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PayPal’s Embedded Finance Vision: Michelle Gill reveals how cash flow lending is reshaping SMB access to capital

As General Manager of PayPal’s Small Business and Financial Services Group, Michelle Gill is responsible for bringing together the products and services that help small business owners run and grow their business. She is my guest for this episode of the Tearsheet Podcast.

Michelle brings deep financial expertise and experience building platforms and tools that help customers manage their finances to her role on PayPal’s Senior Leadership Team. Michelle was previously Senior Vice President of Intuit’s business money management, payment, and banking service, QuickBooks Money Platform. Prior to Intuit, Michelle successfully integrated and expanded SoFi’s lending business as General Manager and Executive Vice President of Consumer Lending and Capital Markets.

Drawing on her early career experience as a Managing Director and Partner at Goldman Sachs, Michelle also served as SoFi’s Chief Financial Officer before moving into the product leadership role. Before that, Michelle spent a decade leading the U.S. Assets business for global investment firm Sixth Street Partners.

Given her career and experiences, Michelle brings a broad view of fintech innovation. She focuses on user-centered solutions. At PayPal, she leads efforts to help entrepreneurs navigate the complicated web of financial tools they often depend on.

“The preponderance of [small businesses] use greater than 15 tools to run their business,” she shares. “What they got into business for is the passion… and yet they end up spending more time on things that are not what they love.”

Our conversation explores how PayPal is actively trying to reduce that complexity. It does so not by offering more tools, but by making the ones they already use work better together. Gill outlines the strategy behind PayPal’s cash flow-based lending model and how it fits within their open ecosystem, whether it’s digital lending, embedded finance, or leveraging open banking.

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How PayPal for Small Business solutions addresses complexity

For many small business owners, managing finances often means juggling over a dozen platforms. PayPal is stepping into this chaos with the goal of integration.  “It’s not the adoption of the new tool in and of itself that’s the problem. It’s how it feeds back into your broader ecosystem,” says Gill. PayPal’s strategy focuses on streamlining tools through a single integration. It aims to reduce friction and give entrepreneurs more time to focus on their craft.

How PayPal cash flow lending works

PayPal’s approach to cash flow-based lending matches repayments with earnings. It is unlike traditional fixed-schedule lending. “Repayment is predicated on the receipt of those earnings,” says Gill. She describes the flexibility of the PayPal Working Capital product. This flexibility makes the loan more manageable for merchants with fluctuating revenue.

But, until recently, merchants couldn’t access more funds until fully repaid the loan. That’s changing. “We are changing our product to allow for the ability to redraw,” she notes. She signals towards an update that will help entrepreneurs recycle capital more efficiently.

Leveraging Open Banking for better lending models

Previously, PayPal could only lend based on what it processed. But open banking now enables them to assess a holistic view of merchant cash flow. “We now can have visibility into the entire merchant account, both on and off PayPal,” says Gill. This broader perspective supports more accurate underwriting. It offers larger loan sizes without expanding the credit risk.

PayPal is embedding finance into merchant workflows

PayPal isn’t just offering loans—they’re embedding them into the workflows merchants already use. Through the PayPal dashboard, users are notified of pre-approved loan amounts as they manage daily tasks. These are like refunds and chargebacks. “We are planning to add the amount that merchants have been pre-approved for, so they know going in,” Gill shares. PayPal is also collaborating with vertical SaaS providers, as well as with marketplaces, to bring financing directly into partner platforms.

Growing with merchants in the Open PayPal ecosystem

Through its open ecosystem, PayPal aims to grow alongside its customers. “We do things from point of sale to lending to online payments for e-commerce… we’ve tried to grow with our customers as they’ve grown,” says Gill. That includes helping businesses navigate newer challenges, like Generative AI and complex commerce models. “We do that through education, tools, and end-to-end services,” she adds.

