Fashion Fintech and Vertical Accounting: The Atomization of Financial Services Accelerates

The venture capital frenzy that pushed one-fifth of all global private company investment into fintech during 2021 shows no signs of cooling, with January 2022 delivering a wave of niche financial products that suggest the industry's next phase will be defined by hyper-specialization rather than horizontal scale.

Two deals in particular signal where embedded finance is heading: Twig, a "circular economy fintech," closed a $35 million Series A, while Responsible, an embedded finance platform for fashion, raised $6.6 million in seed funding from Barclays. Both companies are building financial infrastructure around the liquidation of physical goods—essentially turning your closet into a balance sheet.

Twig's pitch combines nearly every venture capital buzzword into a single sentence, describing itself as a company operating at the intersection of fintech, crypto, and ESG. Strip away the marketing language, and the product is straightforward: a bank account that lets users upload an inventory of their possessions—primarily clothing and electronics—and instantly convert those items to cash. Think Cash App meets iBuying, except for retail goods instead of real estate.

Responsible follows a similar model but distributes through e-commerce plugins, allowing fashion retailers to buy back used clothing from customers instantly at point of sale. The approach represents a bet that financial services will increasingly be delivered not through standalone apps but embedded directly into the transaction flows of specific industries.

The trend extends beyond fashion. Heard, a financial operations platform for mental health professionals, raised $1.3 million (announced in March 2021 but gaining renewed attention in fintech circles) to provide accounting, payroll, and tax management specifically designed for private therapy practices. The company combines software with human accountants who understand the unique financial structures of mental healthcare businesses.

What ties these companies together is a rejection of the horizontal neobank model that defined fintech's last wave. Rather than building a checking account for everyone, these startups are building complete financial operating systems for narrow customer segments—therapists, fashion consumers, sustainability-focused shoppers—and starting with whichever financial product (accounting, payments, credit) solves the most acute pain point for that audience.

For Heard, that entry point is accounting rather than banking, based on the thesis that accounting functions as the "operating system" of small business finance. For Twig and Responsible, it's instant liquidity for physical assets, a product that wouldn't make sense for a general-purpose bank but becomes compelling when tailored to specific use cases.

The strategic question for CFOs watching this space: as financial services continue to atomize into vertical-specific products, which functions remain centralized and which migrate to specialized platforms? The January funding activity suggests venture investors are betting the answer is "fewer than you think."