At Fluent Ventures, we believe one of the macro trends in technology is the ability for small businesses to be more competitive by “renting” scale. They will be able to do this across multiple vectors – operations, procurement, distribution etc. One example, is in the way they manage their finances.

In recent years, the evolution of financial operating systems (Financial OS) has marked a transformative shift in the financial landscape, especially for small and medium-sized businesses (SMBs) – and a salient example of this broader shift. This is not just for the CFO, but for the finance team and the founder.

Financial OS platforms—such as Ramp, Mercury, ZenBusiness, and Xepelin—are rapidly emerging as powerful tools for SMBs, enabling them to manage complex financial processes and make informed decisions with efficiency and ease. These platforms embody a new era in financial technology, integrating various essential services under a single digital roof and thereby reducing complexity, enhancing automation, and unlocking new revenue streams for businesses. They often combine multiple (and not always but sometimes overlapping) products together like a bank account, corporate cards, spend management, bookkeeping, financial ledger, financial statements, financial performance and profitability analysis, budget and forecast. 

—> Read on for more, or if you want two random AI generated characters to banter about it, check out the podcast voiceover.

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The Evolution of The CFO Financial Operating System

The concept of a Financial OS did not appear overnight; it is the result of several waves of innovation within the fintech industry. Each wave built upon the last, creating a more sophisticated and user-centered approach to financial services. Initially, internet-based services disrupted traditional financial models, giving rise to early digital banking and payment solutions. The mobile revolution then enabled the unbundling of financial services, which provided SMBs with tools like mobile payments and on-the-go financial management.

Today, we are witnessing a “rebundling” of these previously separate financial services into cohesive platforms, packaged to fit the distinct needs of SMBs. We crudely simplify it into four waves (building on what many have already written about).

Financial OS systems have brought these advances together to offer industry-specific and deeply embedded tools that provide financial visibility, automation, and greater operational efficiency. This shift is not just a technological leap; it is a strategic evolution that prioritizes customization, scalability, and the specific pain points of the underserved SMB market.

Crucially, financial operating systems are not fintech product alternatives to bank. They are rather software driven solutions that embed a variety of self-reinforcing products together.

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Case Studies: How Diverse Financial Management & Financial Operating Software Business Models are Empowering SMBs

To understand the impact of Financial OS on SMBs, it is helpful to look at specific case studies of companies at the forefront of this evolution.

Mercury, Ramp, Xepelin, and ZenBusiness each exemplify distinct applications of Financial OS, demonstrating how these platforms address core financial needs in innovative ways.

1. Mercury: Revolutionizing banking and cash flow management & reconciliation for startups

Mercury is a banking platform specifically designed for startups and small businesses, with a focus on providing a seamless digital banking experience. Mercury’s Financial OS centers on offering robust, user-friendly tools for cash management, risk management, and cash flow visibility. Mercury combines traditional banking services (checking and savings accounts) with modern tools like automated expense tracking, virtual and physical cards, and cash flow analytics. Its integration with software commonly used by startups allows businesses to consolidate financial management.

2. Ramp: Building a comprehensive spend management and accounting software platform

Ramp focuses on helping SMBs control expenses and optimize spending through an integrated financial platform. Ramp has redefined corporate spending by combining a corporate card with automated expense management and robust analytics tools. Ramp’s Financial OS includes corporate cards with real-time tracking, automated receipt matching, and an expense management system that can identify potential cost savings. It also offers customized spending policies and automated categorization of expenses. Ramp helps small business owners generate an accurate financial picture, create basic finance processes, review fp&a accounts, and save on data entry.

3. Xepelin: Tailoring financial operations, accounts payable, accounts receivable workflow for Latin American SMBs*

Xepelin, a Financial OS provider based in Latin America, caters specifically to the financial needs of SMBs in this region. The platform offers solutions for cash flow management, lending, and accounting, which are particularly valuable given the unique regulatory and economic environment in Latin America. Xepelin integrates cash flow management, embedded lending, and accounting tools into a single platform, making it easy for SMBs to manage finances, meet compliance requirements, and access credit. The company tailors its product offerings to local markets, addressing specific regional challenges. By understanding a company's financial operations, Xepelin can provide appropriate loans at the moment they are required.

