Evolving SMB demands drive embedded fintech and all-in-one solutions

Behind the Paycheck
Evolving SMB demands drive embedded fintech and all-in-one solutions

New research on key trends for embedded fintech and payroll.

In spite of recent economic conditions, vertical SaaS remains the darling of the software world. SMB customer demand for embedded fintech in all-in-one solutions continues to drive this evolution forward.

For SaaS platforms serving SMBs, keeping up with these changes can take time and effort. But, to stay competitive during these times — adding value for existing customers while growing your customer base — it’s vital to understand the attributes driving customer decisions.

To help SMB platforms businesses understand the characteristics that create value and drive spending for embedded payroll and fintech strategies, Gusto partnered with Qualtrics to survey 400+ small- to mid-size businesses — plus interviewed 30 business owners to understand their challenges and pain points. The goal was to understand the following:

  • What do SMBs look for in bundled solutions (i.e. all-in-one)?
  • How loyal are customers to their existing payroll providers?
  • What do budgets look like across the business process application spectrum?

Download the report. Evolving SaaS Environments: Are You Ready for All-in-One?

Three Key Trends:

A majority of SMBs (70%) are looking to switch to more integrated solutions. 

In our survey, 94% of the respondents are very satisfied or somewhat satisfied with their current payroll and HR solutions. However, 70% of respondents said they are somewhat or very likely to switch to new software. So why are customers willing to change?

  • They want one system of record to simplify management and billing.
  • They want embedded solutions from providers that know their industry.

“Because I believe software created by people in my line of work will be most effective for my business.”Gusto Embedded Survey Participant

SMBs want reliable, all-in-one solutions created by experts in their industry.

SaaS customers want multi-platform products that solve many business operations and financial service needs. SMBs care most about reliability when it comes to payroll and HR, followed closely by industry expertise, ease of use, price, and integration with other apps are also top of mind. 

The data shows variations by vertical industry. For example, food and beverage respondents consider reliability and ease of use relatively more critical, while personal services and fitness value industry expertise, integrations, and payroll expertise more.

The report goes into greater depth in several industries as well as by size of company. For example, smaller businesses tend to want more tailored solutions because they have fewer resources to dedicate to customizing and integrating horizontal platforms.

Customers are willing to pay for additional embedded services.

For SMBs, budgeting for software is critical to running a successful business. These applications do the heavy lifting for many of their business processes. Our survey participants showed a wide range of total spend from $1,000 to $3,000 annually.

As you can see by the following chart, POS and Accounting have the highest annual spend, with the rest of the business process apps coming in around the same annual cost for SMBs.

So why should you have a roadmap focused on offering embedded fintech in all-in-one solutions?

When you look at these trends in aggregate, you can see the opportunities that embedded financial services, including payroll, can offer. Why? Because SMBs need operational and financial services that are critical to their business success.

“In the future, we can expect more vertical SaaS companies to layer tech-enabled services onto their core SaaS offering to provide additional value to the customer and to expand their TAM.”

JP Gschwind, Principal, Fractal Software State of Vertical SaaS 2022

Embedded fintech has opened the door for a broader range of all-in-one solutions. Most vertical apps are partially there by taking payments, issuing credit cards, or connecting with bank accounts. Adding new features and functionality to grow is an ongoing trend for most vertical apps that serve SMB customers. This report adds evidence to this trend leaders can use to direct their strategy and roadmap.

As you work on your product strategies and roadmap, use the Evolving SaaS Environments: Are You Ready for All-in-One? to better understand the value of in-app payroll and validate your embedded fintech strategy.

Download the report. Evolving SaaS Environments: Are You Ready for All-in-One?

Updated: December 13, 2023

Brian Busch Brian is currently Head of Marketing at Gusto Embedded; the only payroll API with 10 years of experience and actionable data behind it. Before joining Gusto, Brian held leadership positions at Cloud Elements, Kapost, and Captricity. He holds a BS in finance and a BA in philosophy from Boston College and an MBA from the Cal Berkeley Haas School of Business.
Back to top