Embedded payment tools make inroads

Dive Brief:

• PayPal Holdings is partnering with Rainforest, the Atlanta-based embedded payment company, to provide its payment services to Rainforest’s software platform users, PayPal said in a Wednesday press release.
• As part of the partnership, Rainforest’s clients can allow merchants to receive payments via PayPal, Venmo and PayPal’s buy now, pay later services, according to the press release.
• The PayPal-Rainforest collaboration aims to speed up payments, reduce late payments and trim the time businesses spend following up on unpaid invoices, per the press release. The tie-up is also aimed at helping “software platforms shift more processing volume away from offline payment methods like cash and checks,” the release said.

Dive Insight:

In the past, software companies have had to integrate multiple tools to facilitate various payment methods. But with Rainforest’s PayPal integration, software companies can use PayPal’s service to bypass the need for a patchwork of payment systems. 

“Vertical software is a strategic growth area for PayPal as more commerce moves directly into software,” Taira Hall, senior vice president and head of SMB commercial at PayPal, said in the release. The tie-up will allow for software that’s streamlined, scalable, and purpose-built.”

The PayPal partnership follows Rainforest’s recent fundraising ramp-up.

After raising nearly $12 million in seed funding in 2023, the company raised $20 million the following year, according to the company’s previous press releases. Last September, Rainforest brought in another $29 million from investors to hire more employees, expand into Canada and develop new products, the company said in a separate release. 

Meanwhile, PayPal’s deal with Rainforest comes as the digital payment giant remains at a crossroads.

Earlier this month, the company appointed former HP CEO Enrique Lores as its new chief executive, a move he made after serving on PayPal’s board for five years. This week, Bloomberg News reported that fellow fintech firm Stripe is weighing whether to buy PayPal or at least parts of it. Stripe declined to comment on the report.

Embedded finance is poised to surge as multiple players integrate financial services, such as payment processing and lending, into a variety of new mobile applications, executives on a panel hosted by Cross River Bank said Thursday.

“Embedded finance will explode in daily life experiences,” Adam Goller, head of fintech banking, said in leading a virtual discussion on predictions for the coming year. “That could be social media apps, it could be things that we utilize while we're driving – any app that we’re using on a regular basis will become where we do our finance activities.”

Embedded finance also helps brands in “meeting the customer where they’re doing their finances,” said Noah Cooper, the bank’s chief investment officer.

“So it creates this really nice mutual stickiness, where the lender, the platform and the brand are all acquiring the customer once, and not acquiring the customer at disparate times,” he said.

In other areas, the executives predicted that more fintechs are likely to apply for banking charters as President Donald Trump’s administration seeks to encourage financial innovation with leaner regulation. 

Multiple companies –  including Affirm Holdings, Checkout.com, Fiserv, PayPal Holdings and Stripe – have sought bank charters over the past two years, including applications within the past two months from Affirm and PayPal.

However, the movement of fintechs that want to become banks isn’t “rampant,” said Hillel Olivestone, Cross River’s chief strategy officer.

“It really depends on the type of situation, what you're looking to achieve,” he said of companies considering one of the various banking charters. “It’s not a one-size-fits-all. The regulators are not going to accept every single company to be a bank, and just because you want to become one doesn't mean you’re going to get the approval.”

Cross River, based in Fort Lee, New Jersey, is an FDIC-insured bank that works with a variety of financial tech companies including Affirm, Stripe and Coinbase, the cryptocurrency platform.

The executives also predicted that agentic finance will spread more into the consumer world to provide guidance on personal finance, such as identifying interest-bearing accounts, credit card payment scheduling and financial product recommendations.

The executives also saw more digital tokenization of financial assets but a continued slower pace for consumer adoption of stablecoins.

The lack of consumer use cases for cryptocurrencies and blockchains have hobbled wider adoption of those technologies, said Benjamin Melnicki, the bank’s chief risk and compliance officer.

“One of the challenges that we face as a marketplace is in the user interface and user experience,” he said. “With traditional financial services, when something goes wrong, you pick up the phone and call customer service. I think we're getting there.”

When there’s a problem in digital asset technology, Melnicki said, “it’s immutable, it’s irreversible. And I think that’s a friction point to a lot of the adoption.”

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Dive Brief:

• Capital One Financial said Thursday it will buy the tech startup Brex for $5.15 billion in cash and stock, giving the bank an established financial technology company that integrates cards, payments and banking in a single offering.
• “Since our founding, we set out to build a payments company at the frontier of the technology revolution,” Capital One CEO Richard Fairbank said in a Thursday press release. “Acquiring Brex accelerates this journey, especially in the business payments marketplace.”
• Brex CEO and co-founder Pedro Franceschi will continue to lead the company after the deal closes, which is expected in mid-2026, Capital One said.

Dive Insight:

McLean, Virginia-based Capital One completed its $35.3 billion acquisition of Discover Financial last May, becoming the largest U.S. card issuer. Capital One is the sixth-largest U.S. bank by assets, according to the Federal Reserve’s most recent commercial bank data.

