US-based CapitalOS has raised $21.9 million in a Series A led by LGVP, with WEX Venture Capital, Group11, Great North Ventures, Night Capital and existing investors taking part. The company offers a money orchestration layer for platforms that serve businesses. Through it, platforms can give their customers cards, wallets, bill pay and receivables management. CapitalOS handles underwriting, compliance, capital, risk management and fraud prevention.

What it means: Embedded finance, meaning payments and credit inside software that is not a bank, keeps attracting money, but in a more mature form. Rather than every platform building its own bank relationships, compliance rules and risk models, firms such as CapitalOS offer all of this as a service. For business software, an ERP or a B2B ordering platform, that means new revenue from every transaction and more loyal customers. In Greece the model is interesting for software vendors that serve thousands of small businesses, such as commercial software, restaurant systems and wholesale platforms. The European version, however, requires a partnership with a licensed payment or e-money institution and compliance with PSD2 and, in future, PSD3, which adds time and cost. Anyone thinking of adding cards or credit to a product should start by asking who carries the credit risk and the compliance responsibility, because that decides whether the service is viable. Linking to e-invoicing data from myDATA could also greatly improve credit assessment.

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Related service: myDATA integrations

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