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When it comes to your company’s finances, security is key. Protecting your data and financial information is a top priority, and—whether you’re a Pipe customer or one of our embedded capital partners—it’s our top priority, too. That’s why we’re excited to share about our recent SOC2 Type II completion and why it matters.

At Pipe, we’re committed to keeping our customer’s data safe while helping them access capital to grow on their terms. To guarantee that our systems and processes align with this goal, we turned to external experts for an independent review. A SOC 2 report is the result of that review.

Obtaining a System and Organization Controls (SOC) 2 report is one way for a service organization to prove the security of its digital environment. Completing a SOC 2 examination through an 

 does not result in a certification. Instead, the resulting CPA’s report is an independent attestation, not unlike an external financial audit. It’s a tool to help an organization communicate whether the internal controls governing the security of customers’, partners’, and stakeholders’ data are properly designed, implemented, and maintained.

In simpler terms, a SOC 2 report helps current and potential stakeholders assess risk by giving them a closer look at the policies and procedures put in place to ensure the organization’s services are provided safely and reliably. And while our security team loves to burn the midnight oil (looking at you, Kyle*), it’s these processes that truly work 24/7 to keep your data safe.

* Our fearless Manager of Infrastructure & Security, Kyle Polley

Why SOC 2 matters and why we went through this process at Pipe

Completing a SOC 2 examination is a big step for any company. It demonstrates your commitment to data security and ensures that you’re prepared to face the challenges of the ever-changing cybersecurity landscape.

"Pipe’s SOC 2 report not only confirms the robust controls we've set up but also stands as a testament to our formidable technical infrastructure and our unyielding promise to 

prioritize and fortify security across our IT processes, ensuring the safeguarding of our customers' data,

SOC 2 assessments are overseen by certified CPA entities. An auditor tests the effectiveness of the organization's internal controls and then maps those controls to one or more Trust Services Criteria established by the 

American Institute of Certified Public Accountants (AICPA)

For Pipe, these vital criteria encompass:

A SOC 2 report's breadth can fluctuate based on the time frame examined.

As a part of our commitment to the highest levels of security, Pipe's recent SOC 2 Type II report spanned from June 1, 2023, to August 31, 2023, and included all five of the criteria listed above. 

detailed breakdown of how to read a SOC 2 report

, including where to find the most important and relevant information for your situation.

Current and prospective customers interested in obtaining a copy of Pipe’s latest SOC 2 report can 

Last but certainly not least, a big thank you to everyone in Engineering, Security, and IT for their diligence and thoughtfulness in keeping our customers safe.

Find out what a SOC 2 review covers and why it's crucial for an embedded finance partner.

Why SOC 2 Compliance is a Must-Have for Your Capital Partner

In today's fast-paced world, convenience is no longer a luxury but an expectation. This extends beyond our personal lives and directly impacts how businesses operate. As a result, 

 has experienced significant growth, offering small to mid-size business owners quick access to capital inside of the software they already use for day-to-day operations.

 (ISVs) nd Payfacs have a unique opportunity in this space to offer their customers more access to financial products, building a capital product presents formidable challenges. These challenges can lead ISVs and Payfacs to compare the pros and cons of in-house vs partnership 

click here to jump to a side-by-side comparison. 

The Rise of Vertical Payments and Industry-Specific Software

The ascent of vertical payments is an ongoing trend, offering comprehensive software tools that seamlessly integrate with business operations. Vertical-specific platforms like Toast have emerged as leading examples, providing restaurateurs with a one-stop solution.

This trend is expected to continue, leading to more all-encompassing operating systems that simplify business management and 

By integrating financial services seamlessly into their platform, software companies can unlock numerous benefits.

One advantage is the potential to significantly increase Gross Payment Volume (GPV). With embedded financing, software companies can provide their merchants with easy 

, empowering them to make larger purchases or invest in essential upgrades without straining their 

This increased purchasing power not only leads to higher transaction volumes but also cultivates stronger relationships with merchants, ultimately driving up GPV and bolstering the financial health of the ISV itself. 

, software companies also position themselves as indispensable partners, seamlessly integrated into their merchants' operations. As a result, merchants are more likely to choose and remain loyal to the software platform that not only meets their payment needs but also helps them manage their finances effectively.

By becoming an even more essential part of their business, serving both operational and financial needs, software companies can enhance customer retention and gain a competitive edge in the market.

