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Major corporations have quickly woven AI into every aspect of their business in the pursuit of cost savings and revenue growth. The digital commerce journey is no exception and effectively all large merchants in the US, UK and Europe have implemented generative AI in some part of their customer experience. LLMs and other AI tools are also growing as a traffic source for merchants: Adobe data shows that AI-driven traffic to retail and travel merchants has increased more than 10x over the last 15 months. Despite these signs of progress, LLMs and other AI tools remained less than 1% of total traffic for retail and travel merchants during the 2025 holiday season. And Flagship market research indicates that true agentic payments (where AI agent can initiate and complete checkout on the customer’s behalf using permissioned payment tokens, virtual cards, digital wallets, stablecoins or other rails) are at the very early stages of deployment. We will continue to track progress on agentic commerce and payments as this new space develops in 2026 and beyond. 1. Agentic Solutions Observed at Top US/EU Merchants (implemented solutions across US & EU top 10 companies ranked by revenue, n=80) Across the top 10 US and top 10 EU companies per vertical, customer-facing Generative AI is now widely deployed, most often in Q&A chatbots, image searches, and product support. The more differentiated story is the step-up into agentic commerce (multi-step journey orchestration) and the relative scarcity of agentic payments (checkout execution by an agent). Key observations: Most top US & EU merchants have deployed customer-facing GenAI for Q&A, guided discovery, and product support. Agentic commerce is still early-stage, deployments are concentrated in a smaller cohort where agents can plan and orchestrate multi-step journeys (discover → compare → assemble cart/itinerary) but still stop short of executing payment. Payments is the hard boundary to cross; the market is beginning to standardize on network tokenization and delegated authorization models (via emerging protocols such as UCP / AP2, ACP, and x402) to make agent-led checkout feasible. 2. AI-Driven Commerce: Traffic Signals AI-driven visits to merchants are up 10x over October 2024 but growth tapered or retreated during late 2025, which may be a sign that expansion beyond early adopters may require deeper integration with web browsers, search, social platforms, or other experiences beyond LLM chat. While data on agentic payments is not available, we believe they are still de minimis given Adobe’s data on AI-driven visits. New standards like Google’s Universal Commerce Protocol should help companies across the commerce value chain collaborate more effectively on monetizing agentic traffic. 3. OpenAI’s Largest Users by Vertical: Where Token Consumption Clusters (selected companies' logos) Flagship Commentary & Highlights Intelligent Copilots & Agents (29%) and Infrastructure & Enablement (26%) account for more than half of total token use, showing that most consumption supports the systems and tooling behind AI applications rather than end-user interfaces. Workflow & Orchestration (17%) forms the connective layer, driving automation and integration across agents, networks, and APIs. Digital Merchants (15%) are actively leveraging LLMs, introducing AI into the checkout page and assisting during the checkout flow. Research / Academia (8%) organizations are applying generative AI to technical exploration and innovation. Payments (3%) and Commerce Enablers (1%) are a small share of company count but play a key enabling role for others, especially platforms like Shopify and Mercado Libre which enable millions of SMBs. Conclusion: Near-term progress is likely to look like agent-assisted commerce at scale, with better discovery, planning, more automated cart/itinerary assembly, while agentic payments will rely on industry progress building solutions for trust, governance, and interoperability and finding the right use cases where buyers are eager to delegate shopping and payment to AI. Please do not hesitate to contact Ben Brown at Ben@FlagshipAP.com with comments and questions.

This snapshot is the second in our Embedded Finance Vertical Snapshot series, focusing on the automotive dealership, repair, and car wash landscape. The automotive industry is highly complex with high software penetration (95% of companies use software to manage at least part of their business). However, embedded fintech adoption varies. While payment acceptance is relatively mature, we see substantial opportunity, especially in payouts and lending. 1. Vertical Definition 2. Vertical Spend General Commentary & Highlights High software usage: The automotive industry is very dependent on software. 95% of companies use software to manage at least one part of their business in US and EU. Consolidated list of providers: Most dealerships rely on dealer management systems (DMS) for end-to-end business management. Various point solutions also exist to service specific functions or business areas. Tender Mix: Vehicle financing is largely un-addressable by PSPs, but remaining serviceable payment opportunity, is large, and card-centric (credit + debit covers 75% or more in the US and EU). This pool of volume largely originates from the service lane. In-car payments: enable drivers to transact directly from their, are seeing increased adoption; however, usage remains largely confined to car washes and has not yet extended to repair services. 3. Vertical Dynamics 4. Leading Software Platforms 5. Embedded Fintech Maturity Embedded Fintech Highlights Vehicle financing generally not monetized by PSPs or SaaS: Roughly 85-90% of a dealer’s purchases involves financing, which resides on independent systems and lenders. Room for product expansion: Payment acceptance, consumer financing, and insurance are embedded by most platforms in the US and EU. Beyond these products, there are natural opportunities including payouts and lending. Please do not hesitate to contact Peter Taylor at Peter@FlagshipAP.com, or Sal LoBiondo at Sal@FlagshipAP.com with comments and questions.

This episode explores why embedded lending is emerging as the next big frontier after embedded payments in Europe and North America. Charlotte Al Usta (Flagship) and Luke Trayfoot (YouLend) discuss how lending delivered through platforms can finally fix SMBs’ chronic access-to-credit problem by leveraging real-time data instead of slow, paperwork-heavy bank processes. They dive into key use cases like revenue-based financing and working capital, the role of banks vs. fintechs, the complexity of scaling across European markets, and why most players will pursue embedded lending via partnerships rather than building in-house—plus how AI and better UX will shape the next five years. Do not hesitate to reach out to Charlotte al Usta, Charlotte@Flagshipap.com with any comments or questions. Listen to the latest episode on the following platforms: Youtube Spotify Transcript Embedded fintech has long been synonymous with payments acceptance, but with embedded payments now maturing across Europe and North America, the next major wave is already taking shape and we're only at the beginning. We're talking about embedded lending, delivering capital directly to SMBs through the platforms they rely on every single day. In this episode, Charlotte Al Usta from Flagship sits down with Luke Trayfoot from YouLend to break down why lending is a natural next frontier after embedded payments, how real-time data is transforming SMB credit access, and what platforms, PSPs, fintechs and even banks need to get right to win. Tune in if you want to understand where embedded finance is headed next. Charlotte Al Usta (00:56) Hi everyone and welcome my name is Charlotte Al Usta, principal at Flagship. And today I'm excited to welcome our ever first guest onto our podcast series, Luke Trayfoot Global Head of Strategic Partnerships at YouLend. Luke has spent the last 15 years in fintech and most notably in senior commercial roles at the likes of Hyperwallet, PayPal and Mangopay with a very strong focus on embedded payments and is now leading the embedded lending at YouLend. So Luke, welcome. And can you perhaps tell us a bit more about YouLend? Luke Trayfoot (01:29) Sure, thanks for having us Charlotte. Yeah, sure, so YouLend is an embedded lending provider. We operate 10 markets today and consistently growing in those markets. But fundamentally we're offering an embedded lending proposition which allows platforms, marketplaces, payments companies, fintechs, banks to offer lending to their SMB cohorts of businesses. Charlotte Al Usta (01:51) So perhaps just to set the scene very quickly. So today we'll be discussing obviously embedded lending. And so we'll be sharing our thoughts on why we see lending as a next big opportunity after payments and how it's effectively reshaping ⁓ access to finance for SMB specifically. And perhaps before we deep dive into the topic and also for the audience benefits, Luke, can you perhaps define how you think about embedded lending? Luke Trayfoot (02:16) I think fundamentally it's about how do we get capital or how does a platform, how does any business get capital to their customer base. so traditionally that was always a path for banks and banks would be the capital providers to those businesses, large, small, asset heavy, asset light. And so embedded lending has changed that landscape quite dramatically. And so we look at it in a couple of different proponents. One is that we have various different product sets that allow these platforms to incorporate this offering into their service. But then it goes far greater than that. The ability to provide liquidity for that capital is very, very important. We have a diversified portfolio of capital providers that allows us to do a couple of things, widen the eligibility, improve the offers that we can provide and the size of those offers, both on the smaller end and the larger end. But when you look at sort of the operational side of launching a lending or a capital program. it's significantly different to say payments and so embedded lending allows through partnership allows business to go and offer those services out so everything from how you handle an inquiry to how you make decisions and underwriting and then processing that servicing them and then the renewal. Lastly, would like to say, I think data is the collateral in this whole space for embedded lending. That's where it's fundamentally different that we're looking at a real-time view on businesses to be able to lend to those businesses, which is fundamentally different from years gone by. And so with the emergence of technology, internet, and what these businesses are using as their financial everyday tools, with the data enrichment that comes with it allows for a quicker decision; easier access, less paperwork, less friction, all at the point of need. Charlotte Al Usta (04:00) Yeah, absolutely. And I'm looking forward to double click into all of that. I mean, like the data point especially is like a really important one, right? I think just taking perhaps like, you know, a step back, I think what is really interesting is effectively when we look at the broad embedded finance opportunity, payments is obviously one of the most mature products, still a lot of opportunity to be captured specifically in Europe, UK, where it's like less mature. I think what we also have observed is effectively embedded lending accelerating across geos. And so that was effectively quite obvious in the survey that we conducted earlier this year, where we conducted around 100 platforms. so 36 of them were already, or had started offering embedded lending. 37 were planning to offer embedded lending in the next 12 months. And so that was really the use case after payments and before others such as, know, banking, payouts, insurance that really came out as a next big opportunity. Why do you think that is and what is effectively driving that shift or that acceleration? Luke Trayfoot (05:05) Yeah, I think it's a few things. Firstly, it does depend somewhat on the customer cohort that you might have as a platform. But when you look at what's the driving force, I think it's simply that a lot of these businesses do not have access to capital through any other means. Or if they do, it's a very slow and sort of incumbent type journey. And so your options are the bank, your options are to go through a panel of lenders where you're looking at lots of different offers and different pricing structures, different repayment terms. so lots of businesses have effectively the eyeballs of these customers and they're looking to utilize those in order to, yes, generate revenue, but also generate all the other net benefits that you can get from a lending program, such as higher NPS scores, longer... a lifetime value, an increase in average revenue per user, lower churn. So when you look at the opportunity, there's a big need. There isn't necessarily enough supply from the open market. And lastly, if you can go to market through a partnership, it is not. There's no requirement for capital, there's no requirement for much tech work depending on how embedded you want to go, but there's flexibility in that go to market which many other products and value added services require businesses, especially payments businesses, to have to go quite deep and own the value chain. With this you don't really need to and it's relatively revenue rich but also all those other benefits I mentioned. Charlotte Al Usta (06:34) Yeah, absolutely. And I think that's even more so, right? The smaller the average merchant is effectively on your platform or I mean, we had looked at a couple of numbers in terms of, you know, what is demand by SMB segments. And it's obviously very high. So for example, in the US, you know, 50 % in average SMBs are looking for financing. If you look at micro businesses, effectively only 30 % effectively get a credit, which, ultimately really shows that, the smaller you are, the harder it is to effectively get access to financing. And another point that, you know, we had done lots of research around comparing effectively what it would take to get a credit from a bank as a small business owner across geos. And it's incredibly hard, right? It's a lot of paperwork. You need to provide lots of history in terms of trading history to the bank, until you get the approval, it's very, very painful for an SMB and really hard to get. So do you think, so two questions So who are the ecosystem providers and enablers that will benefit from embedded lending? And do you think banks still have a right to win? Luke Trayfoot (07:43) Yeah, so we look at it in effectively an eight box quadrant and so we look at four different verticals. They're very broad but first is payments and originally that that sort of industry was pioneering this space because they had the card data, they had the user base and to some extent under some pressure for their price points and their net revenue and their margin. And so they looked at these options which they can go through. We then go down and look at software platforms. That's sort of a very large frontier of this right now. Marketplaces, we work with of global household brands in that space, which see ultimately the sellers get a lot of net uplift from getting easy access to capital. Classically a business would be in that bucket that you just mentioned, which, and all that stuff, couldn't go to a bank necessarily and get lending. And then lastly, we're seeing a lot of traction in fintechs, money movement, neo banks and banks and we bucket those together and we look at them in two lenses we've got for intents of purposes, specialist partners, these think of these as verticalised businesses or platforms that are looking at a very specific set of merchants serving them for their needs, be in the likes of hospitality, could be in the likes of… car parts, whatever it may be, there's a vertical approach to it. And then we also have a horizontal lens, which is more like a diversified pool of businesses that they serve. And so those platforms are serving everything from a mom and pops, single owner, single operator type business, all the way through to more established, even up to enterprise businesses. So all of those have a very good context today to be looking at lending if they're not already. But also looking perhaps they have a lending program and they're at new geographies, they're looking at wider eligibility, those are key things that these platforms are looking at. On your second question, yeah I totally think banks have a right to play and to some extent they still have very much a right to win. The rationale behind that is ultimately trust, security and there are many businesses that you know still feel relatively comfortable with their bank and they trust their bank and so it's different for the banks because it's actually about two things risk and operational execution, so we look at those two areas for banks and that's really the point in which we see a need for uplift, especially on the micro end of those businesses, they're effectively smaller ticket sizes, they're still relatively the same amount of operational uplift with paperwork and those sorts of things and in fact we're partnering and continuing to partner with lots of banks in the space that helps the banks serve those micro SMEs. SMEs and even slightly larger SMEs which are asset-like, the banks don't traditionally have a risk appetite to lend to nor do they see the value on a revenue basis for the operational uplift that it takes to serve them and so we can slot in really nicely there and help those banks serve those customers until they become their corporate, mid and enterprise customers. Charlotte Al Usta (10:47) Yeah, I mean, I do agree. think banks have this massive right to win as it comes to access of cost of capital rights in addition as well, in addition to trust. So these two levers really make sense. You mentioned a couple of things ⁓ in the beginning where you said, platforms, marketplaces, as well as, fintechs or PSPs that are starting to offer embedded lending to the end customer, really offer a better product, which ultimately comes with a higher NPS score, LTV, higher revenue, lower churn. What else is in there for them? How would you define that in terms of the key advantages for the end customer, but as well for the provider of embedded lending itself? Luke Trayfoot (11:27) Yeah, I think it's the compound parts of those that are really special. So we see a lot of platforms that are looking to increase revenue, which granted very important and it's not to be ignored. But ultimately, if you could find that right, what I call the sweet spot where the merchant gets a great price point. With a very good experience to be able to get access to that capital instantly or within the same day. Then you have a great experience, which means you are effectively building more of a motor and your core product set. And so there are many examples we can go into, but it's when you get the compound, sum of those parts that becomes really, really important. I do think it's in the detail. It's how do those customers view you, value you. Lending is slightly different in the sense that in payments, there's somewhat of the lifeblood of the system. And in many cases, I'm sure you've seen on platforms, make that mandatory, which could be a friction at entry point, but over time that really improves. That platforms economics but also the experience for the customer and many other platforms make it optional. With lending it's always going to be optional, it's an opt-in type product. And so you have to sort get that sweet spot of the widest eligibility for the best penetration regardless of how small those businesses are, supply them with capital, they can then utilize that capital to open a new office or a new location, hire staff, do better marketing. There's so many benefits that that business gets which then you as the platform get as a follow-on effect. Charlotte Al Usta (13:01) Yeah, no, absolutely. That makes sense. I think it applies also to a lot of different verticals and horizontals, right? You mentioned that at the beginning and I think that's super interesting. It can really be applied to e-com centric businesses, to point of sales centric businesses, to office of the CFO. And so ultimately I think solving just access to finance has been such a pain point not well served by banks in the past. And I think the demand is just very high for that. And it's been proven by a lot of the numbers, right, that we see in the markets. And I think that also comes to my second point. You know, increasingly we see financial services becoming equally an important customer segment for providers such as YouLend as the likes of marketplaces and software platforms. And we'd love to get your perspective why that is. Luke Trayfoot (13:49) I think a lot of these businesses are managing their day-to-days very differently to 5, 10, 15, 20 years ago. And so I would argue that many of these businesses may not even log into their bank more frequently than once a month, maybe once a week if we're being generous. so you look at the software platforms, whether that's an accounting platform that might be a day-to-day. entry point for a business which then is connected up with their POS system or their marketplace sales and it's generating the financial output in order to make a decision as a business owner. So for those platforms embedding financial services makes a lot of sense because the customer wants to ideally have as much as possible in one place. As long as it's the majority of either where they're selling or what they're doing, or it provides a service that allows them to aggregate all this information for them to make a decision rather than having to log into five separate systems, look at five separate sets of numbers they may not reconcile and then make a decision where you don't feel informed. A trust element is very important, but then that user experience and journey that these new digital platforms, whether they're software platforms, financial technology providers, PSPs, marketplaces, are, you know, they're second to none, they're digital first businesses and that's what, as every consumer you'll see today, expects the level of service that you'll get when you order something, it gets delivered next day, you can return it for free. Businesses are humans at the other end as well and they're looking for a similar experience. Charlotte Al Usta (15:21) Absolutely. That makes sense. I think another point that you already touched on that at the beginning, our survey also showed that the partnership route specifically on embedded lending is a preferred one. We'd love to get your perspective around why do you think partnership is so much more important within embedded lending versus other use cases within embedded finance? Luke Trayfoot (15:49) Coming from payments and moving into lending it's been quite high in terms of it just totally different ways of operating a business and I think when any platform is looking to go out there's the typical build, buy, partner type go to market. So perhaps we can look at it in that lens where if you're looking to build yourself firstly it's not always a core competency. Secondly it's quite capital intense so you've got to find that money to go out of the door and ultimately get the money back in the door. And so that takes people time. There's also a lot of data and underwriting that only comes with time and experience and number of merchants served. And so we see a lot of businesses and platforms that come to us looking to leverage that because that is something that builds organically over time through experience. So yeah, it's quite a large uplift and of course if you've got a big base of customers to serve that's the first thing that you need but there are still many other things under the hood that you need to go and be prepared to achieve. Having said that there are a number of successful platforms that have executed on the build model, probably three come to mind globally. So your next option is to buy and we see that quite often but that will typically mean that M&A is quite tricky to go and execute correctly especially if it's not a core competency of the business that's the acquirer of the business being bought. But also it's quite geographically restrained. And so lot of those businesses and payments can go international relatively quickly and lending is a bit different. So there's a different landscape of regulation, currencies, credit bureaus, many different things. And so I think coming to partner is a route that many platforms take to go to market because it reduces all of the nuances of that heavy lift in the build column. It removes the risk if you pick the right partner of the buy column where you can go into many more markets quite quickly. But ultimately you're leveraging someone else's expertise. You're testing and learning and piloting and launching. So through that process you can learn a lot. In which case in the future if the desire is to go to build it yourself, you're doing that with a lot more experience and lot more facts and intelligence and data models that you can then apply yourself. So as a route to market I think that's why it's fundamentally so much more popular. I think some of the stats we've seen is over 80 % of those platforms are looking to partner, which is quite different to say payments or issuing or accounts or insurance. Charlotte Al Usta (18:22) No, I agree. And I think you just mentioned a really good point around, access to data, which is just so fundamental within embedded lending, right. And that's particularly even more important as you think about, you know, Europe, which is very fragmented, where access to data, the more you go into continental Europe is very restricted, I would say, compared to more mature geos. And ultimately, that coupled with the cost of capital just makes it indeed very logical to go first down the partner route and also in the longer term to still just leverage the partner for that. Luke Trayfoot (18:55) Yeah, I think it comes with scale, right? And if you have some context for YouLend we've funded over 350,000 businesses, put offers out to millions of businesses, have our own UX UI that we A/B test on a daily basis, but we have a whole host of partners in that quadrant I mentioned. And so you can, if you're a partner, platform slotting into one of those you have a pre-baked ready-to-go set of data pricing and knowing what you want to get out of the program do you want to get you know as much penetration as possible to as wider cohort of merchants as possible or are you looking to you know just make make money effectively right and then there's somewhere in the middle I always argue you know depends on the strategy for that platform but that comes pre-built pre-boxed up so yeah, a lot of value from going to market through partnerships, of course. Charlotte Al Usta (19:50) And out of curiosity, have you ever had the case where, you know, PSP or FinTech started building that in-house and then went to YouLend to go down the partner route? Luke