Why QED invested in Payabli

When you make a purchase with your credit or debit card, by swiping, tapping or inserting your card’s chip or using the digital wallet on your phone, that payment is processed by a payment processor. Payment processors operate behind the scenes to enable communication between the merchant and the card issuer.

Look at the card statement below. You’ll notice that some entries not only have the name of the merchant but also an acronym and * before the merchant name, such as TST*. These asterisks highlight a significant macro trend underway in the payments industry: software companies are increasingly helping facilitate payments on behalf of their merchant clients. In the statement below, TST* means that the transaction was processed by Toast (a restaurant management software company) and IC* refers to Instacart (a delivery platform that partners with grocery stores).

Historically, merchants partnered with banks and independent sales organizations (ISOs) to accept payments using traditional payments platforms. With the rise in vertical software over the past decade, merchants are adopting platforms tailored to supporting the workflow of their businesses and are now accepting and making payments directly through these software providers.

Vertical software companies have realized that one of the most powerful expansion opportunities is in embedded financial services - offering their merchant clients payment processing, lending, bank accounts, and other financial services. Payments is the logical starting point - by embedding payments capabilities into their core offering, software companies have the opportunity to capture more value from the payments stream they create as well as offer a more seamless experience to their business customers. And, it’s working: Shopify and Toast now generate more payments revenue than their core software revenue. Shopify’s “Merchant Solutions” and Toast’s “Financial Technology Solutions” revenue contributed a massive 70% and 80% of total revenue respectively in Q1 '24.

Embedded or integrated payments represent a large opportunity that is still in the early innings. We have been watching the ongoing tectonic shift of trillions of dollars in payment processing that is migrating from legacy technologies and traditional distribution channels to being embedded within software platforms. Many of the largest fintechs have been built in the payments infrastructure space (Paypal - $66b, Stripe - $65b, Square - $40b, Adyen - $38b), and a massive opportunity still exists today.

At QED, we had been looking for an investment opportunity in the category for several years when we met the team at Payabli. We were energized by Payabli’s vision to help software platforms transform payments from a cost center into a monetization engine. Previously, building a payment processing and analytics stack has been complex and required significant resources. But, Payabli's payment infrastructure has simplified the process, allowing platforms to avoid cumbersome integrations, substantial administration, and high compliance costs. Payabli’s clients have been able to tap into a new payments revenue stream with an easy implementation and top-notch support.

Payabli offers a single API that enables software companies to embed and monetize payments by tying together the key vectors of managing and scaling a payments business – unifying Pay Ins, Pay Outs, and Pay Ops. While the value proposition of payment acceptance (or Pay In) for software platforms is well known, merchants also need ways to efficiently send money (Pay Out) to their vendors, suppliers, sub-contractors, and employees. Stitching together acquiring and issuing capabilities along with payment operations (Pay Ops) bridges their customers’ payments monetization journey. By unbundling the various Payment Operations solutions such as onboarding, underwriting, billing, dispute management etc. into multiple SKUs, Payabli enables its platform partners to choose what parts of their payments business they want to manage.

Payabli is led by William Corbera and Jo Phillips who were instrumental in architecting Service Titan’s payments strategy. With Will’s prior background in founding and running Revopay and Jo leading sales at Service Titan, together they bring a great combination of payments and go-to-market expertise which is essential to win in this space. They are surrounded by a brilliant team that is motivated by the mission of helping entrepreneurs and small business owners succeed.

We are thrilled to announce that QED is leading Payabli’s Series A fundraise with participation from existing investors TTV Capital, Fika Ventures, and Bling Capital. We couldn’t be more excited to join the Payabli team on their journey building a next-generation payments infrastructure company.

If you are interested in learning more, please don’t hesitate to reach out:

Laura Bock, Partner: Laura@qedinvestors.com; Connect on LinkedIn

Shruti Batra, Principal: Shruti@qedinvestors.com; Connect on LinkedIn