For too long, payments have been seen as a necessary evil—plagued by compliance headaches and operational friction, with little opportunity for revenue generation. Embedded finance is flipping that notion on its head, transforming payments into a strategic growth lever. Where payment solutions were once siloed, modern platforms now reconcile across product lines, powering the next generation of embedded finance use cases.
In a PaymentsJournal webinar, John MacIlwaine, CEO of Highnote, and Hugh Thomas, Lead Analyst of Commercial and Enterprise at Javelin Strategy & Research, explored how embedded payments represent a quantum leap for many businesses—and what to consider when choosing the right partner to support this transformation.
The Origins of Embedded Finance
Embedded finance started with large banks issuing credit cards, which required processing the cards and their transactions. As banks began outsourcing this processing to third-party providers, it laid the foundation for what we now call embedded finance. Some of the first embedded finance platforms focused on building a layer in front of these back-end legacy processors. This allowed other businesses to access processing capabilities from these early providers—marking the genesis of embedded finance.
These early systems were essentially wrappers or facades over core processing infrastructure. However, the limitations of those core systems didn’t foster true innovation; they merely enabled more accessible interaction with outdated technology.
“What we’re talking about now is unlocking a capability that goes above and beyond credit card processing—capabilities that previously were not possible,” said MacIlwaine. “It’s about AP invoice automation, embedded finance, and virtual card issuance. To do that, a lot of different platforms and innovations just on the infrastructure side needed to evolve.”
A Platform for Innovation
Legacy platforms revealed the potential of embedded finance but fell short of delivering on its promise. They simply weren’t designed to keep up with front-end innovation—they were designed to process transactions efficiently.
Modern platforms, like Highnote, take a different approach, offering end-to-end innovation through a unified architecture that natively integrates issuing, acquiring, and credit. This resonates with customers eager to move faster, try new things, and differentiate themselves. The ecosystem is moving at such a fast pace, and this wave of innovation is taking hold across multiple verticals.
“We’ve seen many cases where, as they scale, payments businesses run into problems if they don’t have a solid general ledger at the core,” said MacIlwaine. “Highnote wanted to avoid the common problems in reconciliation, settlement, and reporting. At the same time, we allowed them to address more than one payment method, more than one settlement window, more than one capability. All of this was done while still maintaining that transparency for our customers to know, at any point in time: what is the balance of my multiple accounts, what’s been authorized, what’s been settled, where is the money. You need to know where all these dollars are at any one point.”
Flexible Payments for Modern Fleets
Fleet issuing has become a compelling use case for embedded finance. Fleet businesses that issue fuel cards are disrupting legacy infrastructure and increasingly require the features that modern platforms provide. These businesses need access to in-depth Level 2 and Level 3 data, which enables them to offer targeted discounts and incentives across their networks.
“We all probably thought this was a pretty simple transaction—you pull up to the station and fill your tank—but as these fleet businesses emerge and compete, there are advanced capabilities that require more of a platform and product support,” said MacIlwaine. “Having the proper platform in stream during the authorization allows for questions about such things as whether this the right truck driver or the right amount of fuel.”
Fraud controls are also critical in the fleet space. Fuel cards are often used to fill unauthorized vehicles, so putting controls in place has allowed these businesses to operate more efficiently.
Fleet providers may also offer corporate expense cards for employees or disbursement cards for truck drivers. The power of a strong embedded payment platform is the ability to leverage multiple program types in a way that doesn’t require separate onboarding, integrations, or operational processes for reporting.
Enabling Innovation
Embedded payments provide benefits that were traditionally either non-existent or complicated and expensive to implement through a bank. They highlight that an embedded platform is not vertical-specific but a horizontal platform with enabling capabilities. This allows customers, regardless of their industry or competitive focus, to leverage the platform’s capabilities in ways that make the most sense for them.
“Embedding cards that plug into the payable processes, and to the particular cash management processes of a given organization, is huge,” said Thomas. “The notion that you can look at the solution and be able to say, ‘Does this give me $20,000 more working capital a day?’ That’s huge.”
Under the legacy infrastructure, customer had to go back to the provider to request data exposure or tweaks to an API if it wasn’t functioning as needed. Highnote offers a platform that allows for that innovation, enabling customers to drive change and move fast.
While there are platforms capable of issuing and acquiring, the real challenge is doing so in a way that brings tangible benefits to customers. Achieving this requires a unified platform that significantly reduces acquiring fees and enables real-time settlement.
Highnote doesn’t need to wait three days for acquired funds to pass through different payment rails to reach a final settled state. Instead, they journal the funds from the issuing account to the acquiring account and make them immediately available to customers.
Future-Proofing Innovations
Modern platforms are crucial because they focus on the abstraction of creating systems that can evolve, regardless of what the future holds. This concept is often referred to as future-proofing.
“Maybe five years ago we weren’t even thinking about trying to support a stablecoin or digital currency,” said MacIlwaine. “But we didn’t have to pivot or rewrite in order to do that, because our general ledger was developed in a way that it doesn’t matter if it’s stablecoin or fiat. That’s the reason for the abstraction around the general ledger. We can embrace these new capabilities for the future.”
By not relying on third parties to handle these features, Highnote provides its customers with a canvas to innovate, grow, and leverage both current and future technologies. It doesn’t start with the technology or the goal of leveraging digital currencies; instead the key question is: what is the business benefit? With digital currencies, it’s real-time settlement and access to capital that are driving adoption.
Opening Up the Possibilities
Not all companies will adopt embedded finance, but any company involved in selling products or engaging in commerce is inherently connected to financial transactions. This connection provides an opportunity to embed further into the customer journey and solidify those relationships.
Financial service providers will be keen to integrate into payment processes like these. They can support experimentation in this space through rebates or upfront help. Business should not hesitate to lean heavily on them, embedding these capabilities into RFPs for financial services products, particularly in payments.
“It’s important to have a partner that doesn’t dictate that strategy based on their limited capabilities, but rather partners in a way that opens up possibilities and helps to enable growth,” said MacIlwaine. “Now the tables have turned where the opportunity to generate revenue to provide much better customer engagement and customer value by extending into embedded finance opportunities.”