Beyond the corporate cards business, Brex’s technology automates expense management and “leverages AI agents to help customers automate complex workflows” that reduce manual reviews, Capital One said in the press release.

Brex competes with several fintech startups that overlap in some areas of spend management, payments, accounting and automation. The rivals include Ramp, Mercury Technologies and Expensify.

Brex oversees about $13 billion in customer deposits at partner banks and money market funds, The Wall Street Journal reported.

The sale price is nearly 60% below Brex’s $12.3 billion valuation in 2021, according to data compiled by PitchBook. The deal calls for Brex shareholders to receive $2.75 billion in cash and 10.6 million Capital One shares, the bank said Thursday in a regulatory filing.

Joining Capital One will help San Francisco-based Brex “supercharge our next chapter,” Franceschi said in the press release. 

Franceschi and Henrique Dubugras founded the company in 2017 to issue corporate credit cards to startups, along with a tech platform that manages employee travel and other expenses, along with payments. 

The company has expanded from serving small customers to larger corporate clients – including Anthropic, DoorDash and Zoom Communications – and says about 25,000 companies use its products.

“They found a working formula for innovating on corporate cards, expense automation and embedded payments, and now Capital One wants to bring that into its own stack to better serve its existing customers,” PitchBook senior analyst Rudy Yang said Thursday in the company’s report on the deal.

Brex has raised $1.7 billion across 14 funding rounds, according to Crunchbase data. Investors include Kleiner Perkins, Ribbit Capital, Lone Pipe Capital and PayPal Holdings co-founders Max Levchin and Peter Thiel.

Dive Brief:

• Card networks Visa and Mastercard both expect development of digital identity tools to take center stage this year, the companies said in separate online posts last month. Verifying identities has become crucial in allowing consumers and businesses to make payments, and avoid fraud, at a time when artificial intelligence is transforming commerce, they explained.
• Payments technology and software firm ACI Worldwide predicted last month that real-time payments, along with mobile wallets and new digital asset rails, will get more traction this year as they offer a channel to draw more individuals into the financial system.
• Fleet services provider Wex sees embedded payments gathering momentum this year, particularly for business-to-business payments, according to its forecast last month. It pointed to a projection from consulting firm Bain that heralded $7 trillion in embedded payments volume for 2026, for a more than two-fold increase over the past five years, according to the report.

Dive Insight:

Many companies in the payments sphere have pointed to AI, stablecoins and agentic commerce as key themes this year for the industry, but there are a number of other trends picking up speed. That’s due mainly to the dramatic impact of new technology in the payments arena in recent years that have changed consumers’ digital habits and forced regulators to catch up to the changes. 

Visa, and its no. 2 rival Mastercard, are particularly focused on how to guard legitimate payments in the new AI age, and fend off fraudulent transactions. It won’t be easy.

“2026 will, unfortunately, see a material increase in the sophistication and volume of these AI powered identity attacks,” Visa Group President Oliver Jenkyn said in the company’s Dec. 15 post. “This escalation will herald a new AI battle for identity with increased investment, focus and partnership.”

Mastercard is also preparing for agentic commerce in which computerized bots, or agents, shop on behalf of consumers, and maybe even make payments. “The industry is focused on how to identify that an agent is legitimate, how to strengthen authentication with agents and reduce fraud, and how to capture intent in case an AI transaction goes awry,” Mastercard said in its Dec. 3 post regarding 2026 trends. 

Agents involved in this type of commerce will rely on Mastercard’s tokenization technology, as do digital wallets, the network’s chief digital officer, Pablo Fourez, said in an interview last month.

“Mastercard tokens will provide [the agents] access, and they then agree to work with us to make this transaction secure,” Fourez explained. “One of the things that happens is, then, when they're accessing a merchant site, they can identify themselves to the merchant.”

Payments generally are happening at a faster pace, thanks to speedier digital rails.

Since the roll-out of real-time payments in the U.S. by The Clearing House and the Federal Reserve over the past decade, banks have slowly begun to offer such services to consumers and businesses. But the availability of such instant payments could pick up this year, said Philip Bruno, ACI’s chief strategy and growth officer.

“I think we're going to see more adoption [of real-time payments] next year, and I think that adoption will be at an increasing pace,” Bruno said during an interview last month. 

He cited the arrival of more use cases for real-time payments as a driver for that growth, specifically noting the Treasury Department’s decision in October to use the method for delivery of some Federal Emergency Management Agency distributions.

Meanwhile, Wex is focused on how businesses, like consumers, will increasingly rely on payments almost invisibly tucked into their daily routines.

“We’ve all experienced embedded payments in our personal lives — booking a ride, ordering takeout, or paying a subscription without ever leaving the app,” the company said in its list of 2026 trends to watch. “That same expectation is coming to B2B.”