Trayfoot (20:00) Yeah we did, and actually several of our largest partners actually started to build themselves and typically would pick a market to do that and the interesting facts here were the eligibility was, on a few of these, average around 20 to 30 % of that addressable book of business that they could lend to. And so you create a dynamic where that 70, 80 % who weren't getting served with capital were getting actually quite negatively impacted, or as we call it internally, as some FOMO around not having access to capital. And so that's the first entry point for us where we allow for those businesses to be served and we allow for the platforms to do both. They can serve the cohorts that they're, they have a risk appetite too and they know really well, but widen the eligibility. The other use case is geographical expansion and you mentioned Europe earlier and we're live in eight different markets across Europe and it's a different landscape, both on regulation, datasets, credit bureaus and access and also scale. If you were to compare a single European market to the US, it's fundamentally very different in scale and so there's always these questions for these platforms of well we've done it here but if we do it again here is the juice worth the squeeze and so that's where we can slot in really nicely and service them in different languages, different cultural nuances, banks actually have a different approach to lending in some European markets than others and so having that local expertise and knowledge is really important and especially for these large global platforms that are quite distributed across the world taking that micro lens on a small country in Europe sometimes isn't something that happens quite easily, come into there and give that expertise we talked about but also help them launch quickly. Charlotte Al Usta (21:46) Yeah. And I think that, another point that is also worth mentioning, it's very similar for payments, right? A software platform that is embedding payments first actually needs to learn the product. How does it work? How I can cross sell and upsell that into my front book and my existing merchant base. And it's a real learning curve and learning journey. And so that's very similar with embedded lending as well. Right. Even if you launch that in your core geo in the U S right. I think it always comes with learning how to position the product, how does my customer behave? And obviously like your customer in the US is going to be completely different. Somewhat we have like, you know, a different behavior than in the UK or like in Germany or in France. So yeah, fully agree on that. Luke Trayfoot (22:25) One added thing on Europe, you mentioned Germany there, it fascinates me in that market because for the payments folks out there, they would know 50 %-ish, I know it's increasing slightly, but 50%, sometimes less, is card-based. And so what's the other 50 % of it? It's LPMs, APMs, cash, invoice. And so when you're looking at lending off the back of embedding payments, quite a lot of providers may not be able to lend against or have the ability to underwrite and consume the data outside of card payments, which is something that YouLend has achieved in Germany, which we've seen sort of great results from that. And I think that's one example of a very important nuance. If you're coming, say, from the US and going to France or Germany in this instance, not only is there regulation, then there's the, how do you provide a really strong offer to that merchant? On all of their revenue sources, consistent revenue sources, not just one payment method. Charlotte Al Usta (23:23) Yeah, I think it's a fair point, especially whenever we talk about merchant cash advance, we think about that as like an advance on your card receivables. But ultimately in some markets, if you're not going beyond cards, you're just missing out on a big pool. Right. And Germany is probably one of the best examples here. Luke Trayfoot (23:40) As I say, we've seen that in Germany, but also in every market because we have a solution which is total revenue that consumes all that data. so platforms in the accounting space, in money movement. NeoBanks as an example, there might be a business, a solo sort of entrepreneur owner operator business that might do half of their business from cash and invoice and or card. We also saw an interesting use case of this with the food delivery companies whereby there might be one food delivery company that applies for capital with you from a single partner, but then when you look at their revenue, it might only be 10 % of their revenue because they're going to have three other platforms that they're payments from or revenue from. They've also then got their walk-ins, they've got their dine-ins, they've got their cash, and so when you look at a business, you've got to look at all of those points of revenue sources and find a way in order to lend the right offer size for that business's needs. Charlotte Al Usta (24:39) I agree. And so we oftentimes would love to spend a little bit of time around the use cases within embedded lending. Merchant Cash Advance is one of the most advanced use case today. Where do you see the market going and what do you see as kind of the next large use case? Luke Trayfoot (24:57) Yeah, I think Merchant Cash Advance serves a great purpose. I think there's an element here of revenue-based finance. There's lots of different terms, but I think for clarity, it's really about a flexible repayment lending product because for businesses that are quite cash-constrained or cash-flow-constrained and have a very much look at their businesses on a day-to-day basis. The amount they have to repay is really important because if their business is doing well, they'll happily pay more of that in load back. And if they're not doing so well, if they're having to pay back a certain amount on a fixed element, that could be where they get into a bit of trouble. So I see this as a very sustainable product set for those types of businesses. Having said that, we have three other products alongside MCA, or revenue-based financing, and so a fixed repayment product might suit a business that is a little bit more consistent in terms of their cash flow, and they're looking at a position to pay back on a weekly basis, or in some cases, monthly basis. And so that leans towards the larger businesses who are in different types of industries. And then there's also a little line of credit, right? And so that can be framed in many different ways and lots of people have looked at that in different ways and you can even have a card attached to that whereby in theory a platform might say we offer payroll services and those payroll services, that business that's needed to make payroll at that point in time, instead of taking out a long-term fixed or flexible repayment loan can just draw down for the amount they need to make payroll happen. And that's one use case. There are many others. We're seeing quite a few emerge in the B2B buying space where you might be a small business buying on a large marketplace, a platform, and you're looking to actually utilize whether it be a line of credit or some type of lending in order to fulfill that purchase because you've got a very finite point in time to purchase those items, right, that good. Which is an offer that's time limited. So we see that is very popular in marketplaces and many others. Charlotte Al Usta (27:05) Yeah, I think probably that's like one of the area that I find the most interesting is I think about embedded lending is we only scratch the surface, right? So you have revenue based financing, made a head start. But then there's a broad opportunity of pretty much like anything around on security, I would say, right, whether it's term loans or working capital loans, credit cards in some specific markets or ⁓ overdrafts specifically relevant in Germany, example, instant settlement, buy now pay later. Factoring is actually one of the other use cases that has been around for quite some time obviously, but this is also being innovated again with FinTech enablers to make that way more agile, more relevant to B2B verticals and office of the CFO. But in most financing I think the kind of range of use cases and possibilities is just so vast. It makes it just super interesting, I think, and really excited to see what is going to come next. Luke Trayfoot (28:01) Yeah, it is really interesting and I think sometimes the privilege of this challenge is picking which ones are most important for A, the platform and the platform's constituents, so many of these things come to the fore and I think that's again the route to partnering and finding someone who really understands this space can really help because we see a lot of businesses in platforms where that may have an angle of something that they see as being a benefit off of a few businesses or merchants in their cohort that they want to serve, but actually you've got to take a bit of a step back and have a look at the different ways. And fundamentally it's about framing. If you look at it, all of this is a lending product. It's just how you frame it and what am I actually taking, if you're a business you're thinking, what am I taking here, right? What am I getting into? So it's fascinating how UX, UI can actually play into some of this, but also the underlying unit economics and the repayments. Charlotte Al Usta (28:56) When we look at, so at the very beginning I mentioned that, you know, when we look at embedded payments, obviously the US is a couple of years ahead of the UK and Europe. How do you see the state of maturity of embedded lending specifically if you were to compare both regions? Luke Trayfoot (29:12) Yeah, I think in the US it's fundamentally a larger TAM ⁓ serviceable addressable market as well so that helps with regards to the go-to-market motion. There's also a fragmentation of the bank industry for lending and so that helps for the thesis of what we talked about earlier of getting the right offer of the right size at the right time in front of those customers through this technology. It's also a single market the majority unregulated, at least from a revenue-based financing standpoint. So that helps with access and fintechs to come in and actually drive change. I when you look at the lens of the UK and Europe, I'd actually see UK and Europe relatively different in the sense that the UK is more similar to the US. It's a single currency, a pretty good regulatory framework. Revenue-based financing is fundamentally unregulated. In the UK outside of consumer and so that helps but there's a very large difference in the size of the addressable market in those two. When you look at Europe that's where it is fragmented it's different regulatory landscape and when you look at the approach to market it's cultural differences. We typically see in say Germany, they quite often want to speak to someone on the phone. They quite often want to speak their language and understand what they are signing up to, which would be say different to a market, another market in Europe. And then on top of that, you look at markets in, Italy's a really interesting case on sort of how the economics can work or can't work, depending on where you come from. And then markets like Spain, which are slightly different on repayments, and markets like Poland, where there's no national direct debit scheme, and so you have to have different methods for repayments. And the list goes on. France, where it's a nationally owned credit bureau, and so that makes it difficult to go and get third party public accessible data on those businesses. So yeah, you can continue on that journey and those are conversations you don't need to have about the UK or the US. Charlotte Al Usta (31:20) Absolutely. The kind of biggest differences between those countries, first probably like access to data. You mentioned France is one example, right? And I think these official bureaus are also not updating the data on a regular basis, right? So you have a completely different profile there. And then indeed, like, you know, Italy is heavily government subsidized, which just makes it really hard to actually make a proper case out of embedded lending specifically, although it's again, like not, not a closed market either, but yeah, I think you need to navigate through some of those differences there. When we look at difference in maturities between verticals and horizontals, which verticals or horizontals do you think are most advanced as it comes to embedded lending today? Luke Trayfoot (32:04) So I do think the payment space we talked about that and I think in terms of being most advantageous, if you look at the vertical payments businesses, I think they're typically getting the most penetration and the widest adoption because of the focus that they have on the types of businesses that they're working with today. So it might be a smaller pool of businesses or a smaller set of customers, but ultimately, the customers are all looking for the same thing so it makes the ability to go live with lending to those customers through that platform slightly less complicated and you can be more direct. At the same time we've seen a huge amount of success in the horizontal payments businesses whereby typically larger more global brands that are looking to keep up with market trend, market positioning, reducing churn, all those net benefits I talked about earlier and so there's an very interesting race to be watching on who's doing what and where. But we come back to the argument about eyeballs and so a lot of these vertical businesses, if you wanted to cut it, have typically higher engagement from their merchant base than the horizontal businesses. There are obviously some outliers in both, but that's the trend. And I think software is now becoming that frontier. The addressable market in the US for vertical software is extremely large, and that's where in Europe it's slightly less and interestingly we were pondering on this a bit around sort of embedded banking as a service, embedded payments in Europe and I think that's some of this is a follow-on where it's quite difficult for those platforms to go and find a really strong provider for every market in Europe, everything that they need and so that fragmentation is actually multi-layered. But on the horizontal side we do see some success in software so the likes of accounting platforms and others where they have a sway of businesses that need access to capital. But they need these other components in order to have a successful program. So it can't just be card-based, can't just be single market. They're very global, they have different payment needs, slightly lower penetration in terms of embedded payments. So then you have to pick up and look at that whole cohort. And then you come to the banks as well, which is really interesting. We're seeing a lot of success in the neo bank space across the UK and Europe and in the US, whereby it's relatively similar to these horizontal software platforms because the money is coming from many different sources. The one added thing to this is that a lot of these banks, neo banks, they could be secondary account holders. So they have a primary bank, traditional bank that they hold that account with and they're utilizing these neo banks or digital first banks because they find it sort of more flexible to use, easier to use, and so they're looking to get service through that. So, yeah, on that race, it's going to be really interesting where the horizontal businesses have a very large cohort of customers that they can work with, but it's harder to penetrate, whereas on the vertical side, you've got perhaps a slightly smaller cohort of customers, but they're getting higher penetration. So we're somewhat watching this happen in real time, which is fascinating. Charlotte Al Usta (35:11) I think probably the more KPIs that will be published in the public domain going forward will also help accelerate the shift, right? So the likes of Toast, Lightspeed, Shopify are also starting to publish a lot of KPIs in the markets. So for example, Toast published that they originated over a billion in 2024. And, that's very similar to Stripe Capital now starting to publish KPI, so like Mollie, Adyen. And so that is also going to give confidence and is somewhat shaping the way of others also following, their way into embedded lending. Do you have a couple of best practices for marketplaces, for platforms, but also for fintechs or PSP that are looking to embed lending? Luke Trayfoot (35:59) Yeah, I'd be remiss to say not to go to market through partnership, of course. I think when you're looking at setting up an embedded lending or capital programme, it's really important to take that step back, look at the wide lens, but also have your business, whether it's a two-year, three, five-year strategy, in mind. And I mean that in the sense of, you going to different segments of businesses, different sizes of businesses, how will that change? But also the geographical footprint. And the capital intensity of the balance sheet if you were going to build, that was a really important construct. And that's where lending is somewhat different to payments. In payments, you want to believe to get as much volume as possible to scale with the take rate. In lending, if you effectively go a lot higher on the amount that you originate, but the program isn't set up to scale, that's where it can be really difficult and you have to shut it off or really sort pare it back. So take that wide lens. I think the second thing is when you're going through looking at a partner or a vendor to look at, get a panel, understand what they lift the bonnet, really understand how do their models work, what's their underwriting processes, what's their servicing like, who are their current use cases in your same peer set and how have they served them with one of the success stories. That will bring a lot to life than just a percentage you can get as a commission, pricing that they apply because those two things are actually outputs rather than the inputs so you have to look at those those pieces and then lastly business, like where are they on a health, financial health, are they sustainable, can they be a long term partner for you, will they be around in five years, these are all really important things because once you go live with a partnership you really want a partner to scale with that you can spar with through this and not someone that's having to focus on detractor elements of staying alive or raising capital, those are all great things but... Raising capital is very important, but ultimately what is their capital market mandates? How satisfied are they? How successful have they been in adding more mandates or keeping those existing mandates from the capital market providers? So many, many things to unpack there. Take a broad view, find a long-term strategy, the bonnet to understand what are the inputs going into that business, not just the outputs of what you're going to get from a revenue share or a price mechanic. Charlotte Al Usta (38:26) The way that we think about it is effectively, find a strong enabler, right? A strong partner that can help you. You just mentioned my data model servicing, et cetera. And then I think in addition, it really comes down to the go to markets, how you define what is eligible, how you market into your merchant base. Is it directly on the merchant dashboard where the merchant gets notified, that it's eligible, can sign up here. Then a lot also comes down to the sign up flow, etc. whereby comes again back to, you know, the quality of the underlying partner that you're working with, etc. Luke Trayfoot (38:58) Yeah, that's a fascinating point, Charlotte. I think you touched on this in payments and how you do that. And I think in lending it's even more fascinating because you can have a really well-built integration, fully embedded, fully customized, pre-qualified or pre-approved offers, which are effectively serving a soft or a firm offer to those merchants to accept capital. And you can get access to that money. The merchant can get access to that money within one click and instantly, in some cases. That route to market is where we see a lot of platforms coming to us to really understand, well I've got it embedded into my dashboard and I send a regular email to let the merchants know that those funds are accessible but we seem to be struggling and so we look at all sorts of go-to-market motions around direct mail campaigns in some markets across Europe and especially in the horizontal space, how do we get access because they may not actually look at the emails and they may not log into the dashboard. Sales let go to market is a really large part of this too where if there are sales heavy, sales let growth organisation that have...inside sales, field sales, they want to have more in their bag to go and sell in which case lending can actually be a great thing to offer to those businesses. It's also an entry point for those platforms to be able to say, if you join us, you can get capital, which is maybe something they don't get with their provider today. So sales is really important. And then also there's a lot of other things around. You've seen the emergence of terminal messaging for the POS providers. How do you display that? So the route to market is really how you can drive penetration and drive that adoption and get the attachment rates high. Charlotte Al Usta (40:41) Yeah, no, absolutely. think like go to markets again, like once you have a good product, obviously, highly embedded, the more embedded, obviously the better it is. I think then it really comes down to go to markets and how do you drive the penetration? How do you think about the end target states as it comes to embedded finance and also embedded lending specifically? Luke Trayfoot (40:59) Yeah, think when you take the, who knows, I guess would be my first answer to that because there's so much that could happen. When you look at all of these embedded components or embedded financial products. They are starting to actually converge to some extent, where payments is leading to lending, but then you've also got accounts, and so you want to have a stored value component where that money can hold. and now I want a card attached to that, and, you know, and I need to ensure for this over here. So I think they're all starting to converge, but each one of those component parts is a business in itself and an industry in itself, and so bringing those together is a very fun and exciting challenge for many platforms. I think, you as you look at it in the end state, will be somewhat, you who can nail that? But I don't think it's a one-winner space. I don't think it's a one-size-fits-all because each of the businesses such as YouLend I mean, we're very much an inch wide and a mile deep on lending. And that's a really important part of what we do because we want to be the best in that space. I think with the emergence of AI of course, that's helping on the data models, the underwriting, the pricing, testing things. So that's really helping. The digital experiences are becoming easier to integrate. think access to partnering quickly with whether it's APIs, SDKs and embedded components really helps platforms especially in that vertical space to integrate and go heavier and go deeper. And then lastly it's the servicing element. This is somewhat the yin and the yang to the AI where we're still very strong in human servicing. We have a large proportion of our employee bases there to pick up the phone so that when a business needs to call us because they're about to take an offer but they've got a question, they don't really feel comfortable just reading about that online and they want to speak to someone, we're there to pick that up. so I think that's where we perform very well on conversion metrics for a lot of our partners because that's the point in which the human touch is needed and so that's servicing an operational element and having strong KPIs. I think a lot of businesses will be trying to build all of those areas up and across all of that you've got geographical expansion so there's a few players in South America that are doing exceptionally well and seeing a lot of demand there. There's obviously Asia so looking at this from a global lens it will really start to grow wider as well through many different markets where there's a need for lending. Charlotte Al Usta (43:38) I think we are only scratching the surface. So there's still lots ahead. And Luke, perhaps my last question for today's podcast would be, how do you see the next five years? Luke Trayfoot (43:48) Yeah, I think when you look at embedded lending in particular there seems to be more appetite by the day and the week that we see here at YouLend so it's a very exciting space to be in. More businesses are coming around to the idea that they need to incorporate merchant services, value added services for their customers, putting their customers first and so I see that just continuing to grow. I don't see that flatlining or doing anything other than just an exponential growth. When you look at the emergence of some technology in the market, making access to market expansion and speed of payments because ultimately embedded lending has a proponent where the expectations are for it to be quick and frictionless and so those technologies allowing money to move quicker allowing for checks whether that be fraud or KYC to all happen seamlessly in the background. Those things will just keep adding to the value of this growth journey that's happening. So I would make a call, I think, with that plus AI in five years. We're looking at a very different space that businesses will get the vast majority of their capital requirements from those platforms that they utilize today, or the providers that they have for payments and banking and software. Charlotte Al Usta (45:00) I think the AI point is also an interesting one and an important one to mention, particularly in embedded lending. I think probably to close off this podcast, what really gets us excited is that, you know, the majority of the TAM today is still owned by banks. However, fintechs are coming in huge disruption coming, and you will also see an expansion of the total addressable market, right? Because the value proposition is stronger than a bank effectively going to market that you will also be able to charge more for that. And then lastly, access to financing is a pain point for SMBs today. And there's a lot of demand that is not being served, which is why embedded lending is only at the beginning. And we'll see very strong acceleration happening over the next couple of years. Luke Trayfoot (45:48) Fully agree. This access is going to continue. it's some of ourselves and our peers in this space are continuing to see that growth. So very exciting times. Charlotte Al Usta (46:00) No, absolutely. Thank you so much, Luke, for joining today's podcast. It has been an honor having you here today. thanks a lot and have a good day. Luke Trayfoot (46:08) Excellent, thanks Charlotte, it's been great speaking with you today and we hope you and the audience find it very useful. Charlotte Al Usta (46:14) Thanks Luke.