4. ZenBusiness: Comprehensive business formation and financial management*

ZenBusiness initially began as a business formation service for small businesses, helping them navigate the complexities of starting and registering a new venture. The company has since expanded into a full Financial OS, supporting SMBs with a range of tools from formation and compliance to financial management. ZenBusiness provides an all-in-one platform that includes business formation, accounting, invoicing, and compliance management tools. This holistic approach allows small businesses to manage all aspects of their operations from a single platform.

Components Of A Financial Operations System And Why It Matters for SMBs

For SMBs, financial OS offer key services:

Improved Cash Flow Management

Many Financial OS platforms, like Ramp, prioritize cash flow management tools. They consolidate expenses, analyze spending trends, and provide real-time insights into cash flow, helping SMBs to allocate resources more effectively. Real-time financial data enables business owners to make quicker, more informed decisions that can prevent cash shortfalls. They help streamline financial data and tracks financial metrics.

Integrated Lending and Credit Options

The traditional lending market has often underserved SMBs, leaving them struggling to secure the necessary capital to grow. Financial OS providers like Mercury are bridging this gap by embedding credit and lending options directly into their platforms. This allows businesses to access loans and lines of credit without the typical obstacles, improving cash availability and reducing the time and effort required for financing.

Increased Operational Efficiency

Financial OS platforms help SMBs automate repetitive financial tasks such as invoicing, payroll, and expense tracking. By reducing the manual workload, these tools allow business owners and managers to focus on growth and strategic planning rather than day-to-day financial administration. For instance, Xepelin provides accounting and financial management services specifically tailored to Latin American businesses, helping them manage finances more effectively in a complex regulatory environment.

Enhanced Data Insights and Risk Management

The integration of advanced analytics and risk assessment tools into Financial OS platforms has democratized access to valuable insights that were once reserved for larger enterprises. SMBs can now leverage these insights to make data-driven decisions about risk, creditworthiness, and operational investments. Platforms such as ZenBusiness, which initially focused on company formation and business registration, have expanded to offer a full suite of financial management tools that support compliance, governance, and growth strategies. 

The Benefits of a Unified Accounting Software And Finance Stack For CFOs

I have argued that the best fintechs benefit from at least one, and often multiple, of the “3 Ds”: Data, Distribution, and Delivery advantages. Arguably, financial operating systems (Financial OS) enjoy all three, creating a potent combination that makes these platforms indispensable for SMBs.

Data advantage from financial planning and analysis

Financial OS platforms are designed to aggregate and analyze a wealth of financial data that was previously siloed or inaccessible. By centralizing data on spending patterns, cash flow, creditworthiness, and other metrics, Financial OS platforms provide SMBs with a level of insight that was once only available to large enterprises. This data advantage allows businesses to make smarter, faster decisions. For instance, a platform like Ramp uses its data-driven insights to help businesses optimize their spending and identify areas for potential savings. Similarly, Xepelin uses its data to make better and faster underwriting decisions.

Distribution Advantage by being part of the workflow

Financial OS platforms leverage multiple entry points and cross-sell their services across their customer base. A user may start using ramp for their corporate cards, and expand towards bill pay over time. ZenBusiness starts by offering customers formation, and as customers need additional services, easily integrates them into their single pane of glass.

Delivery Advantage from combining multiple key components together

Financial OS platforms excel at delivering a seamless, integrated experience that brings multiple financial services into a single interface. This “one-stop-shop” approach not only simplifies financial management for SMBs but also enhances user experience and loyalty. By integrating functions like accounting, payroll, lending, and expense management, these platforms eliminate the need for businesses to juggle multiple software solutions. For example, Ramp combines corporate cards with spend management tools to streamline expense tracking and approvals in real time. ZenBusiness integrates everything from compliance to invoicing, allowing SMBs to manage all their financial and administrative needs without leaving the platform. This level of convenience is a key differentiator, as it allows SMBs to focus more on growth and less on navigating disjointed financial systems.

In combining Data, Distribution, and Delivery advantages, Financial OS platforms are more than just tools—they represent an entirely new infrastructure layer for SMBs. This combination creates a powerful network effect: as more businesses adopt Financial OS platforms, the platforms themselves become smarter and more valuable, enhancing their ability to serve a broader array of needs.

