payments on a payments company’s behalf, has proven to be an
efficient and profitable model for acquiring merchants
• PayFac providers are quickly taking market share from traditional
merchant acquirers (e.g., Global Payments, First Data)
• Merchant demand for payments functionality integrated into their
software solutions has led to software companies rapidly taking
payments market share from traditional merchant acquirers
• By 2027, software companies are expected to capture $154bn of
payment revenue, over half of the total market(1)
2016 2017 2018
Annual PayFac Payments Volume ($bn)(2)
Square Stripe Adyen
CRM Accounting POS
Software companies are becoming payments companies
Vertical Payments Software
Payments Are Going Vertical
• Workflows: Similar to pure SaaS, payment processing software solutions that are vertically tailored offer a better end-user
experience and are purpose built with features that integrate with industry specific workflows
• Vendor Consolidation: Bundling payments into business software offers merchants “one throat to choke”
• Regulation: Regulated industries (e.g. healthcare with HIPAA) and / or those that involve insurance or government pay (e.g.,
education, auto, healthcare) are better served by vertically tailored payment software as opposed to generic, horizontal offerings
• Analytics: Integrating payments into business software enables merchants to more easily gather valuable insights
• Business Software with Integrated Payments: Business management (e.g. MindBody), online checkout (e.g. Shopify), and POS (e.g.
Toast) software vendors
• Payments Software for Regulated Industries: Payments software for industries that are highly regulated (e.g., AxiaMed in
Healthcare) or that involve insurance or government pay (e.g., nCourt for government pay, HigherOne for education)
• Vertical Platform Roll-Ups: Sponsor-backed platforms who acquire integrated software / payments businesses in niche verticals (e.g.,
Fullsteam / Aquiline, Ministry Brands / Providence Equity)
• Economics: Bundling payments with software greatly increases revenue per customer, massively increasing TAM
• Higher NPS, Lower Churn: Offering multiple products to a single customer often increases NPS and lowers churn
• Efficient Distribution: A vertically tailored go-to-market makes a bundled payments sale more efficient and lowers CAC
Vertical Payments Software Market Map
Legacy Payments Processors Next Gen Payments Platforms
Travel & Hospitality
HealthcareCommerce & Retail
Please send any inquiries to email@example.com