A panel discussion on the future of agentic commerce with Ben Brown (Partner, Flagship Advisory Partners), Craig DeWitt (Chief Product Officer, Skyfire), Robin Gandhi (Chief Product Officer, Lithic), and Colin Luce (Chief Executive Officer, Basis Theory). Together, we explored how agentic commerce could transform payments, digital identity, and risk, and discuss the opportunities and challenges ahead as this emerging landscape takes shape. This podcast episode is based on a webinar Flagship hosted on 14 October 2025: https://insights.flagshipadvisorypartners.com/webinar-the-rise-of-agentic-commerce . Do not hesitate to reach out to Ben Brown, Ben@Flagshipap.com with any comments or questions. Listen to the latest episode on the following platforms: Youtube Spotify Transcript Elisabeth Magnor This is Fintech Conversations with Flagship, a podcast production by Flagship Advisory Partners. In this podcast, we discuss the big topics shaping the world of payments and fintech, and each episode will bring you sharp insights and fresh perspectives from the industry. Whether you're building, investing, or simply curious about fintech, you're in the right place. And welcome to this episode of Fintech Conversations with Flagship. In this episode, we'll dive into one of the biggest buzzwords in fintech and payments: agentic commerce—the new world where AI agents act and transact on behalf of consumers and businesses. Over the past months, we've seen exploding interest in the field, and everybody's wondering: will agentic commerce change the game of payments like the internet did, or is it simply hype? In this episode, you'll first hear Ben Brown, Partner at Flagship, sharing an overview of what agentic commerce is and how it works for around 15 minutes. Then, for the rest of the episode, you'll hear a discussion panel with industry leaders from Basis Theory, Lithic, and Skyfire. This episode is based on a webinar we hosted, and if you'd like to watch the full video recording and presentation, this is available on Flagship’s website. Let's get started. Ben Brown Thanks, everybody, for joining. We'll kick off today's call with a short overview of what agentic commerce actually means, how it works, and the impacts on the payments ecosystem. Once I've set the context, we'll spend most of the time on a discussion with three innovators who are on the front lines of building new payments and infrastructure for agentic commerce: we’ve got Craig DeWitt at Skyfire, Colin Luce at Basis Theory, and Robin Gandhi at Lithic. It’s a cross-section of companies building infrastructure for the agentic commerce economy across things like end-to-end payments platforms for agentic commerce, digital identity for agents, virtual cards, and supporting some of the cutting-edge evolution of network tokenization we see. I really appreciate all the panelists for joining us today. I'll try to keep the Flagship part of the discussion as brief as possible because we want to set good context for the discussion to come. One place we wanted to start is: does this matter, and is this a real thing? We hear from clients a variety of perspectives all the time. There aren't many forecasts out on agentic commerce yet, and the ones that do exist vary widely. Some say as high as 40% of all global transactions by 2030—five years from now—will be agentic-influenced. Our point of view isn't that aggressive, but, like Bill Gates said, people tend to overestimate what will happen in a year and underestimate what will happen in 10. To that end, we do think agents are likely to be meaningful and perhaps influence ~20% of digital payments in the U.S., ~30% of total payments in the U.S., in 10 years. That means we're at the early stage of a once-in-a-generation emergence of a new form of commerce and payments. It’s exciting to be here at the ground floor—for everyone in payments, and broader merchants, online advertising, and AI builders as well. While we're early, we're also seeing a parade of announcements across the industry, from many different players. Merchants like Amazon and Walmart have rolled out conversational shopping assistants inside their apps. Walmart has even rolled that out on the seller side with its “Marty” agent for marketplace seller onboarding. That isn't something we talk about a lot, but a big potential impact of agentic AI is expanding participation in the digital economy—smaller businesses, more custom goods, the circular economy—all the things that can be hard to put online. Agentic AI can really help. We're also seeing CDNs like Cloudflare and Akamai partnering with companies like Tollbit—and even Skyfire, who’s with us today—so publishers can authenticate and monetize AI bot traffic, which is increasing at an enormous rate. Today, roughly half of all web traffic is bots and half humans. And of those bots, it's almost 50–50 between good bots and bad bots. One big impact: if your fraud models assume all bots are bad, you're going to have a lot of false positives as agentic traffic takes off. We see big tech companies like Google announcing protocols for agentic-led payments with long lists of merchants, FIs, and payment networks participating. Visa and Mastercard have both announced solutions to evolve tokenization for an agentic world. Even today—six hours ago—Visa announced its latest proposal around agentic identity and trusted agent identities. And these early announcements are quickly turning into live experiences, such as shopping on Perplexity or buying from Etsy sellers natively within ChatGPT, which you can see here as an example on the page. As this all comes together, across the customer journey AI promises to impact everyone: the search engines and social platforms that drive digital advertising, merchants, payment processors, card issuers. Some impacts are obvious—zero-click search and embedded buying diverting consumers from visiting merchant sites, or agents confusing fraud tools tuned to recognize bot traffic. Some are less obvious—explicit agentic consent trails could reduce certain dispute types if we can verify who authorized what, especially at SKU level. At the same time, issuer costs for card benefits (extended warranties, price protection, etc.) could change if agents systematically trigger claims at dollar amounts none of us would manually monitor. Every company in payments—and the broader digital commerce ecosystem (merchants, ad tech, commerce platforms)—should think about second-order effects, not just the obvious headlines. There are multiple ways agentic commerce can happen in retail. It won’t all be shopping within a conversational interface of an LLM. A few models: Large merchants are evolving onsite search into more conversational experiences. Platforms like Shopify are building ways for customers to create carts and buy across different sellers in the Shopify ecosystem, not just within one seller. In some cases, agents help you find the item, then link you to the merchant site (no new infrastructure needed), monetizing via existing affiliate platforms. Where it gets interesting is when agents act as facilitators or aggregators—either initiating payments through the merchant’s commerce/payments stack, or acting as the marketplace themselves and owning the full customer relationship. Beyond these, we may see specialized agents for parts of the journey. For example, agents that take care of the checkout form for you—even if the rest of the shopping journey is normal. That could make every product page a checkout page and give every merchant one-click checkout, without reconfirming shipping info and CVV codes. We’re payments people at Flagship, so: how are payments working in these scenarios? We see four primary models: Autofill checkout forms. Works, but brittle—and it hides that an agentic experience is happening. Collect-from-user, pay via virtual cards to merchant. Similar to how platforms like DoorDash work today. Early agentic commerce is digitizing human “agentic” relationships we already use (Uber Eats, DoorDash), including B2B analogs. Tokens with richer identity/authority data. More digital identity, delegated authority, and limited-use credentials—the direction networks are steering. Machine-native settlement rails. E.g., the Cloudflare–Coinbase work and the X402 Foundation repurposing HTTP 402 for on-chain stablecoin micropayments—relevant for monetizing API calls, content access, and pay-per-use bot traffic. Cloudflare has said they send out huge volumes of HTTP 402 “Payment Required” responses daily, largely ignored today for lack of infrastructure—agentic AI may change that. Networks are steering toward an agentic token model. There’s a range of protocols and frameworks already announced. Common theme: evolve the tokenization infrastructure (billions of tokens over the past decade underpinning digital wallets) for an agentic world, with more data. Differences remain in digital identity and intent signals. And these aren’t the only solutions; for example, Worldpay announced a partnership with Trulioo on a “Know Your Agent” framework. Panelists here have also built solutions in this space. Lots of proposals and early work—unclear exactly what “wins.” Double-clicking one example—the Google AP2 agentic payments protocol—you’ll hear terms like intent mandates, cart mandates, and payment mandates that aren’t familiar today. Think of them as notarized breadcrumbs of who asked for what, what items and price were approved, whether a human was present, and what payment method to use. That breadcrumb trail will be gold for issuers, acquirers, and merchants to tune fraud models and adjudicate disputes. Those signals will create impacts for every player. Three takeaways: Don’t fight good agents—authenticate and embrace them. Expect changes in digital identity, consent, and SKU-level data; start tinkering now so you’re ready when volumes scale. It’s a good time to pilot while volumes are low. With that, let’s shift to our panel—people hands-on, building the future. I’d love to bring in Colin from Basis Theory, Robin from Lithic, and Craig from Skyfire. It’d be great if each of you could quickly introduce yourself, what your company is doing in agentic commerce, and what makes you most excited about the space. Robin Gandhi (Lithic): My name’s Robin. I run Product at Lithic. Lithic is a next-generation modern issuer processor—similar vein as the Marketas of the world. We issue cards. We’ve been around in many iterations for the last 10–12 years; in this iteration—selling infrastructure—for the last four. For agentic commerce, we’ve been experimenting, especially with folks here on this call. Where we as an issuer really play is around virtual cards. We’ve been exploring how to generate highly controlled virtual cards and give them to an agent to make purchases. It’s early days, but we’re pushing hard because we believe virtual cards are one way to solve this. There are other mechanisms, and we’ll get into those, but virtual cards are the obvious step one. Colin Luce (Basis Theory): Colin Luce, co-founder and CEO at Basis Theory. Our platform puts merchants and platforms back in control—with vaulting and tokenization as the underpinnings—so you can imagine how that maps to agentic commerce. Many use cases we’ve enabled over the past 3–4 years are distributed, embedded shopping experiences; agentic shopping is the next evolution. Social shopping has grown (TikTok Shop, Instagram links); ChatGPT is just the next medium where attention lives. We focus on enabling commerce where attention lives. Most in-production use cases today are non-AI “agentic” commerce experiences; we’re at the precipice of the agentic-AI phase. Craig DeWitt (Skyfire): I’m Craig DeWitt, co-founder of Skyfire—an agentic commerce platform. We serve AI platforms/agents and merchants who want to accept them. On the AI side, we provide identity and the ability to use payments to buy what’s needed—both stablecoins and, now with what card networks are bringing, tokenized cards. On the merchant side, we let merchants identify bots, identify not just the agents but the principals behind them (the user or business), and accept them as paying customers—through the website (most volume today) and headless via a variety of API approaches and protocols. That’s Skyfire. Ben Brown Awesome—thanks to all three. Great complementary panel: Craig is all-in on agentic AI end-to-end, Colin enabling tokenization that underpins a lot of this (and evolving into broader solutions), and Robin/Lithic from the cloud-based issuer-processor perspective. These components come together to make the future happen. Let’s jump in. Colin, you said we’re not seeing a lot of truly agentic experiences yet. What are the most mature ones today—verticals, apps, merchants? Colin Luce I like your friend’s take that we should celebrate building blocks, although it can sound like a participation trophy. The most mature “agentic commerce” today is non-AI agentic. Example: Roku’s shoppable ads platform (we helped enable ~3.5 years ago): one-click buy from the Roku device. That relies on tokenization, checkout APIs—the same backend ideas we’re contemplating, just without AI. Important nuance: agentic commerce vs agentic payments. ChatGPT Commerce and Perplexity are agentic commerce (efficiency in discovery/comparison). The payment flows are existing infrastructure. So when people say “what about risk/fraud?”, if payment flows mirror today’s, existing tools should apply. Transaction volumes on AI platforms are very early (think tens/hundreds per month at some), so we’re at day one. On disputes/chargebacks and legal frameworks—it’s like self-driving cars. Who’s responsible in a crash? We’re years into autonomy; accidents didn’t stop adoption, but adoption is still not universal. It’s amazing we can autonomously drive across San Francisco, but we can’t autonomously book an airline ticket reliably. “Atoms vs bits.” Robin Gandhi Colin and Craig probably see more consumer examples. I think B2B use cases will be more interesting. People like buying fun stuff; removing the person from that experience is less compelling. The transformative impact is on things people hate buying—marketing spend allocation (“here’s 100k, spread across platforms”), supplier payments, low-consideration replenishment. Smaller ecosystems where trust can be built. That’s where we’ll see traction first. Craig DeWitt On the e-commerce use case people imagine—new interface where an agent purchase happens—the coolest I’ve seen is Consumer Reports: they already have millions of users who read reviews; add a “Buy it” button. Want a toaster? Click buy. They spin up a headless browser, navigate to the merchant, find the right SKU, autofill card details, and buy on behalf of the user. That uses card tokenization, etc. The hard part so far is access: how does the agent get access to the site? HTTP 403 errors are going through the roof as sites block programmatic access due to AI traffic. A big part of our business is helping agents identify themselves to get access. We’re seeing many B2B use cases here, because the way the internet worked (open crawling) is changing as bots flood it. It’s much harder to get access than two years ago. Ben Brown I see Cloudflare “are you human?” a lot—false positives are up. That’s a fundamental change and creates opportunities. Let’s talk where this moves faster/slower. a16z wrote that AI plays different roles by purchase type (impulse, essentials, lifestyle). Some will be algorithmic impulse nudging (TikTok); others price trackers; others interactive AI coaches (mortgages, autos). Some sectors move faster. If we’re here in 1–2 years, what moves the fastest? Colin Luce It depends on context. The value of AI is proportional to the context it can access. Procurement has written rules—high context. Consumer Reports—very acute context. Social platforms have massive data about us. ChatGPT/Perplexity are well-positioned: they have conversational context (are you value-seeking, loyalty-driven, etc.). Payment transaction descriptions are still messy (15 years on). Networks saying they’ll provide context—maybe—but “$3,000 at United” doesn’t tell you if I bought one business-class seat or seven economy seats. Or “book me a flight to Miami under $X over the next two months”—what if my plans change? Without calendar/travel context, it breaks. So it’s not B2B vs B2C; it’s wherever the agent can get the most context. Ben Brown What’s the single biggest blocker today—payment plumbing, digital identity, data quality, consumer trust, or something else? Craig DeWitt Procurement: we automated buying a specific resin for a large OEM partner. Identity and payments worked; internal processes were the hurdle—ERP, wires, CSVs, manual steps. For e-commerce, the blocker is user adoption—is it 10x better? For B2B content publishers, the blocker is acceptance: ad models are breaking, but they need to understand protocols/services to allow agents and accept programmatic payments. Net: “agentic commerce” is a huge umbrella; each use case has its own hurdles. Some will react by turning things off (banks, publishers, merchants). Others will endure a painful transition while putting new infrastructure in place. If everyone “turns it off until infra is ready,” we get a chicken-and-egg problem. Robin Gandhi Merchant acceptance is the biggest piece. We’re building enablement, but the merchant needs a clear signal: “this is good traffic, we captured intent, and we know the agent.” Once we agree on a protocol and acquirers support it, we can solve it. We tried a simple experiment—making a donation to the San Mateo Library—and it got rejected as fraud. That shows how broad the “block bots” posture is. We need acquirers/PSPs to enable the right protocol end-to-end. Ben Brown We’ve seen a flurry of frameworks—Visa, Mastercard, Google (AP2), Stripe (ACP), etc. Are they fundamentally different or flavors of the same thing? Colin Luce My biggest concern is competitive dynamics and incentives. Collaboration is needed among natural competitors. AP2 is pushed by Google; ChatGPT is well-positioned—are they going to play nicely? On PSP/acquirer side, Stripe is behind ACP; will Adyen or Checkout be comfortable supporting a rival’s protocol? Specs might be open, but decisions aren’t always purely technical. If merchants have to integrate 12 protocols, adoption stalls. Even within the networks’ offerings (e.g., VIC/AgentPay), issuer support is limited. You can’t ask consumers to pick their issuer behind the scenes. We need convergence. Craig DeWitt Common threads: identity exchange and a payment construct. But many specs try to position who holds power. AP2 (Google) wants to collect mandates; networks say “we carry chargeback risk, we hold mandates”; ACP says “just integrate OpenAI and we’ll handle it.” That’s not great for industry simplicity; it is an opportunity for startups to “future-proof” merchants. On SKU-level data: ACP/OpenAI asks for full product catalog/pricing APIs. Big brand merchants say no way—they won’t become a pure fulfillment back-end. They want a direct relationship with the end user and visibility into what the agent is accessing. Some will turn it off and lose sales; others won’t give it all away. Etsy/Shopify are more likely to lean in, given their merchant base. A Home Depot-type merchant wants the contractor’s agent to buy 10 feet of pipe—but they need identity exchange to preserve the relationship and history. Colin Luce Merchants are asking: what’s the tax? Everyone pays a tax today (ads CAC, take rate). Is the agentic platform tax 2% or 20%? If the tax is zero and traffic is free, merchants might share SKU data. That decision hinges on the economic model. Ben Brown We’re close to time. One piece of advice for the ecosystem—what should they do tomorrow? Robin (issuers), Colin (PSPs/acquirers), Craig (merchants). Robin Gandhi (Issuers) Be in the conversation on protocols. Work with the card brands to support emerging token frameworks. Most modern issuers can spin up highly controlled virtual cards already—connect the dots and be ready. Colin Luce (PSPs/Acquirers) You’re the gatekeepers to merchants. Do the work to make adoption feel like adding Apple Pay/Google Pay—as close to a flip-a-switch as possible. Your one-to-many leverage is key. Craig DeWitt (Merchants) (Easy answer: reach out to Skyfire! And call Flagship for strategy.) Practically: start authenticating good agents, run controlled pilots, and choose a partner that abstracts protocol complexity so you’re future-proof. Ben Brown Thank you to the panelists and to everyone in the audience for joining us. Elisabeth Magnor That’s it for now. Thanks for listening to Flagship. We’re always happy to chat. Stay tuned for more exciting fintech conversations.