The Big Ideas

  1. Small Businesses Face Tool Overload. “The preponderance of them use more than 15 tools to run their business.” This overload creates inefficiencies—PayPal’s integrated platform is intended to reduce that friction.
  2. Cash Flow Lending Matches Business Realities. “Repayment is predicated on the receipt of those earnings.” This model reflects how small businesses operate, especially in unpredictable markets.
  3. Access to Capital Expands with Open Banking. “We now have visibility into the entire merchant account… not only borrow against your PayPal receivables, but also your off-US receivables.” This broader access supports more accurate and inclusive lending.
  4. Embedded Finance Increases Accessibility. “Merchants who use PayPal come into their dashboard generally at least once a week… We let them know they have access to capital.” In-app lending notifications simplify the financing journey.
  5. Loyalty Grows with Product Adoption. “If you borrow once from us, you tend to borrow five or six times.” This repeated usage signals that the lending tools are resonating with merchants.

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Zip CEO Joe Heck: Expanding financial inclusion through Buy Now, Pay Later innovation

Buy Now Pay Later joe heck

Joe Heck, CEO of Zip, joins me on the Tearsheet Podcast to discuss the evolution of alternative payment solutions in the US. Zip is a leading Buy Now, Pay Later (BNPL) company. Joe shares lessons from his 20 years of experience in consumer lending and fintech payment solutions. Heck brings insights from his previous leadership roles at Happy Money and TrueStage.

Heck’s background plays a role in his approach to financial services. Growing up in Flint, Michigan, he understands the challenges of paycheck-to-paycheck living. “There’s a consumer base largely ignored by traditional financial systems,” Heck explains. “FICO doesn’t serve them well, but they have a great ability to pay.”

Zip focuses on providing financial flexibility to these consumers. It offers structured repayment plans that don’t push them into revolving debt. According to Heck, “We win when the consumer wins. If they can’t pay us back, our model doesn’t work either.”

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BNPL’s Growth, Competition, and Distribution Partnerships

The BNPL industry is still in its early days in the US. Heck notes that BNPL accounts for only about 2% of total payments and 5% of e-commerce transactions in the US. These numbers are significantly higher in markets like Australia and Europe. “There’s a lot of upside left,” he says.

Zip is growing both its customer base and engagement. “We’ve added over 400,000 new customers in the first half of our fiscal year and saw a 40% year-over-year increase in the US,” Heck shares. Engagement is also rising, with more frequent and higher transaction amounts.

With more entrants into the BNPL space, competition is increasing. Heck argues that Zip’s focus on the underserved consumer sets it apart. “Our customers often fall outside traditional FICO lending. We provide access and flexibility that other BNPL providers might not.”

To expand its reach, Zip is forming strategic partnerships with companies like Stripe and major retailers, including GameStop. “Our partnership with Stripe allows us to integrate seamlessly into thousands of merchants, making BNPL more accessible,” Heck explains.

Exclusive retail partnerships are becoming less common as merchants prioritize offering multiple payment options. “Optionality for the consumer is what matters. Retailers want to optimize checkout by giving customers payment methods that work for them,” Heck notes.

The Future of Buy Now, Pay Later & Cash Flow Management

Looking ahead, Heck sees BNPL continuing to evolve with better cash flow management tools. Zip is working on “Pay in Z,” a more flexible model that adjusts repayment terms based on a consumer’s unique financial situation. “We’re striving for personalization at scale,” he says.

Moreover, Heck believes increased familiarity with BNPL will drive further adoption. “Younger generations are hesitant about traditional credit cards. They prefer straightforward payment options that don’t come with complex APR structures.”

The Big Ideas

  1. BNPL’s Growth Potential in the US – With only 2% of payments currently in BNPL, there is significant room for expansion compared to markets like Europe and Australia.
  1. Financial Inclusion for Underserved Consumers – Zip is focusing on consumers who don’t fit traditional credit models but have strong repayment potential. “We provide access when and where they need it,” says Heck.
  1. Strategic Partnerships Drive Accessibility – Integrations with Stripe and retailers like GameStop are making BNPL more available to consumers.
  1. A More Transparent Alternative to Credit Cards – Unlike credit cards that encourage revolving debt, BNPL provides structured, predictable payments. “We’re not built in a way that traps consumers in debt,” Heck emphasizes.
  1. The Role of Cash Flow Management in BNPL’s Future – Zip is investing in tools that help consumers manage unpredictable income streams, ensuring more repayment flexibility.

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