Fintech startup Rainforest has received $20 million in Series A funding, marking another significant milestone in its embedded finance journey.
According to TechCrunch, the company also signed dozens of new companies to its platform and increased its payments volume 17 times in the past six months.
Rainforest stated it has more than doubled its valuation in the same period, though it declined to provide specific financials. This growth was achieved by building an embedded finance platform geared directly toward software platforms, unlike most competing solutions that are aimed at merchants.
“There are too many payment products akin to fast food—they fill you up, but you’re sluggish, not nourished,” said Rainforest CEO and founder Joshua Silver. “(It’s the) same for a SaaS. Software companies can increase revenue per customer by two to five times by adding fintech, earning more revenue from embedded finance than from their core product. But that’s only possible when it’s fueled the right way.”
A Different Model
Rainforest has come a long way since its 2022 founding and believes it can differentiate itself because it was designed as an embedded finance company from the start. The company earns revenue from transaction fees, so its clients only pay for what they use. So far, the platform has added support for Apple Pay, 3DS, and Plaid.
Many of its competitors are payment processors who bolted on embedded finance solutions along the way.
Embedded Era
It’s not immediately clear if Rainforest will be able to continue its rise in an extremely crowded and competitive space. However, there’s no doubt that the era of embedded finance is approaching. The U.S. market for embedded finance reached $2.6 trillion in 2021 and is forecasted to exceed $7 trillion by 2026.
The industry is booming because companies increasingly want to offer a wider array of financial services directly in their apps, without becoming fintech companies themselves due to compliance and regulatory risks.
“The market we’re in right now is massive and nowhere close to being penetrated,” Silver said. “There are thousands of mid-market vertical SaaS platforms in the U.S. alone. UBS estimates total U.S. small-to-medium business (SMB) processing volume at $2.2 trillion, and an increasing portion of that volume is being processed through SaaS platforms as SMBs move away from traditional processors.”