The 3 Ds reinforce each other in a virtuous cycle. Data insights fuel better service delivery, wide distribution attracts a larger user base, and streamlined delivery makes it easier to gather and leverage more data.

The Path Forward: The Financial Operating System and the Future of SMBs

As Financial OS platforms continue to evolve, the range of services they can offer will only expand, driven by emerging technologies such as artificial intelligence and machine learning. This evolution will make financial management increasingly predictive and personalized, equipping SMBs with the tools to anticipate financial challenges and optimize their operations in real-time. Financial OS is not merely a tool; it is becoming the central nervous system of modern SMBs.

The next frontier for these platforms lies in further industry specialization and expansion across international markets. For example, as demonstrated by companies like Xepelin, which focuses on Latin America, Financial OS providers are increasingly addressing the specific regulatory, operational, and financial needs of distinct regions. Flychain, a portfolio company, is executing the Xepelin/Ramp playbook for healthcare, and Prax (another portfolio company) is building ZenBusiness for solo practitioners.

For SMBs, adopting a Financial OS may soon become essential, as these platforms prove themselves indispensable in navigating the increasingly complex and competitive business landscape. With financial operating systems, SMBs can build a more resilient foundation, ready to seize new opportunities and thrive in a dynamic global market.

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*I was a former investor in both Xepelin and ZenBusiness at my previous firm

Originally published in my Forbes column here.

The news would have you believe fintech is down and out. But fintech’s annual pilgrimage to Las Vegas for Money2020, the industry’s largest conference, reminds us how much the industry has grown over the last few decades. Over 10,000 people attended from over 80 countries.

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Like I do every year, I wanted to share a round-up of key trends - driven by my own reflections and conversations with CEOs, founders, venture capitalists and other industry insiders, in and around the event. 

And if you’d rather listen to the blog from two AI agents discussing it, check out the voice over :-)

1. The Expanding Role of AI in Fintech Innovation

Artificial intelligence (AI) was front and center at Money 2020, as it has been in the venture capital arena more broadly. Many panels considered both the promise and challenges it will bring to every corner of the financial services ecosystem.

Scott Sanborn, CEO of LendingClub, emphasized AI’s transformative role and simultaneously the need for caution. “While the hype cycle is clearly running way ahead of actual implementations and benefits, the potential here is very real.” He pointed out low-risk AI applications like call summarization, fraud prevention, and compliance automation, which offer meaningful efficiency improvements without overstepping regulatory boundaries.

AI’s greater promise may be serving the underbanked, in underserved ecosystems. Melissa Frakman of EMVC, an India-focused VC fund, expressed excitement for AI in emerging markets where it can benefit consumers, businesses, and capital markets alike. “Despite the clear hype cycle, there remain so many exciting use cases for AI across fintech.” Similarly, Miguel Armaza of Gilgamesh Ventures, which invests meaningfully in Latam Fintech, told me: As AI in financial services grows, so does the sophistication of fraud, making fraud prevention more essential than ever.”

But caution is needed. As Ethan Austin of Outside VC reminds: “Without a doubt AI is going to be transformational and will forever change civilization. But the winners will be concentrated and almost everyone else will end up losing money betting on the space.”

What is clear: generative AI applications in fintech are maturing rapidly. Real applications, with real revenue, are being deployed across fraud prevention, compliance, customer experience and product development. I expect next year’s show will include a number of new infrastructure players for the ecosystem.

2. Embedded Finance for payment, credit, insurance and more

Last year, one of the key trends I highlighted was the rise of embedded finance. This is a broad topic, covering open banking, payment, insurance, and more. One particular application of embedded finance is around so-called vertical operating systems, which power the entire workflow for particular customers or businesses. The reason: vertical software as a financial services distribution platform enjoys all 3 Fintech Ds. They already have distribution through existing customers. They have a data advantage because of usage on the platform. And of course, they have a delivery advantage, to serve customers where they already are, in a way that is natural to their workflow.

No surprise there was continued enthusiasm for this strategy. For example, as Sandy Kimura, Group Executive Officer of Money Forward told me: “I’m closely following trends like embedded finance, where financial services are seamlessly integrated into non-financial products, and the growing focus on lending within industry-specific (vertical) in sectors like construction and transportation are thriving by tailoring GTM strategies to address unique, industry-specific pain points. Simplicity is so important.”

