Welcome to the 35th Vertical Operators (fka Network Effects) Newsletter,
In our previous issue, we highlighted Shopify’s Embedded Finance Stack and its transformative impact on unit economics. For nearly all vertical software platforms, embedded finance is the natural and inevitable next step. Yet, many face an existential challenge: building payments and other financial services is a complex, non-core competency that is fundamentally different from their primary software stack.
Rainforest is a white-label embedded finance platform designed for vertical SaaS companies to offer embedded finance products without any overhead costs or engineering complexity. In this issue, we’ll uncover Rainforest’s unique proposition and the embedded finance landscape.
Let’s dive in.
Source: Matt Brown’s Notes: Embedded Fintech in 1,000 Words
Opportunity for Embedded Finance
Vertical platforms are built to provide everything a customer needs in one place.
Which implies, at some point in the roadmap, this includes financial services such as payments, lending, insurance, expenses, and payroll, etc, which are dominated by horizontal platforms
Stripe for Payments
Ramp for Spend Management
JP Morgan Chase for Banking & Credit
While the rationale for embedded finance is clear, building embedded finance capabilities is tremendously difficult for product engineering teams. Yet, the payment landscape is dominated by providers such as Stripe and Adyen, with opaque infrastructure and tooling.
Joshua Silver, founder and CEO of Rainforest, previously founded PatientCo, where he led the development of its payment solutions. Through that experience, he recognized a massive gap in the market: developer-facing payment infrastructure was opaque and antiquated. For example:
Fragmented Integrations: Platforms often must stitch together separate providers for ACH and credit cards, leading to disparate onboarding, reporting, and settlement workflows
Manual & Antiquated: Operations often still rely on generating raw ACH files and manual transmission protocols, with a poor developer experience lacking modern APIs and tooling
Opaque Pricing: Vendors promise low "starter" rates (1.0–1.5%) but saddle platforms with hidden fees that drive the rate to 4–5% for anything beyond the cheapest transaction type.
Rainforest Differentiation
Launched in 2021, Rainforest is built on three strategic, non-technical design choices that directly counter the pitfalls of the current embedded payments market:
A. Platform-Only Proposition
Most payment giants (e.g., Stripe) serve both vertical software companies and direct merchants. This dual-sided approach creates inherent channel conflict, where the provider is constantly tempted to bypass or undercut the platform to win the most valuable, largest merchants directly.
Rainforest’s business model is fundamentally structured around serving vertical software companies, positioning itself as a strategic partner with shared economic interest without channel conflicts
.One of the fundamental decisions we had to make at Rainforest early on was aligning ourselves 100% with the vertical SaaS companies. We're not going to compete with them by serving merchants directly
B. Data Sharing & Transparency
Traditional and legacy payment providers have historically engaged in practices designed to hold platform partners "hostage" by limiting their control over their customer data, for example,
Contractual Barriers: Providers may enforce exclusivity and non-solicitation clauses in contractual terms. These clauses create a significant risk of vendor lock-in
Data Ownership: Historically, merchant data and payment tokens were often considered the ownership of the third-party processor, not the software platform. This means that the platform's relationship with its customer data could be jeopardized if the contract ends.
High Exit Costs: Platforms attempting to switch payment providers may encounter severe financial penalties, such as an unbearable "breakage fee" (e.g., 10% minimum on the backbook), regardless of how aggressive a new partner's pricing might be.
Rainforest’s core principle is that the vertical platform must have control and portability over its merchant data and tokens for the long term. This flexibility is critical for strategic decision-making, M&A activity, and ensuring the platform is never held hostage by a single provider.
Furthermore, Rainforest offers treasury, reconciliation and risk management solutions such as PCI-compliant vaults to handle data processing, management and reporting workflows.
The biggest thing for me is portability both around your tokens your payment methods as well as your customer data….you need to make sure that you're never in a position as a business to be held hostage and tied to one payment provider
C. Forward Deployment Services
Rainforest recognizes that successful embedded payments rely heavily on strategy, adoption, and non-technical operational execution, often offering dedicated expertise to navigate these challenges.
Rainforest helps platforms build and manage the entire payments program, addressing the need for cross-functional buy-in across product, technology, finance, sales, and operations. The success of payments relies on this cross-functional integration and collaboration.
Rainforest provides clients with deployed engineers and commercial talent in payments on a fractional basis, filling the knowledge and talent gaps related to financial services professionals.
Source: Tidemark’s 2025 Vertical SaaS & SMB Benchmark Report
Attach Rate as a North Star
From a Vertical SaaS perspective, introducing embedded finance offerings does not equal immediate value realization; the adoption of the embedded payment services, also known as the Attach Rate, becomes fundamental to economic improvement
According to Tidemark’s 2025 Vertical and SMB SaaS Benchmark Report, the median payment attach rate has grown from 27% in 2024 to 40% in 2025. 31% of companies have made payments mandatory to their merchants, further normalizing the financial products bundling.
One of the most frequently discussed topics Joshua brought up in Rainforest’s podcast is the law of the cost-focused approach to procuring these solutions. Often, companies would issue RFPs and overemphasize fee margins, since payment is a horizontal solution with plenty of alternatives, they would opt for the lowest cost to maximize gross revenue.
Conversely, focusing resources on improving the product experience and go-to-market strategy to increase the payment attach rate (the percentage of customers using the embedded solution) yields dramatically higher results.
“Volume beats margin every day". If a platform increases its total payment volume by 20% through better adoption, that large volumetric increase immediately dwarfs any marginal savings achieved through reducing basis points
Source: Tidemark’s 2025 Vertical SaaS & SMB Benchmark Report
Zooming Out - Embedded FinTech
Payments are the crucial wedge—the first and most widely adopted financial primitive to be embedded within Vertical SaaS. But this is just the beginning of a generational shift.
We are seeing a greenfield opportunity that was once dominated by disparate, high-friction point solutions. Every vertical, from construction to legal services, is in the process of digitizing workflows and consolidating vendor stacks.
The true value for a platform like Rainforest isn't just winning the payment layer; it’s building the foundational operating system that handles the regulatory, risk, and data complexity across all financial products.
If you found this valuable, consider sharing with a colleague or founder in vertical SaaS.
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