A panel discussion on the future of agentic commerce with Ben Brown (Partner, Flagship Advisory Partners), Craig DeWitt (Chief Product Officer, Skyfire), Robin Gandhi (Chief Product Officer, Lithic), and Colin Luce (Chief Executive Officer, Basis Theory). Together, we explored how agentic commerce could transform payments, digital identity, and risk, and discuss the opportunities and challenges ahead as this emerging landscape takes shape. The presentation is available for download by clicking the PDF button in the right hand side panel (desktop view) or below the post (mobile view). Please don't hesitate to contact Ben Brown at Ben@Flagshipap.com with your comments or questions. Transcript: Amilee Huang | 00:06 Okay! We have around 70 people right now in the attendee room. We'll go ahead and kick it off and let people join as people come in. Thank you, everyone, for coming. Today's event is a webinar and discussion panel on the rise of agentic commerce. Attendees, you guys are invited to submit questions through Zoom. We have enabled the chat function, so feel free. We are always good for engagement. We love to answer questions, of course, after giving our own opinions. Now we are recording this webinar, just to let everyone know. We will send around the recording afterwards, and it will be available on the Flagship website. Amilee Huang | 00:44 Your host and first speaker will be Ben Brown. He is one of the partners at Flagship so I'll pass it over to him. Ben Brown | 00:48 Amilee. Really appreciate the introduction and everybody for sharing their time today. One note. I don't know if everybody's Zoom looks the same as mine, but I see at the top there's a button for a webinar, and then Amilee's screen. On Amilee's screen... You'll be able to see the slides that we're going to present, but that might be easier for those of you in the audience. So, I think we can go to the first slide. Thanks everybody for joining. We'll kick off today's call with a short overview of what Agentic commerce actually means and how it works and the impacts on the payments ecosystem. Then, once I've set the context, we'll spend most of the time on a really good discussion with three innovators who are on the front lines of building new payments and structure infrastructure for Agentic commerce. On the title page, we have got Craig DeWitt at Skyfire, Colin Luce of Basis Theory, and Robin Gandhi at Lithic. A cross-section of companies that are building infrastructure for the Agentic commerce economy across things like... At the end of payments platforms for Agentic commerce, and digital identity for agents to virtual cards to supporting some of the cutting-edge evolution of network tokenization that we see. So, really appreciative for all the panelists for joining us today. I'll try to keep the flagship part of the discussion here as brief as possible because we just want to set some really good context for the discussion to come so that we can move forward. So, what place did you want to start? Thinking about does this matter and is this a real thing? Because we hear from our clients a variety of perspectives all the time. There aren't a lot of forecasts out on Agentic commerce at this point. The ones that do exist, though, very widely. Some say as high as 40% of all global transactions by 2030 in five years will be Agent influenced. Our point of view isn't that aggressive, but it's kind of like Bill Gates said: people tend to overestimate what will happen in a year and underestimate what will happen in ten years. To that end, we do think agents are likely to be meaningful and perhaps influence 20% of digital payments in the US, 30% of total payments in the US in 10 years. That means we're at the early stage of a once-in-a-generation emergence of a new form of commerce and payments. So, certainly, it's exciting to be here at the ground floor of this, and I think it should be exciting for everyone in the payments industry, even broader merchants and participants in the online advertising ecosystem, and companies building the AI future as well. So, moving on to the next slide, you know, while we're really early, we're seeing a constant parade of announcements from across the industry, and those announcements are coming from all kinds of different players. You've got merchants like Amazon and Walmart who have rolled out conversational shopping assistants inside their apps. Walmart has even rolled out that on the seller side with its Marty agent for marketplace seller onboarding, which isn't something we talk about a lot, but that's certainly a big potential impact of agentic AI, as it could expand the size of the pie in terms of who can participate in the digital economy. Smaller businesses, more custom goods, the circular economy. All these kinds of things that can be hard to put online agentic AI can help with that as well. We're seeing content delivery networks like Cloudflare and Akamai partner with companies like Tolbit or even Skyfire on who's with us today? So, publishers can authenticate and monetize that AI bot traffic, which is just increasing at an enormous rate. So, today, something like half of all web traffic is bots, half as humans. Of those bots, it's almost 50/50 between good bots and bad bots, which is one of the big impacts that we see affecting the industry. If you've had fraud models, for example, tuned to assume all bots or bad bots, then you're going to have a lot of false positives in the future as Agentic takes off. We see big tech companies like Google announcing protocols for agent-led payments with a long list of merchants and FIS and payment networks participating in that. Visa and Mastercard have both announced solutions to evolve tokenization for an agentic world. Even today, six hours ago, Visa announced its latest proposal for this space around agent identity, trusted agent identities. These early announcements are quickly turning into live experiences, such as shopping on Perplexity or buying from Etsy sellers natively within ChatGPT, which you can see as an example on the page. So moving forward, as this all comes together across the customer journey, AI promises to impact everybody. The search engines and social media platforms that drive digital advertising today, merchants, payment processors, and card issuers. Some of the impacts will be obvious, such as zero-click search and embedded buying, diverting some consumers from actually visiting merchant sites. Agents could confuse fraud tools that are tuned to recognize bot traffic, as we just mentioned. But some impacts are not so obvious, such as explicit agent consent trails could actually reduce certain dispute types if we can verify who authorized what, especially at the SKU level. At the same time, issuer costs for things like card benefits, extended warranties, price protection, and all the benefits that are bundled into most of the rewards credit cards we all carry in our pockets but rarely use could really change if you have agents who are systematically triggering things like price protection claims for dollar amounts that any of us wouldn't spend the time to really monitor. So, every company in the payments ecosystem, but really in the broader digital commerce ecosystem, whether that's a merchant or an online advertising commerce platform provider, et cetera, should think about second-order effects as well, not just those obvious ones that dominate some of the headlines. Moving forward, there are multiple ways that agentic commerce can happen in a retail context. And it won't all be shopping within the conversational interface of LLM. So, a few of these models are large merchants who are already actively evolving their on-site search into a more conversational experience, and platforms like Shopify are building ways that customers can create carts and buy goods across different sellers across the whole Shopify ecosystem rather than just staying within one seller's environment. In some cases, agents will help you find the item that you should buy, but then link you out to the merchant site, which doesn't really require any new infrastructure. They can monetize their role through preexisting affiliate commission platforms already exist out there, kind of a road to the personal shopper road. But where it starts to get interesting is when agents act as facilitators or aggregators, either initiating payments through the merchant's commerce and payments infrastructure or acting as the marketplace themselves and really owning that full customer relationship. Beyond these three models, we might see some more really interesting innovation in the future. Just a few early ideas in the bottom row there. But one example is you can see specialized agents that just take care of one part of the journey. So, for example, agents that take care of the checkout form for you, even if the rest of the shopping journey looks completely normal. This could be a solution so that every product page is a checkout page, and every merchant has one-click checkout. Even if you're not really known to that merchant yet, or even if you are and you just want to breeze through the checkout experience and not reconfirm shipping information, CVV codes, and everything, you just want to click a button and have it be magical checkout. There are ways that agentic AI can help with that too. It doesn't have to be just this experience of everything happening within the chat bot interface that we talk about a lot today, which is moving forward. We're payments people here at Flagship, and so we think about things through that payments lens. So we ask ourselves, how are payments working in these scenarios? We see four primary models. First, agents might simply auto-fill checkout forms, which can work but is brittle and hides that an agent-based experience is happening. It looks like a normal e-commerce experience from the perspective of everybody sitting behind that merchant and maybe the merchant themselves. The second column... Agents might collect funds from the end user and use virtual cards to make the payment to the merchant. That's pretty similar, actually, to how platforms like DoorDash work today. That's one way to think about the early days of agentic commerce: it's really just digitizing the human agent relationships that we already use and already trust. When you use platforms like Uber, Etsy, or DoorDash, you're asking somebody to place that order and pick up that food or pick up that item and bring it to you. Agentic AI is really digitizing some of those relations that exist, which exists in the B2B space as well. We'll talk about that a little bit later. The third column... Agents might use tokens that carry more information on digital identity, delegated authority. You know what you're able to, what they're allowed to buy, and limited use credentials. This is the way the networks are really steering things into the future, which we'll talk about soon. Then the last one we see emerging in some cases live, in some cases still experimental is machine-native settlement rails. So, examples are the Cloudflare-Coinbase partnership around the X42 foundation repurposing HTTP402 calls for on-chain stablecoin micropayments, which is relevant as a way to monetize things like API calls and content access and potentially even pay-per-use bot traffic between agents and publishers. I think I saw a stat that Cloudflare says they send out a billion HTTP402 payment-required responses every day, and those are largely ignored today because there isn't really the infrastructure to pay for those things. But in the future, as that infrastructure starts to become available and it starts to become even more important with the rise of Gen-Z, we may actually see that new form of monetization happen on the web. So, moving forward, we said that the networks are trying to steer things towards this agent token model. And you know, we do see a range of protocols and frameworks that have already been announced. So across all of these, we don't have the time to go into the details, but I think across all of these, a point of commonality is that they are focused on how do we use that tokenization infrastructure that's been used for billions of tokens so far in the last ten years or so and really underpins a lot of the digital wallet solutions that we use today? How do we evolve that token infrastructure for an agentic world and add more data to those things? While there are commonalities, there are some differences, especially in how those digital identity and intent signals will work. These aren't the only solutions either. This is just a sample of them from some of the biggest companies. But just as an example, Worldpay recently announced a partnership with Trulioo on a Know Your Agent framework. Then, some of the panelists I'll introduce in a moment have built solutions in this very space. So I think a lot of proposals and a lot of early-stage work is going on to build the future, but it's not certain exactly what that will look like. But if we want to double-click and just look at one of those examples to go past the press releases on the next page, taking a look at the Google API 2 agent payments protocol, you'll hear terms like intent mandates, cart mandates, and payment mandates that are not familiar in the payments world today. The way to think of those is that they're almost like notarized breadcrumbs of who asked for what, what items and prices were approved, whether a human was present or not, and what payment method is supposed to be used. That trail of breadcrumbs will be a goal for the future for issuers, acquirers, and merchants as they look at how to tune fraud models and how to adjudicate disputes that might pop up. Those things will create impacts for every player in the ecosystem. Four merchants, four payment processors four issuers if they really want to make use of those signals. So, with that, you're just seeking to give a foundational understanding of the space so that everybody is on the same page. But, you know, would love to do two things: one, just summarize the implications of what I just said there. So, I think there are three takeaways for those of you in the audience. One is to figure out ways to not fight good agents but actually authenticate them and embrace them. The second is that there's going to be a lot of changes around digital identity, consent, and skill-level data that might happen in the industry. So, starting to tinker with that stuff and learn about that stuff now is going to be useful in the future when you need to move those things into production or you see volumes start to scale up, already have those capabilities in production, and then you know it's a good time to pilot the stuff while volumes are low. With that, I'd like to shift gears and move into our discussion panel with people who are not necessarily prognosticating on the industry from an arm's-length perspective but instead, hands-on, out there, building the future. So, with that, I'd love to bring in Colin from Basis Theory, Robin from Lithic, and Craig from Skyfire. You guys are all on the chat already. I think we could take down the slides, and I'll come on video. It'd be awesome to just have each of you introduce yourselves, what your company is doing in the agentic commerce space, and what makes you most excited about this space? Robin Gandhi | 17:01 You gonna popcorn this or are you gonna just go for it. Ben Brown | 17:03 Yeah, you should go for it, Robin. Last to join first to speak, there you go. Robin Gandhi | 17:08 You know, I get it, but the garbage goes out first. All right, so yeah, my name's Robin. I run product at Lithic. Lithic is a next-generation, modern processor, similar in vein to your Marqetas of the world. We issue cards. We've been around for, well, in many iterations for the last 10-12 years, but in this last iteration, selling infrastructure for the last four. I would say, when it comes to agentic commerce, we've been dabbling in a whole bunch of stuff to try to make it work, especially with the folks that are here on this call. Where we as an issuer really play is in the, what Ben talked about, around virtual cards. So, where we've experimented so far, really is how can you take what we think are very controlled virtual cards that we can generate and then how can you give them to an agent to be able to actually buy them? I think we're in early days of experimenting on this, and I think we've started. We're pushing hard because we do believe that cards, virtual cards, is the way that we can solve this in one way. I think, as we go through this discussion, we'll talk about other payment mechanisms that can help, but virtual cards are really easy. I think, to your point, Ben, this is probably step one. Anyway, right, I'll save it for the discussion, but hopefully, that's helpful to give some background. Yeah, I'll call you and take the next one, maybe. Colin Luce | 18:56 Sure, thanks. So, I'm sure I know a bunch of you, but Colin, this cofounder and CEO of a Basis, our core platform is all centered around putting merchants and platforms back in control with the underpinning technologies being vaulting and tokenization. So, I'm sure you can imagine how that translates into our foray into agentic commerce. I think a lot of the use cases we've enabled over the past three or four years have been around these distributed, embedded, shopping experiences. Agentic shopping or commerce is just the next evolution of that. We've been in the midst of this shift towards more social shopping over the past five years, right? You look at TikTok Shop, Instagram Links, and all of that. ChatGPT is just the next medium by which that's going to occur. Or maybe put it another way, shopping is moving closer to where attention lives. I think that's the angle we come at this from: what are the dynamics at play to facilitate or enable commerce and transactions where attention lives today? So, I think Ben will get into some of the big use cases today. But I think the reality is that a lot of the in-production use cases today are non-AI agentic commerce experiences, and we're just at the precipice of moving into the agent-based AI stuff, but we can get into that more. So, last but not least, Craig. Craig DeWitt | 20:39 Thank you. My name is Craig DeWitt. I'm the co-founder of Skyfire. So, Skyfire is an agentic commerce platform. We serve both the AI platforms, AI agents, as well as merchants to accept them. On the AI platform side, really, what we provide is identity and the capability of using payments to go out and buy the things that are necessary for both stablecoins and now, with the advent of what the card networks are bringing to market, tokenized cards for purchase. On the merchant side, we allow merchants to identify bots, to identify not just the agents themselves but the principal behind that, the agent that's the user or business, and then to actually accept them as paying customers. Both through the website today, which is where we see the primary amount of our volume, but helping merchants with this explosion of protocols to be ready to accept agents in a headless fashion via a variety of API approaches and protocols we'll talk about. That's Skyfire. Ben Brown | 21:39 Awesome. Thank you all three for taking the time out of your busy schedules. I love that we have this really complementary panel. So, I've got this cross-sectional view of the industry. We're talking to big merchants. We're talking to the networks. We're talking to acquirers and issuers and wallets. But you guys are going deep on Craig, all in on the agent tech AI world with the end of platform, helping to enable the tokenization that underpins a lot of this, and I know it's evolving, Basis theory into broader solutions as well. Then Robin and the Lithic team from the cloud-based issue processor perspective. Those are all components that come together to make this future happen. So, I think this will be fun. So, let's jump into it with that. I think the first place, Colin, you said, we're not really seeing a lot of agent experiences out there quite yet, but what are the most mature agent-based commerce experiences out there today? There are certain verticals or apps or merchants, and I asked this question to a friend at one of the big tech companies the other day, and they said it's the wrong question for this point in time right, because we're still building the infrastructure for the future. What we should all take celebrate the winds around is putting in place the building blocks of how this works and the components of that infrastructure for the future. It's not about whether Walmart has gone live, but at that said, it seems like Shopify, Walmart, and Amazon all have gone live in some ways with some version of this. So, yeah, I'd love to just hear from you guys in terms of spending all this time, all your time in the space, what do you think are some of the most interesting experiences out there? Colin Luce | 23:35 Well, I'll start by saying I love that take by your friend. I'll admit, it sounds a little bit like a participation trophy award, though. I don't know if we should pat ourselves on the back for just putting building blocks in place, but I hear that point. Look. Ben Brown | 23:49 I do think it's the startup world, right? Colin? We just... Revenue will come later. Let's Like. Colin Luce | 23:55 I can play the game. I know. Ben Brown | 23:57 The game well. Right. Colin Luce | 23:58 Yeah, no, look, I do think it is these non-AI-agentic commerce experiences, right? For example, one of the first use cases we enabled three and a half years ago was Roku's Choppable ads platform. If you think about what that is, it's enabling a one-click buy experience directly from your Roku device. That's exactly what I was talking about in terms of delivering a seamless commerce experience where attention lives. A lot of that is predicated on the backend around tokenization, checkout APIs, a lot of the stuff we're contemplating here, there's just no AI involved in it. I think there's an important nuance for us to separate here between agentic commerce and agentic payments. I think a lot of the use cases, even the ones that are super early, whether it's the chat GPT ones or the Perplexity ones, I'm comfortable saying they're agentic commerce. I'm not necessarily comfortable saying they're agentic payments because the value that AI is providing in those is the accelerated efficiency. The discovery, the comparison aspect again, the