1/ I talked to @mpmassaro and @mattcharris recently on @rebankpodcast about embedded finance and want to share some thoughts.

2/ @BainCapVC believes we’re in the midst of a platform shift that will be bigger than the Internet, Cloud and Mobile, representing $3.6 trillion in value creation.

3/ In Matt's view, the phase of fintech where you can win by digitizing traditional financial services is over, and by now the JP Morgan Chase app is pretty delightful.

4/ "What businesses and consumers, what end users more broadly in financial services are looking for is to buy payments, to buy loans, to buy insurance products through the software they use every day." - @mattcharris

Point of sale lending for sure. What else?

5/ Bain Capital Ventures estimates that 40% of US merchant payments volume will go through software companies within 10 years. Currently, that figure is 10%. What would have to change to go from 10% to 40%? It feels like we’d need to move to a different consumer paradigm.

6/ "If you go visit @Shopify, you would say, 'This is a great software company.' If you look at their P&L, you would say, 'This is a payments company.' It's a majority payments company by revenue. And payments is growing faster than the rest of the business.” - @mattcharris

7/ It’s interesting to think that 10-12 years ago, no one was investing in fintech. Today, anyone that owns Facebook, Shopify, Uber, Apple or Goldman Sachs is.

8/ Embedded credit (eg POS lending) creates positive selection: "People who believe in the first instance that they can afford a Peloton, even if they then go on to take a loan to pay for the Peloton, are the kind of customers you want.” - @mattcharris

9/ But lending is arguably not a good venture investment. According to Matt, you can’t fight the cyclicality of wholesale credit providers. Instead, build conduits between software companies that originate loan assets and forward thinking banks that understand the risk exposure.

10/ If @Kabbage was started again today, would it opt to launch as a conduit instead of a lender? Would it have exited for more or less?

11/ "If you combine payments and lending and insurance, in aggregate, they are more than an order of magnitude larger than the entire software industry. On a revenue basis, they're 12 times as big. And on a profit basis, they're nearly 20 times as big.” - @mattcharris

12/ When you embed financial services into your software, you realize that software is a delivery mechanism for the high value product, which is finance.

13/ If you’re @Shopify’s competitor and you don’t do payments, you’re going to get crushed because of the profit war chest Shopify is building by doing payments. The same is true across software verticals.