Embedded Payments on the Rise

Embedded payments have increased for years as they offer many benefits for consumers and businesses. They allow companies to seamlessly provide payment options to customers without having to redirect to a third party. Maximizing the potential of this trend is critical for modern business. 

Basics of Embedded Payments

Embedded payments are part of a more significant trend of creating embedded financial services that non-financial companies can directly integrate into their services or websites. The purpose of this is to create a seamless customer experience. Popular apps such as Uber and Doordash commonly use this, which allows users to order and pay for services without using a third-party app or website

Embedded payments can work for almost any industry. Regardless of what product or service a customer is looking for, embedded options for payment can offer them a seamless payment experience.

Impact on Consumers

Consumers benefit tremendously from access to embedded payments as they do not have to navigate third-party payment processes. In addition, customers can get more personalized service with embedded options for payment due to the increased flexibility that comes with it. 

However, consumers are not always given perfect clarity regarding embedded payments, as the payment process occurs in the backend. Customers must also be vigilant about what companies they provide their payment information to

There is a risk of embedded payments becoming a clunky process because of their ease of use. They can easily support a wide variety of payment options, and this can add an unnecessary step as customers sort through and find the payment option that works best for them. 

Benefits for Companies and Software Providers

Customer Experience and Monetization

Software providers can benefit tremendously from embedded payments. They can stand out from the competition by offering a better customer experience. ISVs can also monetize payments by partnering with certain payment providers. 

A smoother customer experience is huge for companies as clunky payment options, and checkout is one of the most prominent reasons customers abandon online purchases. However, more than ever, customers expect a seamless purchasing experience and embedded payments allow this to happen. 

Consumers benefit tremendously from access to embedded payments as they do not have to navigate third-party payment processes. In addition, customers can get more personalized service with embedded payments due to the increased flexibility that comes with it. 

By providing a more streamlined customer experience, companies can dramatically increase their overall customer satisfaction and retention. This means happier customers that will keep returning to spend more and more. 

Smoother Business Operations

Embedded payments make it easy for companies to gather data in one easy-to-analyze system with transparent reporting. With more efficient data management, companies can make better-informed decisions about what they should do in the future. This also increases cash flow for companies as customers can pay for their goods and services faster with automatic embedded payment options. 

Embedded payments can work in a business's front, and back ends. This allows companies to streamline their operations while they make their customer smoother. 

Companies can avoid human error and costly chargebacks by streamlining and automating the payment process. Additionally, companies are free to invest more of their team's time in improving or growing the business rather than supervising daily payments. 

Businesses can also offer more comprehensive solutions as their payment infrastructure can easily be adapted to accommodate a broader base of customers. Embedded payments allow companies to accept and process payments in real-time. As such, it gives them much faster access to the funds customers send to them

Who Facilitates Embedded Payments

Several kinds of companies offer embedded payments for businesses to use easily. 

Registered Payment Facilitators

Registered payment facilitators such as large companies like Stripe, Uber, or Doordash must undergo an extensive risk assessment to become registered. They assume all the risk of card compliance but often earn higher profit margins. Typically only large companies can afford to become registered payment facilitators. 

PayFac as a Service

PayFac as a service is when a registered payment facilitator will allow ISVs to utilize the payfacs payment infrastructure in order to offer embedded payments in the ISVs software. The payfac is responsible for compliance and underwriting, while ISV is responsible for marketing and customer support. This requires ISVs to become very knowledgeable about the payment space. 

Partnerships

Partnerships are another option that ISVs use to offer embedded payments. By splitting revenue with a payment provider, an ISV can easily integrate payments into its software without building out and maintaining the payment system itself.

Role of API and ACH

Innovations such as API have allowed embedded payments to become incredibly widespread, making it easy for developers to add new features to their software. For example, this makes it easy to add an embedded payment option. 

ACH can also be included under embedded payments allowing consumers to use their bank accounts to pay for purchases such as cars directly

Embedded Payments and B2B

While most embedded payments occur between consumers and businesses, there is enormous potential in the B2B market. However, this critical market is underserved due to more detailed accounts payable and receivable. With proper development, payment providers can benefit tremendously by offering well-built B2B solutions

The expectation for automation is wider than consumers, as companies expect to have options for automated embedded payments for their B2B purchases. This reduces the cost of transactions and allows for easy scheduling for payment for regular purchases.

Embedded Finances and Banks

Financial institutions have lagged in adopting new technologies, which has been the case with embedded payments. As a result, banks must adapt to be more flexible and embrace new technologies that are in increasing demand from consumers. While banks need to invest heavily in creating new infrastructure and robust security, they can dramatically improve user experience and profits with embedded finance options. 

Future of Embedded Payments

Recent surveys show that most consumers and business leaders are making embedded payments and embedded a priority in their decision-making. As a result, embedded payments are expected to explode in use over the next few years, from $65 billion in 2022 to over $180 billion by 2027. This is a huge opportunity that companies must take advantage of. As long as consumers prioritize speed and ease of use, embedded payments will continue to grow to meet this demand. 

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