payment aspect is all existing infrastructure and flows that we've had in place for a long time. I think there's another aspect to that, which is this carte blanche statement by people like, "What about the risk? What about the fraud?" It's like, "Whoa!" But the payment flows are identical or exactly what we have in place today. So if we have tools to mitigate risk and fraud in those scenarios, shouldn't those apply here? I think so. So that's what I'd say. Look, I think what ChatGPT is doing with ChatGPT Commerce and what Perplexity is doing, it's super interesting, but it's super early. I mean, I don't know any of the specific numbers. But I've heard Perplexity is in the... Ten of transactions a month or maybe hundreds or something, but we're talking about very early in terms of true agentic AI commerce. Ben Brown | 26:09 At least we'll talk about the dispute and chargeback impact of agentic AI, and how do we know the legal frameworks around that? It reminds me of what people said about self-driving cars, right? Who's responsible when a self-driving car gets into an accident? We're five years, ten years, and having self-driving cars in some form, and self-driving cars have had accidents, but people haven't stopped using them. It hasn't been super widespread. So these things will matter, but they'll matter maybe over the long arc of time right? Colin Luce | 26:42 And its kind of amazing that we can take a fully autonomous self-driving car from one end of San Francisco to the other, but we can't autonomously book an airline ticket today, right? So there's always this debate and tech about atoms versus bits, and it feels like atoms are ahead of bits in a lot of ways when it comes to this stuff, which is interesting. Ben Brown | 27:07 Robin, what do you think? Robin Gandhi | 27:09 What I was going to say is that I think Colin and Craig have probably seen more real-world examples. I think we can see it with a lot of the consumer use cases. I think in the grand scheme of things, the B2B use cases are going to be the more interesting ones. Again, we're early days, so it's hard to say, but if you think about it, people like buying stuff. So like removing the person from the buying experience. I think it's sexy to talk about. I'm going on a trip to Bali. What if somebody could just book the whole damn thing for me? But you kind of want to see the hotel. You kind of want to see all this stuff. But I think it's easy for us to grasp it's the stuff that people hate buying that is going to really be transformative from agentic perspective, right? So I mean, a lot of people talk about the marketing example: I need to have a budget of ten grand or a hundred grand, and I want to spend it across these platforms. This is what I'm looking to do. But that's stuff like that or a lot of the supplier payments that we're talking about. I think that's where we're going to see the most traction. So I think you're going to start getting... If we start talking about trust, that's where there is a small enough ecosystem that you can build trust, and you can essentially just have these buying decisions made because you just don't care. It doesn't really matter. When you need to get an extra few yards of pipe or pencils or whatever it might be, that's the kind of stuff that we're going to really see enable through agentic. So for me, I think that would be the really interesting piece of it. But again, it's early days, we have to figure out a lot of this other stuff. Craig DeWitt | 29:02 Yeah. So what we see at Skyfire, at least on the thing that people think about when they think of agentic commerce, is really e-commerce use cases where there's this new third party, a different interface of people interfacing with that to make a purchase. The closest case I've been closest to is what Consumer Reports is working on. They already have millions of users, they already get reviews of products within their interface, just have a button to go and buy it. So it's like, "Okay, do you want a toaster?" Like, "Unlike your Bali hotel room for your honeymoon." It's like, "This is the highest-rated toaster. Do I really want to find the right merchant and make sure the SKUs match? Just click by it." What Consumer Reports do is they'll spin up this browser, they'll navigate to that site, they'll find the right product, and then they'll put the credit card details in the checkout UI and then click "buy" on behalf of the user using the card tokenization stuff. But I think what we found is that the hard part of that, so far, is how does the agent get access to the site in the first place? When you talk about those four or two errors that are getting thrown out, four or three errors are going through the roof as well. Four or three errors just... "Hey, I identify programmatic access. I don't want bots on my site, and a big part of our business." This ties into what Robin was talking about on the B2B use cases. A lot of what powers commerce in general are these programmatic accesses to websites. Those drawbridges are getting put up right now because of the increase in AI traffic. A big part of our business is yes, these payments, but the other big part is agents just needing to identify themselves to get access to a website in the first place. We've seen a ton of B2B-type use cases explode there. Because the way the Internet has historically worked is changing as the bots have flooded the Internet, to where now it's a lot harder to get access to these sites and services than you could have even two years ago. Ben Brown | 30:58 That's interesting. Sometimes I'll get Cloudflare, making sure you're human, and sometimes a lot. I get that. So maybe I'm not using the internet the way normal people do. I'm your agentic AI here at Flagship. Craig DeWitt | 31:11 Yeah, those are the false positives, through the roof, by the way. That's a big fundamental change in terms of how these bot blockers and agent detection services are protecting traffic. So, you're going to see a lot more of those. Ben Brown | 31:24 I think that's a really interesting use case, right? Access. We've talked about digital identity access for the payments moment, but we have to remember we're part of a much bigger journey, right? There are all the ways that people figure out what they want to buy, where they want to buy it from, making sure they have the right prices, but even getting the web pages to load right, there's things that happen there. There are fraud detection services that look kind of similar to the ones in principle that we're using at the payment moment, but they're far upstream. That probably creates other opportunities. As you talked about micropayments that might go around, paying tolls for access is an interesting area to watch for sure, but let's talk a little bit about where this might move faster or slower. I think the folks over at Andreessen Horowitz recently wrote about agentic commerce, and they talked about how it could play different roles for different kinds of transactions, like impulse buys, routine essentials, lifestyle purchases, things like that. For them, it was less about which of these is a better fit and more about how will AI play different roles? In some cases, it might be built into the algorithm on TikTok, just steering impulse purchases and putting it in front of our face so we click that button. In other cases, it might be price trackers. I imagine in the future, I could probably walk around to Best Buy and say, "I'd like to buy that TV." But me again, I don't know, maybe I'm a normal person, but I'm not just going to buy the TV. I'm going to Google: "Where can I find prices? Is this a good price? What are some reviews?" In the future, you could just take a picture of that and all of that price comparison, all that assurance of, "Yeah, go ahead and buy it here. This is a good model, and it's a good price." All that could happen right there automatically or to more interactive AI coaches, right? If you're getting a mortgage or buying a car or something like that. Again, maybe it's not the checkout or the payment experience that they're part of that made it a lot more upstream, but it does. Even though there are different ways AI could be used in those different use cases, it seems inevitable that some sectors will move faster than others. So, we're sitting here in a year or in two years. What do you think will move the fastest? I know, Robin, you said that B2B might be one of those places that moves faster. I tend to agree with that. I think companies have long been comfortable getting comfortable with outsourcing their procurement operations. They do that with really big BPO systems integrators, and they've written down all the rules that go into what they'll buy, who their vendors are, and what the processes are. Then, they have people offshore in India, the Philippines, or other markets taking care of that. Same way, we trust doordash couriers here to pick up food or iPhones or whatever for us. Big corporations are trusting people offshore to run their B2B procurement operations. I think that's something that could probably be either pretty easily lifted and shifted into an agency model or what we see is that human plus machine pairing is always really powerful. So maybe it's not about getting rid of the outsourcing but it's about radically shrinking the headcount of that and using AI tools as your first line so that every human is the manager of something, right? The AI agent. But outside of B2B or specific places in B2B other sectors. Where do you guys think that in a year or two we'll see the fastest traction. Colin Luce | 35:11 So I think the procurement one is a good example. The way I think about it is I think it depends on who can get the most context right. Ultimately, the value of the AI here is how much data it can consume to facilitate this. I think that boils down to context, right? So, to your point about procurement, they've written down all these rules, they know what they want. There's context, right? Craig's example about consumer reports, there's very acute context. I'm looking for this microwave. Tell me the best ones, et cetera. It's why, again, I think this shift towards social shopping has occurred. These big tech companies have so much data on us, right? Which we've willingly given them. But it's why I think ChatGPT and Perplexity are so well-positioned, right? They have context around the conversation. Your objectives are you, a value buyer? Are you searching for discounts? Are you looking for loyalty? What is the context around the transaction? I think, look, having started my career at Yodle back in the day, I can tell you, the Transaction Description Data side of all of this is still a very much an unsolved problem, right? It was a problem 15 years ago and it's a problem today. So, when I hear people talk about the networks being able to provide this context, I say, maybe. But just because you see that I spent $3000 at United Airlines, that doesn't tell you whether I'm just super bougie and like to buy business class or I have a family of seven and we fly in the very last row of economy. It just happened to cost $3000, right? Those are two very different contexts about me that I think could be interpreted very differently, right? Or the... Hey, book me a flight to Miami sometime in the next two months. What if my plans change? What if the flight price dips below this price? Right. So if you don't have the context of my calendar and my travel schedule, that's a pretty moot use case in my mind. So I don't know whether it's B2B, B2C, or even if that's the right binary question. There are probably use cases within both of them, but I think it's wherever the agent or agentic experience can get the most context. Ben Brown | 37:40 Yeah, I mean, it seems like it could take hold in various different places, but maybe the really interesting question for our audience is how it's working and how it's going to work and how it will impact each of their businesses. If you're in the audience and you work at Best Buy, you're not going to change the business. Best Buy is then you just have to prepare for when it comes to your sector. So maybe we talk a little bit about that. I thought calling your point on data was really interesting. The metadata around all of that. So what do you think the single biggest blocker is today for agentic commerce to happen? Do you think it's the payment plumbing or digital identity for agents or data quality, like you just said? Consumer trust, merchant willingness to engage, or something else? Craig DeWitt | 38:37 Yeah. So maybe going across those three at least what we've seen. The procurement use case is actually one of the first things we did with a large partner, OEM stuff for auto manufacturing. It was a really simple use case. They had to go out and buy a specific type of resin and they wanted to automate that process. So the identity and the payments aspect worked great for it. It was all the other stuff internal to both the businesses that really made that use case super difficult. Like a lot of the internal use cases and procurement require human beings sending wire transfers, and that connects into how they're doing their ERP systems. There's a guy who manages the CDS, that CSV file. You know, it's like all those other things have to change for the procurement you use case. So I think there's internal holdbacks on procurement. I think the biggest blocker to e-commerce right now is customer adoption of it, user adoption and user experience. I think that'll come. But right now, for a lot of merchants, they're figuring out how big of a risk this is. Is it a vitamin versus an aspirin to allow this on B2B? Interestingly enough, I think the biggest blocker now is really just on the acceptance side. When we see B2B, you look at the places where there's the most pain right now, and the most pain is in content publishing. Those folks are getting hammered because the search aspect has changed so much that the ads model is breaking. You have well-known publications whose ad numbers are down 70% this year, right? So the big hurdle there is them understanding the protocols that they can use or the services they can use to start agents' access and accepting payments programmatically. So I guess to sum that up, Agentic Commerce is this massive umbrella of things. I think there are individual stop GAAPs or individual hurdles across each of the use cases that aren't specific to all of Agentic Commerce. Ben Brown | 40:48 And you're getting that kind of negative impact, it'll be natural to react and just say, "You know, shut it down." You can see some banks doing that, you can see content publishers doing that, you can see merchants doing that. Right now, I think large merchants are generally like, if you want to send me free traffic, whatever. But if you start to put in place monetization frameworks and open AI and Perplexity and all these guys start to try to create the next Google, you'll see enterprise merchants really react to that. I think one of the interesting things to watch for will be, do you just see this big reaction, or is there going to be this willingness to endure some transitionary phase that's painful while you put in place the new infrastructure? Because if it is a turn it off and then what will turn it back on once we have all the right infrastructure? That could create this sort of chicken-and-egg scenario: "Well, do we build the infrastructure? Because the volume's not there, but the volume is not there because you don't have the Right? Robin Gandhi | 41:58 No, I think... Look, merchant acceptance is at least in my mind the biggest piece of the whole puzzle. I think that a lot of us here on the panel are building things that can enable everything. In general, we're trying to build everything that can get up to the merchant. I think the merchant being okay with the transaction is where things are falling apart. I think that has to do with B2B and it has to do with B2C. In general, across the board, we just haven't... There's no mechanism, and this is what we're working on. I think this is... There's no clear mechanism to tell the merchant or whoever's accepting the payment that it's a good transaction. We've captured intent, and we know the agent. I think everyone's trying to put those pieces together, but the biggest piece is going to be great. Now what do I do with it? As a merchant, how do I get that? So I think once we've established some level of protocol that everyone is generally comfortable with, I think you're going to have to get the acquirers in and be like, "All right, this is what we're enabling." I don't know if I was telling you this story, but... As we were experimenting with how we could get an agent to buy something using one of our cards, we thought, "Okay, great. Let's go find an easy merchant that we can go to." We even thought, "Let's try to see if we can make a donation at the San Mateo Library." Even the San Mateo Library rejected the transaction because it thought it was fraudulent. So, I mean, it just means that there's this level... There's this level that we've already just need to get past where there's this surface level of, "Hey, we're protecting all traffic against bots." The fact that the San Mateo Library can't take it to me that that's a pretty overarching thing. That just means that if we can get into acquirer PSPs, once we have the right protocol, I think you can solve it. So, it's not that hard, but I think we just need to agree on something to begin with. Ben Brown | 44:19 I mean, there's a lot of frameworks and protocols that have been proposed over the last few weeks, and it seems like these things are being built in real time, which is fascinating, right? You can look at the GitHub for AP2, and you can see three weeks ago, somebody on their team said, "We don't have a model for human-not-present transactions. We should build one." There we go, we built it, and we announced it a week later. So, that's the kind of stuff that's fascinating to see it come together. We've seen proposals from Visa, Mastercard, Google, Stripe, et cetera. Is there anything fundamentally different between all these standards? Are they really all anchoring to the same core concepts, but just with slightly different flavors? You guys have surely gone deep on some of these standards. You're members of some of these networks. So, what are you seeing as you unpack these different standards? Is there a choice to be made there by the merchant ecosystem or by acquirers on what they'll support? Or is it really different flavors of vanilla that are all going to converge together into one approach Forward. Colin Luce | 45:33 Yes, I was going to bring this up as probably one of my biggest concerns or risks in all of this, right? I mean, I think there are inherently technological problems to solve around authentication and identity and all the stuff we talked about. But the other aspect here is just the competitive dynamics and the age-old thing of incentives. I think what worries me about this proliferation of protocols is that it is going to require collaboration amongst natural enemies in the market, and I don't know how that'll play out. I mean, if you look at AP2 being pushed by Google, you compare that with who arguably has the biggest advantage or the leader is positioned best here, being Chat PT. Who's their biggest competitor? Google probably, right? So, is OpenAI going to play nicely with AP2 given those competitive dynamics? I don't know. To Robin's point, I think it's going to be critically important that the PSP and acquirers get involved here. Well, what's the leading protocol being pushed on that side? Well, it's ACP with Stripe behind it. So, the question is, will Audion check out be comfortable supporting that with arguably their biggest competitor in the market being behind this? I don't know. If you look at the details of the specs, yes, it's open, right? And so in theory, they should be able to. But it's not always a rational decision based on the tech, the intricacies of the spec. There's this other dynamic at a more corporate level that I think is what worries me. So to answer your question, yeah, I think there are different flavors of vanilla. Yes, there are nuances around exactly what some of these different protocols do. But ultimately, again, as a merchant or platform, unless everyone converges around one, you're going to have to think about how I integrate into twelve different protocols, right? That alone is just going to stop any sort of adoption out of the gate, right? I think we're seeing this even more acutely within the network-specific offerings, right? If you look at Visa and agent pay, the issuer adoption or support just isn't there yet. Right? Mastercard, as of right now, I think has two issuing banks that are supported. So what is a platform supposed to do? Build some sort of UI orchestration layer upfront that asks the consumer, "Hey, who's the issuing bank behind your credit card?" Before you proceed, get out of here. Right? They asked my mom who the issuer behind her card is. She'd say, "United." No, it's not United, it's JPMorgan. She doesn't know that stuff. So I think we see this inside of each of these. But then I think if you upgrade it, we're going to need collaboration amongst all these, and that's going to be tough. Craig DeWitt | 48:36 Yeah, I'd say what these things have in common is they have in common there has to be a way of exchanging identity between the parties, and there's some concept of payment there beyond that, like the Colin’s Point. I think a lot of this, a lot of these have been written, in terms of who actually gets power in this new scenario, just look at AA and AP2 from Google. Like Google wants to collect the mandates there, right? The whole concept of the sharing of mandates. If you look at what the card networks have put forward, it's like, no. We're on the hook for chargeback risk. We get the mandates. And if you look at ACP, it's like, "Hey, don't worry about that. You just integrate into OpenAI." We'll take care of all these things. So I think at the core, there's an identity issue, there's a payment issue, but you have these big folks coming out and trying to put themselves in a position, of course, where they can control it and monetize it. So I agree with Colin. It's not great for the industry. It has been helpful, at least to Skyfire, just because you have a lot of confusion with merchants. It's like, "Hey, I don't