Navigating the Challenges of Embedded Finance 

Building a lending business is harder than it may look, and several crucial requirements must be met. Obviously, you need access to the capital you’ll lend, but getting that capital and making the economics work requires that you clear at least four major hurdles.

You need a frictionless way to acquire quality customers at a low cost, and access to consistent, standardized data sets for risk underwriting.

These first two are the easiest for ISVs, as they already have a customer base and extensive data about them. The other two hurdles will likely take an ISV far outside of its wheelhouse and can lead to a quick death for an in-house embedded offering.

Once you have the customers and the data, you need reliable risk models with a proven track record.

On top of that, you’ll need efficient, automated end-to-end operations that allow you to run your lending program with thin margins while still coming out with a profit. That can be very tough to achieve when financing isn’t your core focus. 

If any of these four components is off the mark, you’ll either be unable to access the capital you need to offer embedded lending, or you’ll launch a short-lived offering that takes you away from your core business and can’t keep itself afloat.

Fortunately, there’s an alternative that allows you to leverage your customer, data, and deep industry knowledge, without taking on unrealistic financial challenges or untenable risk. 

Leveraging Fintech and Collaborative Opportunities 

Given the hurdles we’ve just mentioned, it’s easy to see how challenging it is to add small business lending to your platform.

Fortunately, you don’t have to do it alone. By partnering with fintech firms that specialize in connecting businesses to capital through technology, vertical ISVs can make the most of their deep industry knowledge and data to serve their customers even better. 

An embedded capital partner can automate the process, harnessing real-time data with as little as six months of history, in contrast to the two years of financials typically needed by banks.

It can also greatly reduce your risks, allowing you to benefit from increased revenue and deeper customer relationships without carrying loans on your balance sheet. 

allows for operational efficiency, technology-driven underwriting, compliance and regulatory solutions, for a turnkey embedded financing product.

Here’s a simple, side-by-side comparison of building your own capital product in-house vs partnering with a fintech capital expert like Pipe.

The rise of embedded finance presents a compelling opportunity for software companies to expand their offerings and empower small businesses.

However, building a sustainable lending business necessitates careful consideration, expertise, and strategic partnerships.

By embracing collaboration with fintech firms, software companies can leverage their deep industry knowledge while providing embedded financial services as a seamless off-the-shelf product.

This collaboration between vertical software solutions and fintech unlocks unprecedented value, delivering enhanced financial access to small businesses.

Discover the challenges and benefits of building embedded finance solutions and the value of partnering with fintech experts. 

Should you outsource of build an embedded financing product?

Should vertical software companies develop in-house embedded financing or partner?

Access to financial services is critical for small businesses. And increasingly, those small businesses are looking for easy-to-access financial tools right inside the platforms they use every day. Products like Square Banking and QuickBooks Capital are raising the customer expectation bar, but it’s not too late to take advantage of this shift. 

If you're looking to scale your business, increase revenue streams, and deepen customer engagement, embedded finance could be the solution. In this article, we'll walk you through the steps to 

embed finance in your product or service 

in a way that benefits both your business and your customers.

Before you can embed finance in your product or service, you have to assess your needs. There are a variety of 

 options out there, and not all of them will be relevant for your business and your customer base. Here are some things to consider:

Anyone starting a business needs an understanding of their target market. Fortunately, if you’re considering adding embedded finance to your product or service, you likely already have a well-established customer base and a good understanding of their needs. Now, you just need to step into their shoes.

Embedded finance encompasses everything from 

 and revenue advance products, to payment processing, to insurance. The products that will add value for your customer base will depend on whether they’re businesses or individuals and where they are in their financial journey. For example, if your customer base are small businesses, they likely need access to working capital, and an embedded capital product would be a high value-add for them.

Speaking of your customer’s journey, the next step is to figure out where your customers’ needs intersect with your offering. What financial needs do your customers have at the specific point where they’re interacting with your product or service? Analyzing how your customers use your offering will help guide your choice of which financial services to embed. 

Returning to our earlier example, if you’re a payment facilitator serving small business owners, what can you do to make your merchants’ lives easier? As they go about their day-to-day operations, concerns about payroll, inventory, and other costs are top of mind. Providing them with access to embedded capital allows them to run their business more efficiently without ever having to leave your platform. 

Now that you’ve thought about your target market and analyzed how they use your product or service, you can determine which financial features to embed. 