Like AI, investors stressed the potential of embedded fintech in driving financial inclusion. Herston Powers of 1982 Ventures, a South East Asia focused fintech investor, highlighted how embedded finance integrates financial products directly into non-financial platforms. “Case studies like Credilinq.AI and GoZayaan showcase the power of embedding lending and remittances into platforms such as Amazon and TikTok, making finance seamlessly accessible to the end-user,” Powers explained.

3. Digital asset infrastructure and Stablecoin insight

One of the biggest stories coming into Money2020 was the 1.1b acquisition of Bridge by Stripe. Bridge is a stablecoin provider here in the US.

According to Rob Hadick of Dragonfly a crypto and fintech VC fund, “Stablecoins are going to transcend crypto in 2025, if they haven’t already.” He added that stablecoins are uniquely valuable for accessing the US dollar in emerging markets and represent a significant improvement in cross-border payments. Stablecoins, in particular, have been widely discussed as a viable payment solution, especially in cross-border transactions. Rob Hadick predicts that stablecoins could outgrow crypto, as companies increasingly integrate them into their payment networks for greater speed and lower costs.

Powers also shared his conviction on the development of institutional-grade platforms for cryptocurrency and real-world assets and the tokenization of assets. 

The elephant in the room of course is crypto and blockchain regulation, and how the sector will be treated by the SEC, federal reserve and other agencies in the U.S., or similarly globally in Latin America, Europe, Asia and beyond.

4. Climate fintech 

Sustainability is moving to the forefront of fintech innovation. Ethan from Outside noted the rising popularity of “climate fintech,” where companies create financial solutions that address environmental challenges. As consumers and investors alike prioritize sustainable business practices, climate-conscious fintech models are emerging as an important sector.

The rise of major climate events has also driven new models in insurance, scoring, and prevention. We are still early days, but I expect this will continue to be a growing theme in years to come.

5. Cooling Sectors to highlight

If AI and embedded fintech continue their inevitable march forward towards new ways of serving customers in more unified offerings, single purpose businesses continue to struggle to scale or receive investment. For example, as Kimura told me, “Generic lending platforms are increasingly struggling to capture customer attention.”

To win in this space, financial services providers need a strong, differentiated value-proposition. “It’s why companies that are features instead of businesses are failing and we’ll see more of that consolidation as the market corrects.” As Sanborn told me.

Carlos Alonso of Fintech Collective noted that while certain capital intensive models like credit providers are unfavorable today, he predicts this is temporary and “investors understand these models will eventually be seen more favorably again, as they represent the main need (access to credit) for the majority of the population – both consumer and SMB.”

Beyond fintech sectors, what has also cooled is the notion of blitzscaling fintechs. As Frakman notes: “It's an interesting moment in fintech, where the most exciting companies to watch today aren't necessarily the most innovative ones but the ones that are emerging from the recent challenging market environment—and new post-zero interest rates era—with strengthened operational capabilities and deeper customer focus.”

Indeed, the winners seem to be Camels. As Powers reflected, “Fintechs are prioritizing sustainable business models over hyper-growth. The survivors of the VC funding winter and fintech correction over the past two years have emerged stronger and ready to scale.”

The oil on the fintech fire: exits

One of the buzziest topics was who would be the most likely next IPO. As Simon Khalaf, the CEO of Marqeta told me: “We’re seeing a shift in 2024 compared to the last couple of years where many sizable companies are now thinking about going public” – noting that many across AI, spend management, payments and beyond were gearing up. Scott Sanborn predicted Stripe and Chime (which received a few other votes) as likely candidates, while Kimura suggested Klarna and Plaid. However, Powers noted that in Southeast Asia, the fintech IPO landscape might be led by firms like Kredivo or Akulaku, which would set the stage for more technology listings in the region (Note: Chime and Kredivo are former portfolio companies of mine at previous firms).

Conclusion: A Fintech Future Full of Promise

This year’s Money 2020 showcased an industry that had not withered. New sectors like AI and stable coins, and continued focus on existing applications in new geographies or to new customers continue to show potential. Looking ahead, it is clear that the fintech ecosystem is primed for significant growth. With IPOs on the horizon and innovative technologies pushing boundaries.