want to pick, just give me a platform where I can be future-proof for these things." That's why I think there's a startup opportunity to come and hate you. Don't worry about it. We're on top of this at all times. We have a solution that will get you future-proof for all these things. Ben Brown | 49:52 And of the things that I think is interesting in some of the specs is that they ask for item-level data. That has been a really strategic thing. Merchants have been unwilling to share for a long time. So I'm interested in whether you guys are hearing merchants out there saying, "Hey, to enable Agentic, I'm willing to populate that SKU-level data into a message." Or is it that I get it that's big, but over my dead body? Will anybody ever get my item-level details? What are you seeing out there? Craig DeWitt | 50:28 So response that I've seen to ACP or essentially OpenAI integration, which essentially is asking the agents, "Hey, give me an API to your entire product catalog and pricing at the SKU level data." The answer there from big merchants that have actual brands is no way. I cannot just become a fulfillment center for e-commerce. What we have seen is that, "Hey, I am interested in accepting agentic commerce, but I still have to have a direct relationship with the end user, and I want to know exactly what that end user is looking at when their agent is accessing my site or accessing my APIs." So, I think there are two sides to this. One is just turning it off, which I think some folks will do, but you're going to lose sales on that. The other is just completely giving it away to the LMS, which I don't see happening. I don't think it's a surprise that... It's... Etsy and Shopify, I think, are good examples of companies that would lean into that just because of the nature of the merchants that are behind those. When I look at something like, I don't know, as an example, as an example, Home Depot, they do want that contractor agent to come in and buy those ten feet of pipe to Robin's Point earlier. But they don't just want to see the agent platforms crawling that site and then facilitate a checkout. They need to know who that contractor is. So, they have a relationship there and they're able to track history. That's again, Ben, I don't want to beat this point to death, but a big blocking piece is that identity exchange is so critical because it's what solves this problem that scares a lot of folks about risk maintaining a brand and a relationship with the principal who that agent is working on behalf of. Ben Brown | 52:03 It makes sense. Colin Luce | 52:05 I think we're seeing them ask the question that you alluded to earlier, Ben, which is what's the tax right? What's the business model here? So, inherently, all merchants and platforms face some sort of tax today, whether it be advertising, the cost to acquire traffic via advertising being the tax or the take rate from the e-commerce platform or the marketplace or whoever. Right. And so is that tax from these agent-based shopping platforms, LMP providers going to be 2% or 20%? And you said something earlier about free traffic, and I draw the analogy to us in the social world. We were very willing to give up all of our data and information for a free service. So maybe the merchants will be willing to provide skew and item-level details if the tax is zero, and they get free traffic, right? Maybe that's the trade-off. But the merchants we talk to, they're asking that question before deciding whether they want to participate or not. What's the tax. Ben Brown | 53:18 And that value doesn't have to be really complicated. We've worked with big tech companies in the past. You know what some of them say? What's the little blue dot? Because the little blue dot in your map application unlocks a whole bunch of data for the companies that are behind those apps. It's not a complicated idea. I want to know where I am, and I want to have directions to places, and there's a value exchange there that maybe some people don't appreciate the full value exchange going on, but I see we're pretty close to time. Maybe one thing. Just with a couple of minutes left, what's one piece of advice that you give to companies out there in the ecosystem on what they should do tomorrow on this topic? Maybe I can ask each of you to talk to a certain part of our audience. We have merchants out there, we have acquirers, we have issuers, and we have investors, for sure. So, Robin, why don't you? What do you have in your mind in terms of what issuers should do since you guys are spending all your time in the issuer space? Colin, what's something that you'd encourage PSPs and acquirers to do since you're sitting right adjacent to them? Craig, what should merchants out there in the audience think about doing tomorrow? Robin Gandhi | 54:44 Easy enough. I think on the issuer side, there's less that we play in general, right? I think the reality is what I would encourage most issuers to do is figure out how you're going to contribute to some of the things that we're talking about in terms of protocols and where issuers play in that, working with the card brands and figuring out how you can support some of the token framework that they're talking about. I think most modern issuers already have the ability to spin out virtual cards that are reasonably highly controlled, so I think we just... From an issuer perspective, where I think others should be is really just being in the conversation. I mean, I think we know that this is where things are going. We don't know exactly where it's going to go, but the reality is makes a ton of sense that you would connect the dots and issuing a payment mechanism is the way to go. So yeah, that's kind of where I think. Ben Brown | 55:52 Colin. What should acquirers and PSPS do tomorrow? What's the kind of first step for them? Colin Luce | 55:58 Yeah. look, I think in a lot of ways, they're the gatekeepers to all the merchants they have behind them. So, I think they sit in a unique part of the stack whereby the more work they can do to make this as seamless to adopt on the merchant side, the better. So, I would say if they could start to think about this as the new Google Pay or Apple Pay, and all merchants have to do is flip a switch or as close to flip a switch as possible to participate, the better. So, I would say, PSPs and acquirers should just think about how they can, given their mini nature, take on the initial lift or work here and then enable all the merchants behind them. Ben Brown | 56:49 Yeah, sometimes acquirers and PSPs are frustrated by rising complexity in the industry, but actually, complexity is good for them because they can help simplify it for their clients. Craig, why don't you wrap us up with thoughts on what merchants out there in the audience should think about doing in the near term? Craig DeWitt | 57:05 Yes, super easy. Just reach out to Skyfire and we'll take care of all this. Thank you. Yeah, I'm glad I got merchants. Thank you, Ben. Ben Brown | 57:14 I think it's called Flagship for figuring out your strategy. But with that, thank you to everybody in the panel for joining us. I know you're all super busy. Thank you to all in the audience for joining. I know we didn't have time to go live through some of the audience questions, but we've collated those and we'll follow up directly with some of you that asked questions out there and we'll put the recording up on our website if anybody wants to replay, as well as distributing some of the slides. So thanks again, everybody, for joining today. Craig DeWitt | 57:45 Awesome. Thanks, everyone. Thanks, everybody.

Joel van Arsdale, Managing Partner, and Rom Mascetti, Principal at Flagship Advisory Partners, sat down with Elisabeth Magnor, Senior Manager, at Flagship Advisory Partners to unpack the real story behind public fintech growth and to reveal new research across 50 listed fintechs. From revenue efficiency to the rise of SaaS-with-payments, cash flow health, and what AI and IPOs mean next, this episode is your data-driven guide to how fintechs are really performing. The episode focuses on the financial health of public fintech companies. Topics covered include: The shift from rapid, cost-heavy growth to disciplined, efficient operations What exactly lies behind the growth Why SaaS-based fintechs like Shopify and Toast outperform through embedded payments The growing impact of AI and IPO momentum on fintech performance and investor sentiment Listen to the latest episode on the following platforms: Youtube Spotify Please do not hesitate to contact Joel Van Arsdale at Joel@FlagshipAP.com or Rom Mascetti at Rom@FlagshipAP.com with comments or questions. Transcript (00:01) Elisabeth Magnor This is FinTech Conversations with Flagship, a podcast production by Flagship Advisory Partners. In this podcast, we discuss the big topics shaping the world of payments and FinTech and each episode will bring you sharp insights and fresh perspectives from the industry. So whether you're building, investing or simply just curious about FinTech, you're in the right place. (00:18) Elisabeth Magnor Hello and welcome to the very first episode of Fintech Conversations with Flagship. My name is Elisabeth Magnor and I'm the host of this episode. We are Flagship Advisory Partners a consultancy that specialises in strategy and M&A in the payments and fintech space. Today we're diving into a very interesting topic which is the financial health of public fintech companies. Over the past years, fintech has been on a rocket ship. Growth everywhere, funding pouring in and headlines full of big promises. But here's the question we wanted to answer: What exactly lies behind the growth? Is growth powered by efficiency? So are fintechs finding smarter and more automated ways of generating revenues or are costs secretly piling up in the background with ballooning operating expenses? That's exactly the analysis our team has been working on. And without giving away too much just yet, I can tell you this: the way fintechs manage their financials has shifted dramatically over the past three years. So in this episode, we're going to unpack what's really going on under the hood. But first, I'm happy to introduce the guests of this episode. First up, have Joel Van Arsdale a truly impressive person. He's the managing partner and founder of Flagship. He has supported hundreds of deals across his career and Joel's financial sponsor clients are among the world's most successful investors in fintech. Welcome Joel. (01:35) Joel Van Arsdale Thank you, Elizabeth. Thanks for hosting the discussion. And we're excited to discuss this topic, which I think is a very interesting one. I mean, I think what the audience will hear is really dramatic shifts in how fintechs are managed as seen in the public markets over the last five years. And so we're excited to get into the details of that. (01:51) Elisabeth Magnor And in addition to Joel, we also have Rom joining this episode. Rom Masetti is a principal flagship and he brings more than 10 years of experience in FinTech and is considered a trusted advisor in domains such as CFO SaaS, B2B payments and payments orchestration. Welcome Rom. (02:06) Rom Mascetti Thanks Elisabeth, looking forward to exploring some of the key drivers behind the fundamental shifts and discussing how we see the market developing along some of these themes. (02:18) Elisabeth Magnor In this episode, we are discussing the financial health of publicly listed fintechs. The background is an interesting analysis we did now in 2025, which was a refresh of an analysis we did back in 2023. And the topic gained a lot of attention in our network. So Joel, before we dive into the data and specifics, appreciate that not everyone listening are familiar with our research. Could you please share some background on why we conducted the analysis at the time and what metrics we looked at? (02:43) Joel Van Arsdale Yeah, so firstly, flagship publishes, you know, 100 insights a year and one of the advantages of the fintech industry is that there are a lot of publicly listed companies, you know, dozens of listed companies around the world and across different subsectors within fintech. This analysis specifically focused on 50 publicly listed fintechs. It was an analysis first conducted in 2023 using 2022 data. The reason why we conducted the analysis then is because we were essentially emerging from a valuation and exuberance bubble in the public markets and fintech equities. And so, we essentially wanted to test sort of what was the management philosophy of fintechs coming out of that bubble or as existed during that bubble. And so we ⁓ prepared a data set using really two basic KPIs, which we converged into one measure of performance index. So we essentially looked looked at gross profit growth and 2022 in the original analysis that we published in 2023. And then more recently between 2023 and 2024, the analysis that we just published, we essentially measured gross profit growth over each of those time periods and then OPEX growth over each of those time periods. And then we created a simple metric that we call revenue efficiency, which is the gross profit growth divided by the OPEX growth. The reason why we picked this KPI is that FinTech is an industry that should be delivering very significant scale efficiencies. And one way to measure scale efficiencies is just by measuring your top line versus OPEX growth or top line versus bottom line effectively. And for you to be generating efficiencies, that number has to be above 1.0 And for you to be generating significant scale efficiencies, that number really has to be above 2.0 And so that's simply how we went about the analysis. We also took those 50 companies and we bucketed them by business model. So we define them as either diversified processors, as merchant PSPs, as payment schemes or networks, as B2B fintechs, as SaaS fintechs, or as product specialists or other types of fintechs. And we did that just to understand if there were categorical trends within business models that were impacting the overall performance KPIs that we were measuring. So that's the basis of the analysis. I mean, we're using a good deal of public equity data, but actually measuring efficiency performance or scale economy performance using one simple metric. Gross profit growth over OPEX growth, 1.0 being a baseline for your effectively generating no scale efficiencies, 2.0 being a baseline for generating significant scale efficiencies. (05:25) Elisabeth Magnor So to put it simply, you're comparing how fast revenue is growing versus how fast operating expenses are growing. And obviously for an ideal fintechs, revenue growth should outpace expenses if you do it in an efficient way. And when you think about it, it's such a straightforward but really clever way to look at things. So Joel, in our research from 2025, this is an update of your 2023 analysis, which we rightfully gave the title, "Higher Growth Fintechs Must Now Learn efficiency". So if we go back two and a half years from today reviewing that 2022 Fintech performance, what were some of the key observations you made back then? (05:58) Joel Van Arsdale So 2022 was really the high watermark of exuberance in FinTech valuations. And so this is one of the reasons why we went looking for these insights is that we suspected that the industry had really lost track of focusing on scale economies and efficient operations. And that in fact is exactly what we saw when we went looking, which I'll explain in a minute. essentially FinTech went through an exuberance bubble COVID really focused attention on the industry as the entire world sort of transitioned towards digital transacting and digital commerce as opposed to physical commerce. so Fintechs, by and large benefited significantly from a focus on digital commerce. And so all Fintechs essentially achieved peak valuations in 2021, 2022. And so 2022 being the baseline of our analysis, we were essentially capturing the end of that exuberance bubble. so what we saw was correspondingly not surprising. really told us, in fact, that that's exactly where we were in the cycle. Because when we looked at the data, what we saw was that over half of the companies had a revenue efficiency index of less than 1.0 meaning their OPEX growth, in fact, was exceeding their gross profit growth. less than or only 15 % of the companies had a revenue efficiency index of greater than 2.0. And so those were dramatically poor results, quite frankly, because it meant on average, entire industry was failing to deliver on scale economies. What's really impressive, though, is that the most recent analysis is really the flip side of that storyline, which is there's been a dramatic reversal or dramatic improvement rather, in how fintechs are managed financially. In the most recent sample, in fact, the majority of companies were well above 1 in their revenue efficiency index, greater than only 21 % of the sample of 50 companies was below 1.0 in their revenue efficiency index and fully 50%, half of the sample was above 2.0 in their revenue efficiency index. And so the entire industry rather dramatically shifted from failing to deliver scale economies to delivering scale economies on a relatively broad base. And we think this is exactly what the industry should be doing when capital is properly deployed. The reality is that in the course of the bubble, capital was being misallocated, valuations were too high, capital was chasing growth without really having recognition of underlying earnings fundamentals. And that has now corrected itself. rather quickly, that correction happened over the period of two years, which is probably faster than I would have expected. But it's a testament to the CFOs in the fintech industry being adapted and reacting well to changing market conditions. (08:49) Elisabeth Magnor So if we take a step back, what Joel just described sounds like the story of an industry going through full cycles. So first the exuberance and inflated valuations, then what sounds like a painful realization that operating costs were outpacing growth. And then you mentioned Joel, a pretty remarkable turnaround. So that's actually a nice bridge into my next question. And over to you, Rom. I mean, you did the work updating this analysis with more refreshed data now looking at 2024 annual reports. Could you please elaborate a bit more on what Joel mentioned about the market correcting itself? what are the top line findings from that updated report? (09:25) Rom Mascetti Yeah, so Joel definitely hit on one of the biggest ones, right, which is this flip in operating efficiency. And I think as we go through the conversation here today, we'll get into some more of the details just naturally throughout the conversation. But the big picture is this: the operating expense growth is slowed across every cohort, which is obviously a sharp turn away from the kind of concept of growth at all costs, the playbook that we saw running only three years ago as Joel was alluding to earlier. What's interesting is that many of the high growth fintechs that we looked at, so the likes of the Affirms, the Toast, the Shopify's of the world, they're actually proving that hyper growth is still possible and that efficiency can go alongside that hyper growth. By that I mean they're all growing gross profit by more than 30 % while still keeping their operating expenses under control. All three of those being part of that cohort that Joel described the 2.0 index. Even the most recent quarter backs up these findings. So the trend is holding that capital efficiency is certainly a focus. Though there is a twist. I would say that some of the largest global fintechs, so Visa, Corpay, Global Payments as examples, just to name a few. are seeing expenses start to increase, at least at pace relative to gross profit. But these more mature players that we observe are certainly adjusting their models as they face pressure from smaller, more agile, fintech challengers. And I think that's something that we're gonna poke on and discuss more as we continue the conversation. (10:59) Elisabeth Magnor So you mentioned a couple of interesting names there, Rom. And I think, Joel, you also mentioned earlier that the report clusters or buckets different fintechs into different categories. And not to spill the beans, but one category that stood out in the research were the SaaS, 'Software -as-a-Service' of companies that have software DNA having expanded into fintech , so the likes of a Shopify and a Toast. So Joel, could you please elaborate on what stood out to you in the research looking at these categories and how they perform in terms of efficiency? (11:25) Joel Van Arsdale Yeah, I mean, first of all, we recognize that, you know, being categorical and putting all these 50 fintechs into buckets is an imperfect exercise, right? You know, within any one bucket, you'll have a fair amount of variability, but we're consultants, and so we like to draw boxes around things so that we can reach categorical conclusions. And so we we do think that there is some validity in the sort of broader categorical trend lines that you see in our analysis. I think, you know, quite frankly, almost effectively, all of the categories improved on the revenue efficiency index. And so, I think that's the key conclusion is really broad based, dramatic change in the way that fintechs are managed financially. But I think, you know, the category that jumps out, I think most dramatically is just the SaaS fintech cohort, as we're calling them that went from kind of the far right of our index, meaning well below 1.0 to the far left of our index, meaning approaching 2.0 or higher for a lot of those companies. That's incredible shift in underlying bottom line performance. And I think it's a testament to the profitability and the scalability of the SaaS FinTech model. The reason why SaaS plus FinTech is so powerful as a business model and also an investment vehicles because SaaS FinTechs benefit from huge economic advantages in their financial performance. They're very low CAC ratios, very low customer acquisition costs relative to standalone companies. And they have much greater abilities to cross sell and upsell and benefit from price insensitivity within their product bundles. So for like Toast or Shopify is effectively attaching their payment service with zero customer acquisition costs, whereas an independent payment service provider is actually paying