It's important to prioritize the financial features that will have the biggest impact on your customers and your business. Consider the cost and feasibility of implementing each feature, as well as the potential ROI.

Finally, don't forget to test and iterate on your financial services offering. The data you collect from your embedded finance customers can allow you to continuously improve and optimize your offering, identifying new opportunities to serve them even more.

Step 2: Choose the right embedded finance platform

Choosing the right embedded finance platform is crucial in ensuring the success of your offering. Financial partners play a vital role in providing the necessary infrastructure and support to help your business grow. 

When selecting a financial partner, it's important to consider a range of factors that will impact the success of your partnership. Below are some things to keep in mind as you evaluate potential partners:

There are various types of financial institutions to consider when embedding finance in your product or service. These include banks, fintech companies, and other financial service providers. Each type of partner has its own unique strengths and weaknesses.

For example, banks may offer a broader range of financial products and services, while fintech companies will likely be more agile and innovative in their approach and offer more tech and engineering support to help you build out your embedded offer. It's important to evaluate each potential partner to determine which will best meet the needs of your business and your customers.

Regulatory compliance is one critical element of an embedded partnership. Many financial services require you to jump through regulatory hoops to protect consumers and businesses. This can be a huge lift for you if your partner doesn't take care of regulatory issues on your behalf. It's important to partner with an institution that is fully compliant with all relevant regulations and has a robust compliance program in place. At Pipe, our team handles all the regulatory hurdles for our partners, so they don’t need to allocate any resources to stay fully compliant. 

Tech and engineering support are the next thing to consider. An embedded offering allows you to build financial products right into your platform, but a build that goes smoothly and feels natural to your customers takes the right tech team. This is a major advantage for fintech teams, who can typically provide a much more seamless turnkey offer along with more support for customization. For example, while Pipe’s UI is based on hundreds of tests and proven optimizations, our team also supports and enables partners to customize their UI to match their own platform.

Finally, consider your revenue opportunity with a partner, which goes beyond just sharing in revenue. Compare how embedded partners help you with acquiring, onboarding, and supporting your customers. While some offer only a single channel (like email) to help you increase activation for your financing offer, others offer a suite of marketing and promotional services. The more customers you can activate on your embedded offering, the bigger the impact on your customers 

 your revenue. You’ll also want to take the long view, considering the future roadmap and how an embedded partner can build out new offers with you, as well as scale with you and your customers as you grow.  

Once you've chosen a partner, it's essential to strengthen that partnership. This involves clear communication, regular check-ins to assess performance, and a willingness to work collaboratively to address challenges and opportunities as they arise.

Regular communication is critical to maintaining a strong partnership. Schedule regular check-ins with your partner to discuss performance, identify areas for improvement, and share feedback.

Another key to a strong partnership is a willingness to work collaboratively. Be open to feedback from your partner and be willing to make changes. By working together, you can build a strong and successful partnership that serves your customers and grows your GPV.

Step 3: Overcome common challenges with implementation 

While embedded finance offers many benefits, such as increased convenience and accessibility, it also presents several challenges companies need to address.

Embedded finance has great potential for scalability and flexibility. As long as you choose a partner who can scale with you and look to the future with you, you’ll be able to grow your offering exponentially.  

Scalability depends on how much financing your partner is able to provide, and what size of businesses they can serve. As a capital partner, Pipe works with small businesses, all the way up to mid-market, allowing us to scale with your customers as they grow, as well as scale with you as you add more customers.

Embedded finance involves providing financial services which are subject to various regulations and compliance requirements. Companies need to ensure that they are able to comply with an state financing disclosure laws which may apply to capital products, along with any other state and federal laws and regulations, such as 

(KYC) regulations. Failure to comply with these regulations can result in significant penalties and reputational damage. 

Staying current with regulatory changes requires ongoing monitoring and communication with regulatory authorities and industry associations. Your financing partner can help you with this, as they’ve got their finger on the pulse of changes in the industry. Regulatory disclosures and AML/OFAC checks are built into Pipe’s embedded capital, handling KYC and other processes automatically, so there’s no added burden on your team and no unnecessary friction for your customers.

Another challenge in implementing embedded finance is ensuring the security and privacy of customer data. Financial information is highly sensitive and valuable, making it a prime target for cyberattacks and other forms of fraud. Companies need to ensure that their security measures are robust and comply with applicable data security and privacy laws, such as the 

Companies also need to communicate clearly with their customers about how their data is being used and protected. This requires transparency and trust-building measures, such as clear privacy policies and secure data storage practices.

