Beyond scale and verticalisation: Why payments leaders must think diagonally

Core Insights - Vertical-specific software now captures over 50% of payments-adjacent spending among US SMEs, indicating a significant shift towards embedded payments, which are projected to grow more than 30% annually through 2034 [1] - The payments industry is evolving, with a shift from horizontal and vertical approaches to a diagonal thinking strategy that combines the strengths of both [2][5] Industry Trends - The 2000s focused on networks and processors competing on reach and reliability, while the 2010s saw the rise of API-first platforms and vertical payments that embedded finance into specific industries [2] - Diagonal solutions are emerging as a key opportunity, combining the scalability of horizontal platforms with the workflow depth of vertical ones [12] Payment System Definitions - Horizontal platforms, such as Stripe and Adyen, process payments across industries but lack contextual understanding of transactions, leading to inefficiencies [4] - Vertical platforms are tailored to specific industries but struggle with cross-use case functionality, necessitating a diagonal approach that integrates both strategies [3][4] Case Study - A leading US public research university exemplifies diagonal infrastructure by allowing different departments to manage their payment needs independently while sharing a common engineering foundation [6][7][8] Technological Shifts - Modern APIs enable payment platforms to customize workflows for multiple clients without extensive rebuilding, significantly reducing implementation time [9] - Embedded finance infrastructure allows for the creation of workflow-specific experiences without the need for banking capabilities [10] - AI-powered automation addresses operational complexities, enabling configurable platforms to serve numerous organizations efficiently [10][11] Future Outlook - The payments industry is bifurcating, with horizontal platforms focusing on reach and vertical players on workflow depth, while diagonal solutions are positioned to capture the emerging opportunities [12] - The next wave of successful payment platforms will prioritize seamless integration into workflows, making payments an invisible part of the user experience [13][14]