AffiniPay: Bringing Buy Now Pay Later to the legal industry

In this interview Christian discusses AffiniPay’s embrace of embedded payments, the importance in choosing the right financial technology partner, and shares valuable insights on the current state of the payments. He also offers advice to financial professionals considering embedding payments into their SaaS platforms. Looking to the future, AffiniPay sees potential in offering embedded financial products like business financing and accounts to their users.

Christian: Our first product beyond regular cards and ACH was "Pay Later," the first at-scale buy now pay later solution for legal and accounting verticals. We saw a need for payment options in legal services similar to what's available in retail. After an exhaustive search, we partnered with Affirm, which helped us create this market by pitching to banks and getting approval for underwriting legal service loans.

A key consideration was that we're not a licensed money transmitter and wanted to avoid becoming one. We needed to provide a cohesive solution for our customers, regardless of the payment type they were accepting. Adyen's integration with Affirm allowed us to offer the Pay Later solution at checkout alongside other payment options. We've integrated these features into our legal tech application, posting back to the legal practice management system for a truly cohesive environment.

Christian: It's an interesting situation. Lawyers typically don't think about technology or ask for specific products. However, through our market research, we uncovered pain points such as clients struggling to pay for legal services and lawyers wanting to acquire more clients.

When introducing payment methods like Pay Later to the legal segment, we faced challenges with regulatory concerns. Similar to when credit cards were first introduced in legal services, there was hesitation about acceptance and regulatory approval. We had to educate both lawyers and state bar associations about the benefits and compliance of these new payment options.

This education process took time, but it paid off. Since launching Pay Later, we've processed over $140 million in volume and are now on an annual run rate of about $150 million. It's been a great growth product for us and adds "stickiness" to our card and eCheck products. While these basic payment options are widely available, offering a pay later solution on top of them gives us a competitive edge.

Christian: After launching Pay Later on top of our card and ACH offerings, we're introducing a spend management product tailored for legal services, allowing attorneys to pay for client-related expenses and immediately tag them to specific cases. This solution addresses the significant concern about expense leakage in law firms, as revealed by our market research. The software automatically adds these expenses to the client's invoice, a feature that garnered strong interest when we proposed it to lawyers who were initially uninterested in a simple credit card program. Our product roadmap is driven by customer feedback and focuses on identifying pain points in the legal industry. We're exploring various offerings including business financing, receivables factoring, SMB insurance packages, and integrated payroll solutions. Additionally, we're developing a digital banking solution that can automatically reconcile trust accounts, addressing a critical need for attorneys. By integrating these features with our legal practice management platform, we aim to create a unique experience that differentiates us in the competitive legal tech market.

Christian: This is an exciting time for embedded finance. I've seen payments evolve from physical credit card slips to over the computer. There was a time when the industry was very price-focused, and I almost left because it was so commoditized. Thankfully, technology shifted the focus to integrated payments and solving problems through embedded solutions. Now, we're moving beyond just payments to offer more embedded financial solutions that help SMBs grow their businesses.

It's an exciting time because companies like ours can truly help businesses with these innovative solutions. However, it’s complex, especially regarding legal and regulatory issues. Our partnership with Adyen, which has a banking license, allows us to deliver the right solutions without the regulatory burden. Fintech companies are now providing services traditionally offered by banks, and customers are becoming more comfortable with this shift.

We've chosen to be a technology provider bridging these gaps rather than a balance sheet lender or payroll provider. We partner with the right companies to deliver solutions, making the process simple and avoiding regulatory complications.

Christian: First, understand that payments, while easier to start with, are still complex. Be thoughtful about your approach. My advice is to recognize that launching products takes longer than expected. Choose the most important product, focus on it, and invest time and energy into launching it properly.

Find the right partners and ensure the product gets market traction and utilization. Avoid taking on too many projects at once, as each product requires time to mature. Once a product is successful and gaining traction, you can start on the next one. Remember, it's crucial to educate your customers on how to market and offer these services to their end clients.

AffiniPay's journey from embedding payments to offering financial products demonstrates the future for enterprise SaaS platforms. By identifying pain points, developing tailored products like "Pay Later," and integrating seamlessly with legal practice management systems, AffiniPay has positioned itself for the future.