{"id":475,"date":"2023-11-16T08:05:00","date_gmt":"2023-11-16T16:05:00","guid":{"rendered":"https:\/\/embedded.gusto.com\/blog\/?p=475"},"modified":"2023-12-13T14:19:27","modified_gmt":"2023-12-13T22:19:27","slug":"the-future-of-embedded-finance-partnerships-with-banks","status":"publish","type":"post","link":"https:\/\/embedded.gusto.com\/blog\/the-future-of-embedded-finance-partnerships-with-banks\/","title":{"rendered":"A Glimpse Into the Future of Embedded Finance Partnerships with Banks"},"content":{"rendered":"

Embedded finance partnerships with banks may be turning a corner. At least that\u2019s the consensus from thought leaders in the embedded finance space following our September 2023 announcement that <\/span>Chase Payment Solutions had selected Gusto<\/span><\/a> as their embedded payroll partner.\u00a0<\/span><\/p>\n

Embedded finance<\/a> has become synonymous with innovation, particularly for financial institutions offering SMBs seamless and integrated operational and financial solutions. <\/span>CNBC covered the announcement<\/span><\/a> and Closing Bell anchor <\/span>Jon Fortt also interviewed Gusto\u2019s CEO Josh Reeves<\/span><\/a> (watch the <\/span>full interview here<\/span><\/a>). The partnership between Chase Payment Solutions and Gusto Embedded underscores this trend of fintech\u2014finserv partnerships but several commentators have opined that we\u2019ve reached an inflection point for financial services sector.<\/span><\/p>\nhttps:\/\/www.youtube.com\/watch?v=Tnopw34l-PM\n

What the embedded finance experts are saying<\/span><\/h2>\n

The decision by Chase Payment Solutions to select Gusto Embedded as its payroll partner has triggered insightful analyses within the fintech community about the future of embedded fintech partnerships with banks.\u00a0<\/span><\/p>\n

Simon Taylor, Head of Strategy at Sardine, discussed this collaboration in his post titled <\/span>The Frontier of Embedded Finance<\/span><\/i><\/a>. In the post he highlights the upward trajectory of embedded finance on the complexity curve, unlocking astonishing product innovations. This move is seen as a testament to the vast opportunities for growth when established banks partner with enterprise-ready fintech companies, as noted by Taylor.<\/span><\/p>\n

\u201cBanks have so much more opportunity to partner for growth. This is a new case study example of a bank with amazing distribution partnering with a Fintech company that can deliver enterprise-ready services\u2026 Enterprise-ready Fintech companies can help you cross-sell to your existing client base, reduce costs, or get more operationally secure.\u201d<\/span><\/i><\/p>\n

Simon Taylor<\/b><\/p><\/blockquote>\n

The sentiment is echoed in the <\/span>A16Z newsletter<\/span><\/i><\/a> by Joe Schmidt of Andreessen Horowitz, who suggests a potential turning point:<\/span><\/p>\n

\u201cDespite the last few years of startup activity accelerating financial services infrastructure\u2026 incumbents have largely remained on the sidelines when it comes to embedded fintech experiences. J.P. Morgan Chase\u2019s recent partnership with Gusto, however, may be a sign that embedded fintech\u2014the idea that a company with sizable distribution offers additional financial services products to its existing customers\u2014has finally arrived for larger incumbents.\u00a0<\/span><\/i><\/p>\n

This partnership is a great example of the win\/win\/win scenario promised by embedded fintech.\u201d<\/span><\/i><\/p>\n

Joe Schmidt<\/b><\/p><\/blockquote>\n

Alex Johnson, the founder of <\/span>Fintech Takes<\/span><\/i><\/a>, discussed the announcement in the context of the SMB sector, stating that the trend toward rebundling might be more relevant in small business banking, where owners seek simplicity and efficiency.<\/span><\/p>\n

\u201cI\u2019m impressed that Gusto landed JPMC as a partner. Chase buys fintech companies. It doesn\u2019t often partner with them\u2026\u00a0<\/span><\/i><\/p>\n

We talk a lot about rebundling in the consumer banking space, but it might be an even more relevant trend in the small business banking space. Small business owners are some of the busiest and most stressed people that you can find. They don\u2019t have time to cut the cord and manage a bunch of streaming apps. They want to pay for cable.\u201d<\/span><\/i><\/p>\n

Alex Johnson<\/b><\/p><\/blockquote>\n

Finally, Sara Khari at <\/span>Tearsheet<\/span><\/i><\/a> pointed out that what makes an embedded payroll partnership different from, say fintech innovation in payments and card issuing, revolves around the high compliance requirements that are core to withholding calculations, tax filings, and tax notice resolution.<\/span><\/p>\n

\u201cPlatforms like Gusto can make a difference by helping their clients simplify the process of running payroll, generating pay stubs, calculating withholding taxes, and filing the right documentation with the respective agencies\u2026 The amount of intricacies and technicalities involved in this process is what likely led Chase Payments to partner with Gusto to provide the underlying technology for the new payroll feature \u2013 and save business owners time to focus on their core business.\u201d<\/span><\/i><\/p>\n

Sara Khari<\/b><\/p><\/blockquote>\n

Additional Commentary on the Evolution of Embedded Finance Partnerships with Banks<\/span><\/h2>\n