quite a lot of customer acquisition costs to sign up that customer. Or similarly, Toast or Shopify can cross-sell a loan at little to no acquisition costs, whereas a lender independently selling that same loan would have a high customer acquisition cost. And so you just see these efficiencies now translating into the bottom line performance of that category. I will note that SaaS tends to account for their revenue somewhat differently than FinTechs. And so the way in which they treat COGS tends to be a little bit different and therefore gross profit tends to be a little bit different. But the underlying conclusions of the analysis are still very much valid and dramatic shift in bottom line delivery from that category of companies, which we think is a trend that will continue based on the power of the business model. (13:53) Elisabeth Magnor Yeah, that's interesting. And if you think about acquisition cost of, for example, a small to medium merchant, I recall from research we've done in the past that those can range widely from a couple of hundred euros to up to several thousand euros or dollars. And obviously a reasonable acquisition cost needs to add up in terms of the revenue that that merchant will generate over its lifetime. So, so, automation and quick seamless sales and onboarding process are really key in something that these SaaS companies, do really, really well. and speaking of a couple of other KPIs I think Rom in your updated analysis you did mention a couple of other interesting KPIs such as profit margins, cash flow coverage and leverage. Could you please tell us a bit more about what these KPIs tell us about FinTechs today? (14:34) Rom Mascetti Yeah, sure. So at the risk of burying the lead, I think overall we're looking at a financially healthy cohort overall. And so I think there's exceptions to every rule, of course. Some of those have been all over the news and we won't dive into them here. But I would say based on the data, broadly speaking, tells a pretty positive story. And I would say the three stats that you called out in your question or the three that we looked at, the three that we chose, we looked at several when sort of developing our insight. But I'll touch on those three quickly. So first, from a net profit margin perspective, overall, these seem to be stabilizing for many of the market leaders that we've mentioned throughout the conversation. It's just proof that fintechs can reach sustainable profits when applying real operating discipline. So for all the reasons that we've discussed, whether it be the stronger model that embedded SaaS with payments can offer, whether it's just overall focused by CFOs on better bottom line discipline, all of that can be applied and still seeing meaningful outcomes, meaningful positive ⁓ performance as a result. Second is cash flow coverage. So for most companies, it's in pretty good shape. They're generating more than enough operating cash flow to cover, for example, their capex. That said, there are some firms showing strain in the most know, latest fiscal quarter, again, some of those we've seen in the news, but overall the cohort very healthy from a cashflow position perspective. Then finally, leverage. And this one probably varies the most. ⁓ And it's not a surprise given the, ⁓ M&A that we've seen in the industry where debt or leverage can oftentimes be a catalyst for some of those M&A decisions. When we dive into the cohorts a bit more, diversified processors and SaaS providers with embedded payments tend to run with relatively low debt. unsurprising there. But, know, acquisitive players like a CorPay, who we've seen many times in the news making relatively large acquisitions in the last, two quarters, tend to lean more into that heavy borrowing. So to circle back, I would say that the ratio analysis really informs the same message that I said, you know, a couple... couple questions ago, which is the sector is really moving away from that growth at all costs mantra and towards a more balanced model and one that's better equipped to handle some of the macro volatility that we see today and some investor scrutiny. So overall, just a much healthier place than we were at, you know, call it two and a half years ago. (16:54) Elisabeth Magnor So really what I'm hearing is that fintechs today are in a much healthier and maybe more disciplined place than just a couple of years back. And those are some really great findings. That makes a good bridge into the future. So Joel and Rom, as we are about to wrap up, let's look into the crystal ball. What predictions or expectations do you have for these public fintechs moving forward? Maybe starting with you Joel. (17:19) Joel Van Arsdale Well, I think the most dramatic force of of influence on revenue efficiency, the coming five years, for example, will be AI because AI has such amazing potential to generate operating efficiencies in areas like technology development, customer servicing and many others. And, you know, AI is inevitably one of those things that you tend to underestimate in the longer term and overestimate the near term. But we're already seeing evidence of impact on areas like technology development and service automation among many others, by the way, and we'll cover that in a separate podcast. But we do expect to start seeing the impacts of AI over the next two to three years. Klarna's IPO underscores that they already see impacts. think part of that was kind of good preparation and dressing of their IPO. But there's also legitimacy underpinning that, right, that we're seeing in other parts of the industry. And so I think FinTech just has incredible potential to yield high gains in productivity because what of the key constraint really in the industry today is people productivity, because almost all fintechs still have challenges with the growing costs of people, whereas the revenue productivity of people are more disappointing relative to the cost. so not that, you know, certainly I'm advocating a downsizing of the industry from a people standpoint, but we can get a lot more out of the people that are in the industry with the help of the right AI tools. So I do think we're going to start to see that impact more significantly in the data over the next two to three years. (18:46) Rom Mascetti Yeah, so we've seen a lot of public activity this year, including several public to private deals in the first half. But that phase seems to be winding down and more fintechs are now heading down the IPO path. So of course we have the Klarna IPO that just happened not too long ago and we have Chimes IPO from Q2. I think we'll see more fintechs that had been sitting on the sidelines start to go public as the market is continuing to stabilize. You know, just recently we learned that T &E platform, the travel and payments FinTech Navan filed for its IPO. Sum Up also rumored to be exploring one. Of course, Stripe remains to be the big one that's still primed for its long anticipated IPO. So I think in the public markets, we'll continue to see a lot of investor enthusiasm, whether that's, IPO driven or even some interesting valuations on the public to private side, which still seem to be happening. ⁓ throughout the course of year. (19:40) Joel Van Arsdale One of the advantages of companies IPOing now, some of which were slated to IPO during the bubble, is that those companies are now IPOing in a healthier state of revenue efficiencies. And so, you know, those same companies had they IPOed in early 2022, probably would have been punished by the markets as they figured out how to be more efficient with their bottom lines and with their revenue. But now they've had the benefit of prepping those activities and getting healthier before they enter the public markets. And so it's actually kind of a healthy outcome in hindsight for those companies now that are prepared to IPO over the next year or two. (20:18) Rom Mascetti And I also find it interesting back to your AI point. I mean, I think even in the public markets, right, investors are starting to reward the AI shift. And so if you take Dave, who's been public now for a few years, I mean, they recently repositioned as an AI first public fintech. And it's a great example of how AI can help turnarounds in the public market. I mean, think their stock is up something like 180 % year to date and something like 500 % over the last several years. So just showing how AI, as a continued improver of performance, whether on the revenue side or on the cost side, really does categorically change both the performance of a company as well as investor sentiment on the company as well. (21:00) Elisabeth Magnor With that, Joel and Rom, thank you so much for sharing your insights. I certainly look forward to checking back in when you update the analysis with the 2025 data. (21:10) Joel Van Arsdale Yeah, excited to publish an update to the analysis. We hope that you all take a moment just to look at the figures and data because we think it is really compelling and interesting. we'll be excited to revisit this analysis in the coming couple of years to see if this trend continues or even accelerates on the back of innovations like AI. (21:27) Rom Mascetti And of course, if anybody does have a chance to go through the images and the analysis and you have any questions or comments, you know never hesitate to reach out to Joel, myself, Elisabeth, or anybody else at Flagship. (21:43) Elisabeth Magnor That was it for now. One thing is clear, there is no doubt that the rules of the game have changed and top line growth alone is not enough to make investors happy. Growth must include the bottom line, including a story on growing in an efficient way. You have listened to a podcast by Flagship Advisory Partners. Stay tuned for more exciting FinTech topics and conversations.

The fintech sector is undergoing a clear shift from hypergrowth at all costs to disciplined, sustainable expansion. Recent results from Q2 ’25 show that while global leaders like Visa and Global Payments are seeing expense growth outpace gross profit, firms such as Affirm and Toast prove that high growth can still be achieved with operating discipline. Net profit margins, capital efficiency, and leverage profiles vary widely across the peer set, underscoring the different strategies shaping today’s fintech landscape. Investors continue to reward those delivering both consistent growth and meaningful operating leverage. 1. Fintech Cohort Gross Profit vs. OpEx Growth (2021 - 2022 and 2023 - 2024; bubble size representative of cohort avg. market cap) 2. Gross Profit vs. OpEx Growth for Select Fintechs (Q2 2024 - Q2 2025) 3. Fintech Cohort Gross Profit vs. OpEx Growth (Q2 2024 - Q2 2025) 4. Valuation & Financial Health Metrics (valuation and financial metrics for 2024 and Q2 2025) 5. Efficiency Index (2022 vs. 2024 data; index = gross profit growth divided by opex growth; n = 34) What the Data Suggests Gross Profit Vs. Opex Growth Public fintechs have made meaningful strides towards overall operating expense discipline in 2024, a notable development from the “growth-at-all-costs” attitude prevalent pre-2022. The most recent quarterly data suggests this trend is persisting, though some of the largest global fintechs with the most mature margin structures (e.g., Visa, Corpay, and Global Payments) are seeing expense growth outpace gross profit growth. Fintechs such as Affirm and Toast demonstrate that hypergrowth (30%+ gross profit growth) can still be achieved with a measured focus on expense discipline. Net Profit Margins & Other Financial Health Characteristics Five companies in the fintech peer set (Figure 4) saw net profit margins eclipse FY’24 benchmarks in the most recent quarter (Q2 ’25, Fiserv, Global Payments, Shopify, Toast, and Affirm) while six have seen net profit margins contract (Paysafe, Worldline, Block, Visa, Payoneer, and Marqeta). Including this most recent quarter, SaaS + embedded payments providers like Shopify, Block, and Toast demonstrate strong capital efficiency despite ongoing global expansion efforts (capex less than 2% of revenues). Across the cohort, cash flow from operations adequately covers capex requirements, though we observe some instances of operating cash flow coverage being strained in the most recent fiscal year (e.g., Worldline and Fiserv with 48% and 35% of operating cash flow devoted to capex in the most recent quarter). Leverage (the use of debt versus equity) varies widely among fintechs, with Diversified Processors and SaaS + Payments providers having the lowest relative leverage. Highly acquisitive companies such as Corpay tend to use debt more to fund acquisitions. Valuation Multiples The market continues to favor companies demonstrating consistent growth and meaningful operating leverage. SaaS + Payments businesses also generally benefit from higher valuations, with Shopify and Toast bearing the highest forward valuation multiples. Source: Public Company Filings, Press Releases, Flagship analysis Please do not hesitate to contact Rom Mascetti at Rom@FlagshipAP.com with comments and questions.

Credit Card Landscape Credit card issuing programs have long followed two primary operating models: managing everything in-house or outsourced arrangements through agent banks or program managers. These models evolved as natural responses to the complexity of credit card issuing and the very different levels of scale, capital availability, risk tolerance, and operational capabilities that financial institutions have. Large FIs have typically decided to own and operate their credit card business in-house (usually with the help of a third-party processor) while smaller FIs have typically relied on program managers. Each approach offers a distinct set of trade-offs. In-house programs offer full control, better long-term economics, and ownership of the customer experience but they require significant capital, talent, and time. Outsourced models provide a straightforward way to offer customers a credit card product with less operational complexity, faster time to market, and reduced capital and compliance implications – but with limits on flexibility, profitability, customer experience, and program differentiation. Our analysis of the top 130 U.S. banks indicates that this natural alignment of operating models to scale continues to hold true. Only two banks with more than $100 billion in assets partner with an agent bank issuer but about half of banks with $10 billion to $100 billion in assets use this model (as do the vast majority of banks with less than $10 billion in assets). Over the last seven years, since just before the pandemic, the agent model has actually become much more popular among midsize banks. Figure 1: Est. Distribution of U.S. Banks by Credit Card Program Model (among top 130 U.S. banks by assets) Recent developments, however, are changing the calculus. A new ecosystem of cloud-based issuing enablers – modern processors and program managers, SaaS tools for operational automation, and sophisticated tools for credit risk assessment and fraud prevention – has lowered barriers to entry and reduced the need for extreme scale. On top of that, agentic AI promises to automate much of what used to require armies of specialists and years of integration work. The result? The traditional “lines in the sand” that dictated who should outsource vs. in-source have begun to blur. Today, any issuer, whether a regional bank or a hypergrowth fintech disruptor, should re-evaluate their issuing strategy in light of a rapidly evolving landscape. The Case for In-House Issuing: Control, Customization, and Scalable Economics At its core, in-house issuing is about control. It allows financial institutions to define their own roadmap rather than adapting to someone else’s. Issuers can shape credit policy to match their brand’s risk posture, design features that truly stand out in the market, and adjust pricing, rewards, or customer experience without being constrained by what their partners can and will do. For FIs that see credit cards as a strategic tool for customer engagement – not just a revenue stream – this level of autonomy is crucial. Ownership of the full credit card issuing P&L is another key advantage. Rather than splitting revenue with a partner or accepting pre-set fee structures, in-house issuers retain 100% of the interchange, interest income, and fees. They also gain full visibility into program costs and can manage them proactively – from servicing to fraud management to marketing. Critically, in-house programs integrate more naturally across a bank’s broader product set. The value proposition of the credit card, how it’s marketed, and the data generated through its use can be designed to complement the checking account (and debit card), enhance an FI’s enterprise-wide loyalty program, or support cross-sell efforts into lending or wealth. In the past, this level of integration helped enable more profitable and long-lasting relationships. In the future, with the rise of AI, this level of data integration may be table stakes to keep pace with the market. The next five years will be a time of rapid evolution in using data to understand the needs and mindset of each individual customer, providing real-time support and solutions, and personalizing product value propositions. That said, the in-house path isn’t for everyone. Success depends on having (or building) the right capabilities. Issuers must attract and retain specialized talent across credit, fraud, operations, and tech. They must be ready for the scrutiny that comes with full regulatory ownership. They must tolerate profitability that changes quarter over quarter, with ROAs fluctuating between 3-4% over the last 10 years but sometimes touching 1% or even going negative, as they did during the pandemic. And they must commit to continuously investing in products, marketing, and customer experience to remain competitive. Figure 2: ROA of Large Credit Card Focused U.S Banks (banks>$10B assests maintaining consumer CC balances >15% of assets since Q1 2020) Fortunately, some of these barriers are eroding. Today’s issuers can build atop modern, modular issuing platforms that reduce the burden of development and integration. Third-party fraud tools, underwriting engines, and servicing capabilities can be combined into tailored stacks. This enables smaller or mid-sized issuers to operate with the sophistication of a top-tier bank – without the legacy tech drag. The Case for Outsourced Issuing: Speed, Simplicity, and Leverage For many issuers – especially those testing new markets or operating under capital or regulatory constraints – outsourcing credit card issuance can offer an appealing fast track. Partnering with an agent bank or program manager allows institutions to launch and scale a card program without shouldering the full operational burden of this complex product. Much of the heavy lifting – technology integration, customer servicing, fraud management, regulatory compliance – is handled by the partner. This enables leaner teams to move quickly and focus on growth. Perhaps the most important benefit is risk transfer. In an agent bank model, regulatory compliance and credit risk often largely sit with the agent, easing the issuer’s exposure to audits, CECL requirements, and reputational risk. For organizations not equipped to own a card program under today’s regulatory microscope, this insulation can be the difference between “go” and “no-go.” Outsourcing is also more capital-efficient. In agent relationships, the agent typically owns the receivables, which means the partnering institution isn’t required to hold large capital buffers against expected losses. That frees up balance sheet flexibility for other initiatives. Today’s outsourced programs are evolving beyond the vanilla. Leading agent banks now offer modular integrations, digital wallet compatibility, highly customizable rewards engines, and BNPL/installment overlays – all features that just a few years ago were limited to in-house players. Creative contract structures can even allow for partial control or co-governance in some cases, and shared profitability in others, which helps issuers maintain strategic influence without full operational ownership. Most of the partner options in credit card outsourcing are obvious: Elan Financial Services and FNBO are the largest agent bank issuers (but certainly not the only ones); TSYS, Fiserv, and FIS are the largest credit card processors, all offering managed services in addition to third-party processing; and Velera dominates the group service provider market with more than 4,000 clients (though it’s not public how many of those use Velera’s managed services for credit card issuing). Figure 3: Credit Card Provider Market Share In the last few years, a new set of providers has entered the market: Galileo, CoreCard, Cardless, Tallied, Highnote, Zeta, Marqeta, i2c, Lithic, Thredd, Episode Six, Pismo, Vervent, and others. This is a harder option set to navigate because each player has slightly different capabilities (some are pure play processors, others offer managed services). But for financial institutions who want more flexibility and integration to real-time data feeds without the operational complexity of in-house issuing, these new processors and program managers present an exciting alternative. Conclusion: Rethinking the Issuing Strategy The old dividing lines between in-house and outsourced issuing are no longer fixed. With cloud-based platforms, AI-driven automation, and an expanded roster of partners, issuers now have the ability to rethink the trade-offs and design models that combine the best of both worlds. The right choice is no longer determined primarily by your scale, it can be based on your strategy. Issuers should start by defining what role credit cards play in their broader customer engagement and growth agenda. From there, they can evaluate whether control, speed, capital efficiency, or risk insulation matters most and build the appropriate operating model. With today’s rapid pace of innovation, the right decision five or ten years ago might not be the right decision today, so issuers should re-evaluate their strategy ahead of every key contract renewal date in order to stay competitive in an industry where the lines in the sand are shifting faster than ever. Please do not hesitate to contact Ben Brown at Ben@FlagshipAP.com or Ryan McDonald at Ryan.McDonald@FlagshipAP.com with comments and questions.

