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Flute
Flute CEO Derek Dean sits down with Leaders in Payments host Greg Myers to talk through how payments are shifting, what's still too hard for merchants, and what's coming next.
Payments used to be something merchants shopped for. Now it’s built into the software already running their business, quietly bundled into the tools they use to book appointments, ring up orders, or manage inventory. That shift is reshaping who profits from every transaction, and it’s only the start of a bigger conversation about where payments are headed next.
I recently sat down with Greg Myers, host of the Leaders in Payments podcast, to talk through that shift and what comes after it. During our conversation, we covered three things:
Read a highlight of our conversation below, or watch the full video.
Greg Myers: Payments never change in a single direction — they evolve through technology, regulation, customer expectations, and the constant pressure to make commerce easier. With that in mind, what shifts are you seeing that are reshaping the payments industry?
Derek Dean: The biggest change right now is something that’s already been shifting pretty rapidly for the past five to seven years: how payments are sold to merchants.
For decades, payments was a product. ISOs (independent sales organizations) signed merchants up one at a time. The entire game was based on distribution, with a goal to get card readers into just one more store.
Today, that world is ending. Merchants don’t go shopping for a payment provider; they buy software to run their restaurant or medical practice, and payments are just built in. Nobody sold it to them separately.
On the surface, that might sound like a small change. But it’s actually the biggest in the business because it flips the economics. When payments ride inside the software a merchant already uses, the cost of acquiring that merchant drops to basically zero for whoever owns the software.
That means the software company doesn’t just act as a referral and take a tiny cut of the revenue. In a lot of cases, they take on the risk and keep the spread. When a platform runs its own payment infrastructure, it can earn three to five times as much as it would by just referring merchants to an outside payment provider.
That’s why Toast and Shopify make more money on payments than on the software. The software is the hook. Payments is the business. And the scale is huge. Something like $7 trillion of U.S. payment volume now runs through software platforms instead of the old direct channel.
But the part I’m really watching is what comes next. Payments is only the first thing software is eating. Once a platform owns the money flowing through a merchant, it can stack everything else on top. For instance, you’ve got lending and business credit cards, instant payouts, and even bank accounts.
Payments are just a wedge. The real prize is the merchant’s whole financial relationship. And software is walking right into it.
Myers: In payments, we often talk about removing friction. But it doesn’t just disappear. Instead, it tends to move somewhere else. With that in mind, what’s harder than it should be, given the innovation we’ve seen in payments?
Dean: This is the one that really gets me because it cuts against the whole story that we like to tell about how far payments has come.
We spent years making the moment of taking a payment beautiful. You tap, you glance at the phone, and you’re done. It feels like magic. But underneath that, you have the merchant. For them, the process of getting paid at a price they understand is still incredibly hard. And it’s hard in a few ways that nobody really talks about.
First, as an industry, we’re better at blocking good customers than we are at stopping fraud. There’s a figure that I come back to a lot, which is that false declines (which refers to the real, legitimate customers who are wrongly turned away at checkout) cost global retailers over $400 billion a year. Compare that to actual card fraud, and that number is only $50 billion.
Most of those declined orders were perfectly fine. But the result is that about a third of those customers never come back. So, we got really good at catching fraud, but along the way, we created a much bigger problem.
The second issue is around cost. Think about this for a second: Almost everything in technology has gotten cheaper over the last 10 years. Computers, storage, software, have all dropped in price. But, somehow, the cost of taking payments didn’t.
A small business is still paying somewhere between 2 and 3.5% every time it takes a card. But if you ask the owner what their real rate is, most of them couldn’t tell you. And that’s not because anyone is being shady; pricing has just become incredibly complicated.
There are hundreds of interchange categories, and the rules change a couple of times a year. The merchant never sees that complexity, though. They just see a number they can’t predict and can’t really control.
From a merchant’s perspective, we keep inventing new ways to pay, but we almost never retire all the old ones. Cards, digital wallets, buy now, pay later, pay by bank, account to account; they’re all great for customers. But each one is just one more thing that the merchant has to plug in and reconcile at the end of the month.
Myers: Let’s look at the next chapter. Not 10 years out, but three to five years. Close enough to feel real, but far enough away that today’s decisions will shape how ready the industry is when that future arrives. Looking ahead over the next few years, what changes should the payments industry be preparing for now?
Dean: If the now is software payments, then the next chapter will be all about two things: money movement and AI agents.
Money is starting to move over new rails, mainly real-time bank transfers and stablecoins. The topline numbers of what’s going on sound huge; real-time payments (RTP) moved about $2 trillion last year. But almost none of that volume was because of shoppers choosing a bank transfer over their credit card at checkout.
In reality, that number represents B2B, payroll, money moving between accounts, and stablecoins. If you strip out crypto trading, you’re left with under $400 billion worldwide, which is mostly cross-border payments.
So, at the checkout counter where cards live, these new rails still account for next to nothing. But I’m paying attention anyway, because these payments settle in seconds and don’t carry interchange. Real-time payments grew by more than 40% last year, and we’ve finally seen stablecoins start to get some regulatory backing.
The cost advantage is real. What’s missing is a reason for anyone to switch.
The next thing to keep an eye on over the next few years is AI agents, specifically agents that handle buying on your behalf. What’s making this real, in my opinion, is who’s starting to build for it.
In the last year, Visa and Mastercard have both started issuing identity credentials to agents. These are verified IDs that signal to their networks they can trust the bots to pay. After Visa and Mastercard, Google put out an open standard for it, and Stripe found a way for an agent to pay on your behalf without ever touching your card number.
When Visa and Mastercard are issuing IDs, that’s the industry telling you that it’s coming. That said, it’s still early; even earlier than new payment rails like RTP. The volume’s tiny, and it’s all online. But it’s still something to keep an eye on as the industry evolves.
Listen to the full interview here.
