NMI's new CEO pushes embedded payments in an uncertain time

NMI

The expansion of embedded payments can be slowed, but not stopped, according to Steven Pinado.

Pinado, a fintech veteran who has worked on embedded payments for more than two decades, on Tuesday became CEO of NMI, a financial technology company that powers embedded payments, or technology that enables checkout directly within an app.T

The concept has existed for years, but has gained more attention recently as technology that supports embedded payments grows quickly, including advanced forms of data sharing, blockchain and new forms of AI. There's also roadblocks, such as the impact of tariffs on supply chains, the fees that banks may charge for data aggregation, and the uncertainty of data-sharing regulations.

But the popularity of embedded payments will win out, NMI's Pinado told American Banker.

 "The uncertainties could slow adoption, but it's really temporary," Pinado said. "Embedded payments are making the world more convenient and it makes payment processing faster." 

NMI's CEO

Pinado is replacing Vijay Sondi, who has been NMI's CEO for the past seven years and will remain as an advisor through the end of the year.  Pinado has about 30 years of experience in payments and other financial technology. He most recently was a partner in Radian Capital, a New York venture capital firm, where he was in charge of the investors' operating team, and also advised technology firms. Radian's portfolio includes companies that develop cybersecurity for mobile payments, insurance technology and white label e-commerce and payments technology.

Before Radian Capital, Pinado was president of B2B payments firm Billtrust, where he helped lead the payment company's initial public offering and oversaw Billtrust's automation and invoice technology. Other executive roles include posts at Jonas Software and Constellation Payments, where Pinado worked on early forms of embedded payments.

"I worked on embedded payments more than 20 years ago," he said. "But the technology is far beyond that today." 

Improvements in open banking are making embedded payments more attractive now, Pinado said, adding artificial intelligence and blockchain are emerging as ways to speed processing and embedded payments by reducing manual steps on a payment's journey.  

Read more about open banking. Open banking | American Banker

Open banking, the most important technology tied to embedded payments, refers to sharing bank account data with third parties such as e-commerce apps, normally through application programming interfaces that enable checkout to exist in the app with a single click. Uber's model, where riders leave the vehicle without stopping to pay the driver, is often used as an example of embedded payments at scale. In most cases, embedded payments is a "buy button" that executes payments without the buyer having to leave the merchant's app, site or point of sale.

NMI's new projects are designed to ease checkout, another part of integrating payments directly into an app. This includes adding Tap to Pay for Android and iOS, enabling merchants to accept payments on their smartphone apps without adding payment-specific hardware. 

"If you look at Uber or the new unattended devices that are out there, it's really changing payments," he said. "It's less about technology that has access to a terminal, but arranging for a funds transfer to happen." 

Popular with banks

Banks are aggressively pursuing embedded payments and related technology such as embedded finance and open banking, creating potential demand for fintechs as banks choose between developing technology in house or working with partners. 

The global embedded payments market is expected to expand by 134% between the end of 2024 and 2028, with embedded account-to-account payments and digital wallet payments being the primary payment types, according to Juniper Research. Account-to-account payments, or "pay by bank," enables transfers directly between bank accounts, circumventing card networks and other third parties. It's an older payment option function that has gained popularity in recent years as merchants and consumers try to mitigate card payment fees by supporting pay by bank features on e-commerce sites. 

Another research firm, KPMG, reports 58% of U.S. banks said embedded finance is a priority in the next year, with 75% saying open banking is a priority.

"The business of embedding payment will persist. It's been around for a long time and is a compelling option," Pinado said. 

This demand comes despite the fact that the U.S. does not have a regulation that governs open banking or embedded payments. Rule 1033, a pending regulation that would provide parameters for data sharing, and thus open banking, is in flux. The Trump-supervised Consumer Financial Protection Bureau initially planned to scuttle the Biden-era rule 1033, then more recently said it would rewrite the rule. 

"Uncertainty over regulations and fees hurt progress for open banking and related trends such as embedded payments," Enrico Camerinelli, a strategic advisor for Datos Insights, told American Banker. "Regulations are supposed to provide clarity and guidance, and – especially -- to reduce as much as possible interpretations and gaps."

The European Union has had data sharing rules for years under PSD2, a rule that has indirectly pushed U.S. banks to adopt data sharing.  

 "The market approach is pushing steady growth in the U.S." Kieran Hines, principal banking analyst at Celent, told American Banker. "It's something that the consumers want."