Redefining the entire financial services experience for SMBs

Embedded Partners
Redifining the entire financial services experience for SMBs

Welcome to the SMB Tech Innovators podcast series powered by Gusto. We explore the intersection of financial services and vertical SaaS strategy and discuss how software combats the rising complexity of running a business. We aim to share stories, advice, and best practices from the leaders and investors behind today’s cutting-edge platforms.

In this episode, we speak to Michael Rangel, Founder & CEO, Novo, the powerfully simple financial platform for small businesses and a Fintech 50 honoree.

Michael shares his experience from a traditional finance background and how, after realizing the complexities of financial management for SMBs, he was inspired to create a fintech solution. That’s why one of Novo’s primary objectives is to make moving funds easier and improve cash management for SMBs through data optimization for financial clarity. Michael explores the challenges SMBs face with financial management, how Novo tackles them, and discusses the future of embedded financial services and financial products, how it can benefit small businesses and valuable advice for SaaS leaders looking to start or continue their embedded fintech roadmap.

Embedded Finance Topics include:

  • What it means to extend the capability of a traditional checking account and banking services
  • The biggest problem for SMBs and how to solve them
  • Novo’s plan for improving inbound payments for a better user experience
  • Where Novo fits among a world of vertical SaaS competitors
  • Advice for founders interested in building out a fintech ecosystem

This transcript has been edited for length and clarity.

Experiencing the problem firsthand leads to understanding the need to create one of the top small-business financial services solutions

I come from a traditional financial services company and operational background, with relatively little connection to tech startups or fintech. However, this background gave me firsthand experience and exposure to the problem that Novo is now solving.

I worked for a financial institution in Miami. Although the firm managed over $20 billion AUM, we were a small team of only 20 employees operating as an SMB. But a seemingly mundane task – reconciling trades – led me to start Novo. As I performed this repetitive process, I wondered how everybody else handled the manual manipulation of these reports and asked myself, “Is this a problem in SMBs?” That’s how my co-founder and I ended up at Novo and the exact problem we’re looking to solve.

Exposure to the problem for your startup journey

Introducing Novo and how it solves the complexities of SMB financial operations

In the world of small business, innovation is key to success. That’s where Novo comes in — our financial platform’ is designed to empower small business owners to focus on innovation, customer experience, and becoming top service providers. At the same time, Novo focuses on taking care of the financial details. Our core product is a small business checking account, but we offer so much more than that. Our technology makes the checking account smarter and provides tools and real-time insights that help business owners navigate their operations and forecasts.

By making the checking account the hub of their financial activity, we enable small business owners to integrate their payment processors and other providers, giving them a comprehensive view of their finances.

The differentiation between financial services companies like Novo, traditional checking accounts, and traditional banking services

We noticed that business owners were overlooking many connection capabilities. If a client holds money in their account, how do we improve that experience? As a large incumbent, our priority is that there’s money in your account at the end of the month and that money grows every month, every quarter, every year, and so on.

Banks’ main focus is not how the money moves in or out of the account; the main focus is the hold. At Novo, we built our entire thesis around this and realized that creating a solution to make these flows easier create an entirely different game.

We aren’t merely focusing on reinventing the wheel and making an incrementally better checking account. We aim to completely transform how this financial tool has been structured for decades. This means simplifying every aspect of financial management for small and medium-sized businesses by integrating the SMB stack into our platform and optimizing the movement of funds along the rails. Ultimately, it’s not just about holding; we aim to enable businesses to move their money through the rails faster and more efficiently.

Solving the biggest challenge small business owners are facing

At first, I identified cash management as the biggest problem for SMB founders, and it became the initial catalyst for Novo. As time passed, and as we amassed more data as a team, we realized, from a technology standpoint, that the root of the issue is data.

The lack of tools in traditional checking accounts and the many external tools available elsewhere has made financial management for small businesses unnecessarily complicated. As small business owners add more tools to operationalize their business, it becomes increasingly complex to navigate their financial picture.

For any SMB, extreme precision and forecasts are necessary to see whether there might be a cash shortfall. Banks are not incentivized to get involved in this process as it involves a 100% margin. Novo’s solutions simplify financial management and stitch all of these pieces of data together, allowing small business owners to navigate that complexity.

Watch Michael’s tips on using data to simplify banking.

The rise of SaaS companies and the connections Novo is building

One of the things that we’re excited about is connecting the process of moving money in and out of Novo from another platform. By building tech between Novo and the other platform, we can speed up payments to put our customers on an entirely different cash flow cycle. We’re circling back to the number one problem for SMBs: poor cash management. We can help small businesses optimize their cash flow and make better financial decisions by saving time on both fronts.

How acting as a neutral layer helps fintech companies like Novo wins a world where vertical SaaS companies are becoming increasingly popular

Let’s use an Uber driver as an example. The good they’re selling is transportation; a ride in their car. Their primary objective as small business owners is to get as many rides as feasibly possible over the period they are working that day. A few minutes before dropping off the rider, they’re already cycling through a few other mobile apps to compress the time between rides as much as possible.

When small businesses start, most of the time, they’re just trying to make ends meet. Small businesses will go anywhere and everywhere to sell their product, whatever that product will be, just as the Uber driver is on Lyft, DoorDash, etc.

Small businesses are not exclusive to their distribution channels. They are everywhere that they can have a chance to sell their product. So when you start thinking about embedded fintech and how deep down the stack you can “embed” fintech, you have to start thinking about this.

Novo is often described as a neutral layer on top of and harmonizes all underlying financial services and tools. Consider if Uber were to offer a bank account to its drivers. Would the drivers also need accounts with Lyft and DoorDash? What if each platform developed unique features, causing payment schedules to become even more complicated? SMB owners and tech leaders are looking for a single, unified layer that simplifies the management of their finances. This is how we approach the integration of revenue streams for the SMBs we support, and it’s an essential part of our distribution strategy.

Keeping your offering simple

The importance of keeping it simple and focused on the problem when building out an embedded financial services ecosystem

When it comes to small business finance providers, it’s essential to keep things simple. Novo’s philosophy is all about keeping the focus on the problem. If embedding financial services, like payroll, banking, insurance, credit cards, debit cards etc., helps solve that problem and adds profitability, then great. But if it doesn’t, it’s best to revisit embedding their API’s later. As a business owner, you must understand that just adding fintech for fintech’s sake doesn’t make sense.

Another critical consideration is the distance from your core product. Business owners must stay close to their core product and affirm that any additional features or services are directly related. Ultimately, simplicity is key for small business financial platforms. Small business owners already have to navigate a lot of complexity, and adding more options or features can do more harm than good. Staying focused on the problem, staying close to the core product, and keeping things simple is the best advice I can offer any tech leaders building their fintech ecosystem.

Listen to the entire podcast with Michael Rangel on Spotify or Apple

To learn more about Novo, visit and connect with Michael on LinkedIn. And, to get notified when new podcasts are available, subscribe to the Gusto Embedded Newsletter and read more about our embedded partners.

Updated: May 11, 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.
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