Software-led payments turns 10: What Connect’s first decade says about the next one

A decade after Stripe launched Connect, the thesis behind it—that software companies would become the primary distribution channel for payments and financial services—has largely played out. Stripe reports that more than 10,000 software companies, marketplaces, and enterprises now use Connect, collectively serving over six million businesses worldwide. Total payment volume processed by software platforms on Connect has tripled in the last two years alone.

That growth tracks a broader shift in how small and midsize businesses operate. In 2011, only 29% of SMBs used cloud-based services, according to a Microsoft survey from that year. Today, in a study Stripe conducted with Edgar, Dunn & Company, 67% of SMBs say they subscribe to at least one cloud-based software solution. Of those, 73% have integrated payments into their software tools, and 65% say they would consider financial services offered by their software vendors.

From merchant accounts to multiparty payments

Before Connect, selling online required a business to go through a time-consuming merchant account application process. For software platforms, integrating payments meant building that infrastructure in-house. Connect changed the equation by offering a multiparty payments solution that lets developers embed payments natively into their products, onboard businesses quickly, orchestrate custom fund flows, and pay out earnings.

The user base has expanded well beyond the original marketplace use case. Carvana uses Connect to power its used-car marketplace; Twitter and Spotify use it to let creators monetize audiences; Ford Motor Company plans to use Connect to extend its ecommerce infrastructure to customers and dealers. Software platforms now make up more than 60% of Connect users, and many have shifted to a combined revenue model of subscriptions plus payments.

Platform growth through the pandemic

Platforms running Connect saw sustained growth during the pandemic. From March 2020 to March 2022, the number of businesses served by software platforms using Connect grew 88%, while the payment volume processed across those platforms more than tripled.

That growth shows up in the financial results of individual platforms. Shopify’s merchant solutions revenue—which includes payment processing—grew roughly 250% between FY2019 and FY2021, reaching $3.3 billion and representing 70% of the platform’s total revenue last year. Podium, a customer interaction platform, saw significant acceleration after launching an integrated payments offering in March 2020.

Payments integration has also become a retention lever. As Alec Lovett, vice president of product and head of payments at Podium, put it: “For many of our customers, who are local business owners, we are their core operating system, and payments is their most critical business process. By building an integrated payments offering, we are providing a tremendous amount of value to our customers and, in turn, we see higher retention on our platform overall.”

The next phase: embedded financial services

The logical next step for software platforms is adding financial products beyond payments: lending, cards, and financial accounts. SMBs are often underserved by traditional banks—a J.D. Power report found only 32% of small businesses say their bank understands their business. At the same time, 59% of SMBs in the Edgar, Dunn & Company survey said they would pay more to work with a “one-stop shop” software vendor.

Vertical software platforms are well positioned here because they already understand their customers’ businesses. They can prequalify customers based on payment history or issue expense cards tied to sales earnings. Shopify, Lightspeed Commerce, and Jobber are among the first to extend payments into embedded financial services through Stripe, tapping into an estimated global addressable market of more than $7 trillion by 2030—twice the combined value of the world’s top 30 banks today.

“The biggest and arguably longest-lasting trend in the SaaS space, with regard to fintech, is the increasing value these solutions can unlock for customers,” said Mark Assini, product marketing manager at Jobber. “This ever-increasing value is what makes fintech solutions like embedded payments, lending, consumer financing, and other financial services such a growing priority for SaaS companies.”

A broader mission than payments

When Connect launched, Stripe’s stated goal was to build “very broad economic infrastructure for the internet.” A decade later, that mission now extends beyond payments into the wider world of embedded finance. For platforms, the opportunity to deliver financial services alongside software appears to be the next frontier—one that Connect will need to support with increasingly sophisticated infrastructure.