One of the biggest challenges in implementing embedded finance is integrating it with existing systems. Financial systems are often complex and highly regulated, making it difficult to integrate them with non-financial systems seamlessly. Companies need to ensure that their IT infrastructure can handle the increased complexity and any potential security risks associated with embedded finance. Let’s take a closer look at overcoming implementation challenges.

Key strategies for a frictionless implementation 

Embedded finance is a rapidly growing sector, and companies are increasingly looking to offer financial products and services to their customers. However, implementing embedded finance can be challenging, with complex technical requirements, regulatory hurdles, and security concerns. Here are some strategies you can adopt to overcome these challenges:

One strategy for overcoming implementation challenges is to adopt a modular approach to embedded finance. This involves breaking down the implementation into smaller, more manageable components that can be developed and tested independently. By doing this, companies can reduce the complexity of the implementation and allow for greater flexibility and scalability. 

For example, a company could start by offering a single financial product, such as a revenue advance, then gradually add more products and services as the implementation progresses. A modular approach also allows companies to iterate on each component independently, making it easier to address issues and make improvements. This approach helps companies identify needs and areas of potential growth so they can expand their offerings wisely.

Pipe uses an iFrame-style solution called 

. It plugs in easily, offering a turnkey revenue advance product with no need to build anything. This allows companies to offer capital to their merchants right away, taking advantage of a fully tested user experience, and gathering data on what those merchants may want next.

 is another strategy for overcoming implementation challenges. They enable companies to build and deploy embedded finance offerings quickly and efficiently while ensuring scalability and flexibility. By using APIs, companies can avoid the need to build complex, monolithic systems from scratch.

For example, a company could use an API to access a third-party payment processor, rather than building its own payment processing system. This would allow the company to focus on its core competencies, while still offering a high-quality capital product or service to its customers. 

Fintech companies are creating solutions that bypass these layers of complexity. At 

, we use a simple API to embed an offering without complex integrations and without deploying software on your end. This not only eliminates many potential integration issues but also allows you to go to market with a capital offering in just a couple of days.

Let's consider PayFac Pro, a [fictitious] payment facilitator looking to 

 into its platform to enhance its services for small business customers. They already have a great reputation and a well-established customer base made up mostly of small and medium-sized businesses in online retail. Recognizing the need for these businesses to have easy access to 

, PayFac Pro decided to embed a financial service into its platform.

PayFac Pro begins by assessing the specific needs of its customer base. The company understands that these businesses often face cash flow challenges due to the time lag between purchasing inventory and selling it. Seasonality is also an issue for some. To address this, they consider embedding a capital offering product like Pipe, which would provide immediate funds to businesses based on their projected future sales.

Next, they evaluate potential financial partners to provide this embedded capital offering. The company seeks a partner that has scaling capabilities and robust regulatory compliance. PayFac Pro also prioritizes partners offering product, design, and engineering support to ensure seamless integration of the financial service into its existing platform.

After selecting the right partner, PayFac Pro focuses on integrating the capital offering into its platform. This integration is designed to be user-friendly, enabling businesses to apply for and manage their financing directly within PayFac Pro’s existing interface. The process is made efficient and secure, with minimal disruption to the daily operations of the businesses using the platform.

By embedding a capital offering like Pipe, PayFac Pro enhances its value proposition to its customers and opens up a new revenue stream. This move also positions PayFac Pro as a more comprehensive service provider, deepening customer engagement and loyalty. The embedded capital feature empowers small businesses with quicker access to funds, aiding their growth and stability, and in turn, contributes to PayFac Pro’s growth as a preferred payment facilitator in the market.

Embedded finance is a powerful tool to help you serve your customers and grow your own business. It can increase usage on your platform, improve brand loyalty, and help your b2b customers grow their own businesses. By following these three steps and leveraging a few key strategies, you can make the embedded financing process quick and painless, so you can start reaping the benefits right away.

If you're looking to scale your business, increase revenue streams, and deepen customer engagement, embedded finance could be the solution.

If you're considering added embedded financing to your product or service, find out how to assess the opportunity and align with the right partner to help you.

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Why SOC 2 Compliance is a Must-Have for Your Capital Partner

Should vertical software companies develop in-house embedded financing or partner?

3 steps to embed financing into your product or service

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