What do you think 2025 be like?

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We just published our most recent Forbes and longform summary of our episode, but wanted to share the full episode.

Here are a few of my favorite quotes:

The disparities that we encounter in decisioning systems, whether they're in lending or in other domains, are not the result of people of bad faith building those models. They're largely due to limitations in data and mathematics

Is my decision fair? If not, why not? Could it be fair? What's the economic impact to our business of being fair?

If you've been locked out of the financial system or preyed upon the financial system, as for example, Black Americans have been, then, you know, the data that's available about you is very likely to be messy, missing, or wrong.

I think at every step of the customer journey, we are seeing the potential for AI to deliver better experiences, better experiences, more cheaply

Sign up here to stay in the know.

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What makes a good investor? And what makes an investor good? Whether impact investing or driving above-market returns, David Rubenstein has done it all.

In this episode, we interview the formidable Rubenstein, co- founder of The Carlyle Group. We explored the qualities of successful investors and venture capitalists, as well as what qualities make an investor similar to an artist. While this episode deviates from our usual debate format, it offers considerable insights into the world of successful VC investing. Rubenstein noted that some of the most successful investors often have a few things in common: they challenge conventional wisdom, share blue-collar backgrounds, have great educations, and have a penchant for making the final decision. Join us as we delve into the minds of exceptional investors from an exceptional investor himself.

Show Notes & Links

• https://www.simonandschuster.com/books/How-to-Invest/David-M-Rubenstein/9781982190309

  
  



• https://www.youtube.com/watch?v=-Iq51NdatuM

  
  



• https://givingpledge.org/pledger?pledgerId=275

  
  



• https://www.forbes.com/sites/alexlazarow/2023/04/18/how-to-become-the-greatest-venture-capitalist-lessons-from-the-masters/?sh=7576e98432a0

  
  

Environmental, Social, and Governance (ESG)-based investing: just more Wall Street bullsh*&t or a way to finally hold polluters accountable for their actions?

This week, we're diving into the controversial topic of ESG investing, and we have two deeply knowledgeable debaters who will present their perspectives. Hans Taparia, a professor at NYU Stern and a critic of ESG, argues that ESG systems have been designed for profit rather than creating real change. On the other side, Charlotte Degot, CEO of C02 AI, emphasizes the need to measure impact accurately and to make ESG investing a force for good. The conversation revolves around the challenges of measurement, the pace of progress, and the role of regulations. Join us as we delve into this thought-provoking discussion and explore the complexities of ESG investing with our esteemed guests.

Show Notes & Links

• https://www.nytimes.com/2022/09/29/opinion/esg-investing-responsibility.html 

  
  



• https://www.stern.nyu.edu/experience-stern/faculty-research/world-may-be-better-without-esg-investing

  
  



• https://www.stern.nyu.edu/experience-stern/faculty-research/one-of-the-hottest-trends-in-the-world-of-investing-is-a-sham

  
  



• https://co2ai.com/

  
  



• https://www.innovatorsunder35.com/the-list/charlotte-degot/

  
  

You’ve seen them in your checkout carts and they follow you online shopping: Buy-Now-Pay-Later companies have become significant players on the fintech scene.

In the inaugural episode of “The Pnyx”, your hosts Alex and Vikas discuss Affirm, Klarna, Afterpay and all the other actors that constitute the Buy-Now-Pay-Later (BNPL) phenomenon. Joined by panelists Marshall Lux and Jeremy Solomon, we dive deep into the pros and cons of BNPL, exploring its potential benefits for consumers, the inherent risks, and the implications for financial transparency and inclusion. This episode sheds important light on the complexities surrounding this popular, but still nascent financing model.

Show Notes & Links

• https://www.cnbc.com/video/2023/01/10/harvard-senior-fellow-mashall-lux-calls-buy-now-pay-later-financial-dynamite.html

  
  



• https://fintechfundamentals.substack.com/p/how-bnpl-really-works

  
  



• https://www.forbes.com/sites/vikasraj/2020/11/30/embedded-inclusive-fintech/?sh=795ae50310cc