On July 1st, 2025, Flagship Advisory Partners co-hosted an event with UBS in London, where Anupam Majumdar, Partner at Flagship, presented on the rising wave of B2B and Office of the CFO SaaS innovation in Europe, highlighting its evolution in relation to the more mature US fintech landscape. We advise viewing the slides via the "PDF" icon button. Some Key Takeaways: B2B payments represent a substantial $135 trillion in volume as of 2023, which is 2.5x larger than the C2B segment. In contrast to C2B payments, where payments between consumers and merchants tend to be rather simple (often a click of a button or a tap of a phone), B2B payments between buyers and suppliers are significantly complex, often involving a series of workflows. Today, there are several pain-points in the buyer-seller transaction flows. However, these pain points offer opportunities for value creation through automation, digitization and embedded fintech, simplifying the naturally complex B2B transaction flows. B2B CFO workflow automation SaaS platforms continue to demonstrate strong linkages with payments and fintech, viewing embedded fintech as a strong driver of monetization and growth. The embedded finance maturity for B2B SaaS varies by region and functional orientation, yet overall, more mature in the US. In the U.S., companies such as BILL and AvidxChange offer successful examples of mature embedded finance strategies in B2B SaaS, having expanded their payments and fintech revenues from 2021 to 2024. B2B fintech and SaaS in Europe are still emerging relative to the more mature US market, with a fragmented ecosystem that continues to rely heavily on traditional bank transfers. However, market consolidation, and funding / M&A activity across the European of CFO Stack, as well as upcoming B2B e-Invoicing mandates will have an impact on B2B fintech and SaaS in Europe. Payments acceptance is only the starting point. Over time, successful platforms evolve to deliver new embedded finance use cases and products that go well beyond payments (e.g., into embedded lending, x-border payouts). There are a wide variety of opportunities for every stakeholder who are involved in the value chain – banks, fintechs, B2B SaaS and card schemes. Please do not hesitate to contact Anupam Majumdar at Anupam@FlagshipAP.com with comments or questions.

Introduction Software platforms (ISVs or SaaS or SW companies) are rapidly expanding into payments and embedded finance, capturing more and more of the fintech value chain. In the U.S. market, we estimate that ISVs (independent software vendors), in various forms, already control 35% of the SMB merchant payments revenue pool. In response, payments service providers (PSPs) are evolving their strategies, increasingly focused on acquiring commerce software to control the full SMB product bundle. This motivation for payment companies to own commerce software is visible in recent M&A activity. What began in the U.S. with payment companies such as Global Payments, Shift4, and Fiserv is now accelerating in Europe (as shown in Figures 1 and 2). In this article, we review M&A activity along this theme and explore the strategic rationale and challenges for PSPs acquiring software assets. U.S. Trend Of PSPs Buying Software Accelerating in Europe Figure 1: US Payments + Commerce SaaS M&A (non-exhaustive; US Targets) As shown in Figure 1, there is a long list of U.S. merchant acquirers (PSPs) that have pursued software M&A over the last decade. One of the earliest and most notable examples is Heartland, a leading direct-selling POS acquirer in the U.S. SMB segment. Heartland’s direct sales approach faced pressure from ISVs working with PSPs to bring integrated bundles to market. Rather than embracing ISVs as a channel, Heartland maintained its direct distribution focus but acquired a series of software assets to better position for software-led product bundles, acquiring a series of software assets from 2011 to 2015, at which point Global Payments acquired them. After acquiring Heartland in 2016, Global Payments continued to scale this strategy, extending its software M&A well beyond POS-centric verticals and into more specialized verticals such as practice management and recreation/events. Global Payment’s recent pullback from its broad vertical software portfolio (e.g. divestment of Advanced MD) suggests that this strategy stretched too far from the group’s core of merchant payments. Shift4 is another example of a U.S. merchant acquirer using software acquisitions to go-to-market via its own distribution. Shift4 acquired multiple commerce software assets in hospitality, venues, and charitable giving while also developing its target Skytab POS platform. The strategy for PSPs to acquire commerce software is gaining momentum in Europe. As shown in Figure 2, we see an increase in PSPs acquiring commerce software. Recent examples include myPOS acquiring Toporder, a French specialty retail SaaS provider; Shift4 acquiring Vectron, a pan-European restaurant platform; and Sipay’s acquisition of Pikotea, a Spanish restaurant SaaS. Planet, a market leader in accommodation, hospitality, and retail payments, acquired a series of software companies in recent years to bolster its full-stack offering across those verticals. Figure 2: UK & European Payments + Commerce SaaS M&A (non-exhaustive; UK & European Targets) PSPs Face the Choice to Partner or (and) Own Software Not all PSPs have the strategy to own and market software. Many PSPs focus principally on partnering with software companies, powering integrated/embedded payments. While it is a strategic choice to emphasize owning software vs. partnering with software, these choices are not mutually exclusive. Some PSPs are successful doing both. As shown in Figure 3, both strategies - partnering with ISVs or owning the software stack - come with distinct rationale and success factors. Both strategies can be successful with the right focus and investment. Figure 3: Pros and Cons: Partnership-Led vs. Owning the Software (non-exhaustive) Becoming the payments partner of choice for ISVs / SaaS platforms offers greater scaling pace as it’s a one-to-many marketing outcome when successful (vs. selling each SMB merchant). Particularly in Europe, where the ISV ecosystem is fragmented and less mature, we expect rapid growth in embedded payments over the balance of this decade. The key challenge with relying on only software partners for product bundles is that the software providers seize share of the economic pie over time, owning more than 80% of the merchant payment economics at scale (e.g., billions of payment turnover). Owning software, on the other hand, provides greater long-term ownership of the lucrative economics inherent to the SMB segment. However, owning the software only matters if you can learn to sell and develop it. Owning and going-to-market with software requires a fundamental shift in organizational and cultural DNA for payments companies, however many have struggled with this transformation. As mentioned, it is also possible for payment companies to both own software and partner with software companies for embedded payments. Success with both GTM strategies requires a balance of the potential conflict. Many leading U.S. PSPs partner with ISVs who provide more vertically advanced software to larger SMBs while marketing their own simple POS software into smaller SMBs. In this case, the vertically specialized SaaS companies generally do not see simple POS software as a threat. Critical Success Factors for a SaaS-Driven PSP Strategy Just as software platforms must learn to sell payments and embedded finance, PSPs must learn how to sell software. Selling simple POS software requires adaptation, but the small SMBs that purchase these bundles tend to exhibit simple buying behaviors similar to stand-alone POS payments. Selling more advanced vertical software requires greater transformation as GTM success requires coordinated multi-channel marketing, technical sales, and patience to navigate a sales cycle that takes weeks or months. Owning software is not simply about adding a new product, it is about reshaping how you acquire, serve, and grow your merchant base. Below we outline four successes for PSPs that want to own (market and develop) commerce software. Software is your anchor product, you aren't just selling payments: For SMBs, business management software is the primary and generally first purchase. It is the brain of a merchants’ business. Payments (and fintech) is a secondary purchase. PSPs must understand their software offering deeply: its value proposition, pain points solved, and how it fits into the day-to-day operations of target merchants. Software sales require more multi-channel marketing, conversion selling, and success management: Commerce software is a more complex product than stand-alone payments, often requiring more marketing touchpoints to establish a conversion opportunity and then more work to convert and drive merchants to sustained activation. Digital engagement is a must: Digital engagement for sign-up, for boarding, for servicing, and for cross-selling is the key success factor to optimize merchant lifetime value while minimizing cost to acquire and serve. You have to have a solid digital experience to win in a software-led world. However, once you master digital engagement, software product and customers are naturally more digitally engaged, allowing for easier cross-selling. Software bundle merchants are twice as likely to use another embedded finance service (beyond payments) than stand-alone payment merchants. Data is powerful – unlocking significant monetization potential: Combining software and payments unlocks powerful data. Even market leaders are early in the learning curve for monetizing this data, but the potential is massive, for example with AI powered digital advertising linked to measured customer loyalty success. Acquisition Integration: And finally, do not underestimate the complexity of integrating a software company into a payments company culture. Software companies tend to have different DNA and cultures (more technical, more remote, etc.) and squashing such culture is a major pitfall. Conclusion: A Strategic Crossroads for PSPs Buying software marks a fundamental shift in the role PSPs play in the commerce stack. It changes how you acquire customers, how you retain them, and how you monetize merchant relationships. The partnership model [being the payments partner of choice to the ISV/SaaS] continues to be a highly effective strategy. But as competition intensifies on the supply of embedded payments, owning software can be a pathway to sustained capture of the SMB economics. We expect to see more PSPs both acquire and partner with software as the days of stand-alone payment services fade away. Please do not hesitate to contact Charlotte Al Usta at Charlotte@FlagshipAP.com, Francesca De Fina at Francesca@FlagshipAp.com or Tobias Vink at Tobias@FlagshipAP.com with your comments or questions.

This snapshot marks the first in our Embedded Finance Vertical Snapshot series, beginning with a focus on the US Healthcare Providers landscape (excluding payment to payer payment flows). The healthcare sector is notably complex and highly regulated, with widespread software adoption driven in large part by US electronic health record (EHR) mandates. Despite this digital maturity, the embedded finance ecosystem within the vertical remains relatively nascent, with significant room for growth. We see meaningful opportunity for fintech solutions to expand, particularly in patient payments, provider payouts, and financial services integration. Sizable embedded payments market: The vertical is associated with a large and stable card payments volume pool with potential for growth. For example, card acceptance has become order qualifying for healthcare software, but most patients still pay in other ways. High software usage: The healthcare sector is undergoing continued digitization, with approximately 85% of medical providers now using practice management solutions. Moderate embedded lending upside potential: The vertical offers the potential for business and consumer lending, buoyed by provider profitability constraints and an increasing cost of care. Fragmented, but consolidating software market: The provider landscape is consolidating, led by acquisitions from hospital systems, private equity, and large tech companies (e.g., Amazon). 1. Vertical Definition 2. Vertical Spend - US Healthcare Providers Revenue (trillions of USD, 2022-2026) 3. Vertical Dynamics (all sub-segments) 4. Software Landscape - Practice Management / Billing / EHR Healthcare providers often use multiple software products, creating competition for embedded payments and finance. Practice mgmt. and billing modules are the most common payment integration points. Practice mgmt. solutions are increasingly expanding into other software adjacencies (e.g., EHR). Sub-verticals (e.g., dentists, veterinarians, etc.) have specialized software needs and vendors. 5. Embedded Finance Monetization Maturity in the U.S. Embedded Fintech Highlights Most payments are made via insurance, which is more challenging for SaaS to monetize, there remains high volumes of ACH/check, but card acceptance and usage is growing rapidly. Embedded e-billing, POS payments, and consumer financing are the most mature embedded fintech products. Consumer financing is often offered for large patient payments. We also see potential growth in embedded pay-outs (in various forms) and business financing. Please do not hesitate to contact Peter Taylor at Peter@FlagshipAP.com or Amilee Huang at Amilee@FlagshipAP.com with comments and questions.

Introduction The B2B mobility ecosystem continues to evolve rapidly, underpinned by favorable macro factors: huge volumes, unmet customer needs, complexity, and technological innovation. It now encompasses fuel and energy cards, fleet management software, specialized mobility services such as driver and fuel management, route optimization, and field scheduling, among others. To gauge the current state of activity levels in the B2B mobility ecosystem, Flagship examined the press releases of a representative sample of 39 companies from 7 different provider types for a recent 12-month period, and we highlight the results below. Figure 1: Press Releases per Category (number of press releases as advertised on global website, Jan’24 – Feb’25) Overall activity levels in B2B mobility are high. Between January 2024 and February 2025, our sample of 39 mobility providers issued 286 press releases. Most press releases focused on new product/feature launches (27% of total), new client announcements (21% of total), product partnerships (18% of total), and distribution partnerships for electric vehicle (“EV”) charging (12% of total). Announcements for other types of distribution partnerships (e.g., for traditional and alternative fuels) were less prevalent. Figure 2: Press Releases per B2B Mobility Provider (number of press releases as advertised on global website, Jan’24 – Feb’25) EV Charge Point Operators (CPOs) were the most prolific in terms of number of announcements, with the EV CPOs in our sample making 79 announcements, of which 41% were related to new clients. Fuel card providers followed with 71 press releases, with a more even distribution of announcement types. More Frequent Type of Announcements: Product/Features Figure 3: Press Releases Announcing Product/Feature Launches (number of press releases as advertised on global website, Jan’24 – Feb’25) Product/feature announcements were the most prevalent announcement type: Fleet Management Software (FMS) providers were the most prolific, with announcements focused on integrating AI into route optimization and operational efficiency tools, EV integration, and safety tools. EV CPOs announced new solutions to improve the charging experience both at home and en-route (e.g., enhancing the architecture, charging solution for commercial vehicles, omni port adaptable charger, etc.) Fuel card providers and auto manufacturers (“OEMs”) announced new products/features (especially related to EV and alternative fuels), in-car payments, and safety solutions for drivers New Client Announcements Figure 4: Press Releases Announcing New Clients (number of press releases as advertised on global website, Jan’24 – Feb’25) EV CPOs released the highest number of new client announcements, as they sought to highlight expansion of EV charging infrastructure with both private and government clients. Other provider types had markedly fewer new client announcements. Fintechs made announcements regarding new clients for core and expansion use cases, OEMs expanding their reach in EV and driverless trucks, and FMS announced new government agency clients. Product Partnerships Figure 5: Press Releases Announcing Product Partnerships (number of press releases as advertised on global website, Jan’24 – Feb’25) Announcements regarding product partnerships were more evenly distributed: FMS providers announced partnerships that embed with OEMs and fuel systems to centralize data on vehicle status, maintenance, and telematics OEMs partnered with energy providers, AI developers, in-car payment providers, and EV CPOs to push towards higher adoption of EV and vehicle digitization Fuel card card providers partnered to continue in their push to expand from traditional fuel offerings into digital payments, EV integrations and retail services EV CPOs announced partnerships to enlarge and enhance their networks with faster, more reliable, and more accessible charging solutions EV Distribution Partnerships Figure 6: Press Releases Announcing EV Distribution Partnerships (number of press releases as advertised on global website, Jan’24 – Feb’25) Fuel card providers, EV CPOs, and OEMs have been actively investing in EV charging infrastructure expansion and customer experience enhancements. Collaborations between OEMs and EV CPOs are becoming increasingly common, with the goal of accelerating the deployment of faster and more widespread charging stations. Additionally, fuel card providers are forming strategic partnerships with EV CPOs to expand merchant network coverage and to distribute co-branded EV charging cards. Figure 7: Fuel Card Providers Press Releases (number of press releases as advertised on global website, Jan’24 – Feb’25) Fuel card issuers continue to highlight their efforts to expand into EV and sustainability (DKV announced 12 EV distribution partnerships) and alternative fuels, while continuing to partner for fuel distribution (DKV 4 press releases, UTA 6). Fuel card issuers continue to expand geographically (UTA published 3 press releases on the topic, Eurowag, DKV, Radius and Wex 1) and enhance card functionalities (Eurowag and Comdata published 4 press releases each on new products/features, Wex 2), particularly in areas such as in-car payments, seamless EV charging access, and integration with digital payment ecosystems. Conclusion Using press releases as a proxy, activity levels in B2B mobility continue to be high across categories. Payments and fintech underpins or is relevant for many expansion initiatives in the space, and therefore B2B mobility continues to warrant consideration by investors and financial sponsors, different types of fintechs, and software providers. Overall, the topics with the highest announced activities clustered around EV and software, but even “traditional” mobility is still an underpenetrated area in payments with many opportunities for expansion by specialists and non-specialists alike (e.g., why don’t banks offer basic mobility solutions for their huge numbers of SMB customers, many of whom have small fleets?). Although recent macro trends in the mobility space indicate a pullback or at least slowing growth in EV generally, the overall B2B mobility space remains robust and activity levels create a call to action for all types of fintech and payments providers: most types of fintech and payment providers should assess B2B mobility for suitability as a target vertical, and many will have opportunities to grow in the space. Please do not hesitate to contact Erik Howell at Erik@FlagshipAP.com with your comments or questions.

The European office of CFO SaaS remains a fertile ground for investments and M&A. Rapid market consolidation across CFO SaaS domains, key regulatory mandates (e.g., B2B E-invoicing) and increased adoption of embedded fintech across SaaS domains makes the space an attractive investment hotbed. We advise viewing the slides via the "PDF" icon button. General Commentary & Highlights The ‘Office of CFO’ SaaS spans across several segments and operates in a highly fragmented European market today (e.g., accounting & ERP, treasury, cash management & financial planning, AR & e-Invoicing, payroll, AP automation & spend management) CFO workflow automation SaaS continue to demonstrate strong linkages with payments and fintech, seeing embedded fintech as strong monetization growth levers Recent M&A in this B2B "Office of CFO' SaaS segment demonstrate the ongoing convergence between CFO software and B2B fintech services (payments, lending, FX, other). For example, ThomaBravo invested in Coupa and Bottomline to create a global integrated B2B automation + payments powerhouse New regulatory mandates are likely to lead to increased uptake of workflow automation and process digitization: One-Stop Shop (OSS) for VAT Registration: Creating a single VAT registration system to enabling businesses to manage their tax obligations throughout the EU Digital Reporting Requirements (DRR): Standardize e-invoicing processes and exchange of VAT info across the EU Platform Economy: Enhance VAT collection for digital platforms (short-term accommodation rentals, passenger transport etc.) New European (EU) regulatory mandates are likely to lead to increased uptake of workflow automation and process digitation Please do not hesitate to contact Anupam Majumdar at Anupam@FlagshipAP.com or Niko Berank at Niko@FlagshipAP.com with comments or questions.