One often-cited example that represents the potential for embedded payments is that of Uber, which automatically charges the payment method on file at the end of a ride. The company has embedded payments within its technology to the point that the ride-hailing and payments experiences have merged into one, rather than separate steps to be taken by the consumer. For decades, payments have been the purview of large companies and payment processors. Software companies have traditionally had to rely on third-party integrations to allow their customers to accept payments using their platform, which has caused a disjointed customer experience between software and payments.
This next decade will bring the embedded payment infrastructure to the forefront of the industry, spurred by recent world events like the COVID-19 pandemic. Crucially, embedded payments and embedded finance are not just B2C solutions, but are revolutionizing the B2B space as well. Some APIs, for instance, let suppliers onboard buyers at checkout, set terms and even extend credit. For any customer, whether B2C or B2B, it’s the ease, immediacy and seamlessness of the process that makes purchasing more enticing. You might not notice it but embedded payments are getting woven into the fabric of our digital infrastructure everywhere. Embedded payments are the umbrella term for a variety of financial products that are seamlessly integrated into the customer journey when buying a product or a service.
Shoppers using PC Financial cards get higher rewards at Loblaw Companies stores and access to other financial products, such as 24/7 no-fee personal banking. Worldpay discovered in their research, that for every additional page online the customer has to go to ultimately yields a drop off in customers – often to the competitors who have easier onboarding processes. The lesson is to make your payment or insurance process as frictionless as possible and limit what else you offer upon checkout. Or even a channel model, sponsoring other software partners and becoming a “PF lite” enabler yourself.
The next decade should crown a new crop of successful, verticalized software providers. Customers are already showing their appreciation for embedded payments. Business Insider’s Embedded Finance Explainer reported that embedded finance in the United States generated approximately 22.5 billion USD in 2020.
When to consider embedded payments
The COVID-19 pandemic has shone a light on the need for digital payments, and the industry is preparing for an oncoming wave of immense growth in the next decade. The last decade ignited the fintech industry following the 2008 recession, and several heavy hitters came onto the scene right at the start of the 2010s, such as Stripe, Square, Venmo and others. In fact, digital payments have raced ahead in the last decade, thanks to strides in radio-frequency identification , chips on cards and mobile apps. Slow-to-adopt verticals such as construction, manufacturing, wholesaler, and education are poised for payment transformation. Increasingly, banks and traditional lenders are offering more of these solutions. Consider contacting your existing business banker to learn more about whether embedded finance makes sense for your organization.
These solutions point to a strong outlook for embedded finance, ushering in the next decade of unprecedented payment growth. Different software integrations offer different functionalities to sweeten the payment offering. For instance, some embedded payments can offer Buy Now Pay Later or instalment payment options. Don’t undermine your future by accepting low profit margins and conversion rates, settling for unfavorable terms with payment partnerships, or relinquishing control of their customers’ payments service contracts. Use Nexio to optimize your payment strategy, maximize revenue opportunities, and increase asset value. Embedded payments make sense if your long-term technology benefits justify these upfront costs.
Trust has super-charged the Nordic payments ecosystem
Otherwise, the embedded finance will not be useful and profitable. This strategy is winning verticalized software providers strong customer bases within their respective industries, which presents another tantalizing opportunity. Cross-selling those customer bases with tailor-made embedded payments platforms can cost verticalized software providers virtually nothing while tripling or quadrupling their total addressable market. We cover these sorts of trends, such as embedded payments, in ongoing member research and agree that such experiences are ripe for transformation.
But perhaps more important is that growth is based on a positive customer experience. What is the point of delivering phenomenal customer service if all is shot when you transfer a customer to a third party whose experience is antiquated? The desire to improve these experiences and make them frictionless is Best Upcoming Embedded Payment Trends the true driver behind the uptake of embedded financial services,” says Fredrik Neumann. Not only tech companies can make use of embedded financial services. It will help them to become more convenient and increase their turnover. So, what financial services companies can integrate into their products?
Supply chain and delivery challenges made it hard for them to keep goods in stock and get them in customers’ hands on time. When lockdowns prevented stores from opening, customers developed https://globalcloudteam.com/ new shopping habits and routines overnight. While many stores made the rapid necessary switch to eCommerce and contactless payment solutions, many still suffered extensive customer losses.
Some estimations show that embedding financial services increases revenue twofold. Others say that it can rocket as much as 5 times, depending on the business. With a growing ecosystem of distributors, it is crucial to understand the opportunity and prepare for change. Learn from those at the forefront of developing embedded finance strategies.
Speed to Market and onboarding
Ultimately, the question of embedding payments into your software application comes down to clarifying the role of payments in your business strategy and outlook and then finding the best fit for your business model. Building optionality into both your platform and operations is really at the foundation of any successful, scalable embedded payments strategy. Many software companies have become payment facilitators, allowing them to provide similar experiences that are relevant to their own verticals.
High-quality embedded finance tools depend on strong partnerships among trusted parties. A banking as a service provider can connect fintechs with the right partners, providing an API interface for integration. The most important qualities to look for in a BaaS provider are transparency and expertise.
For example, some accounting platforms like Treasury Prime client Bench allow business owners to view their business account balances within the accounting app. It allows them to retain the payment processing fees as their own revenue, rather than handing it over to a third party. In many cases, this recurring revenue stream leads to investor interest and higher valuations.
It is best known for providing merchants with a buy-now-pay-later solution. Iana Dimitrova“Embedded payments deliver the convenience consumers expect by seamlessly fitting into the checkout process. Merchants are using embedded payments to transform what was a strictly functional payment process into a personalised, intuitive experience,” said Iana Dimitrova, Chief Executive at OpenPayd.
Users can even order a physical PayPal Cash Card to draw from their PayPal balance at brick-and-mortar retailers. Together these features make PayPal’s offerings almost like neobanking services. Embedded payments refer to digital payment options that are embedded within non-payment apps. These tools allow non-finance or non-fintech merchants to accept payments.
In the end, this Embedded Payments report helps to save you time and money by delivering unbiased information under one roof. The in-depth market segmentation analysis helps identify the prevailing market opportunities. The analysis tools such as SWOT analysis and Porter’s five force analysis are utilized, which explain the potency of the buyers and suppliers to make profit-oriented decisions and strengthen their business. This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.
Payments & beyond
This can happen if you process many transactions and want to save on third-party transaction charges. It’s also a better fit for online businesses that primarily deal with their customers by app and website. You also need to plan how your embedded finance process would work, including the compliance side. Because you’re handling and storing private customer financial data through your software rather than outsourcing this to a financial company, you’ll need to meet the PCI compliance requirements for this data. Embedded financial services and payments enhance the customer experience and have become a necessity to win in the digital economy. Part of the reason for that is the sheer volume of terms used to describe some of the approaches to the space, like PayFac®, payment facilitator, merchant of record , embedded payments, software-led payments, just to name a few.
- Cross-selling those customer bases with tailor-made embedded payments platforms can cost verticalized software providers virtually nothing while tripling or quadrupling their total addressable market.
- The monumental shift to a seamless cab-hailing experience set a new precedent for travelers, transforming the entire industry.
- One major advantage of adding embedded payments to your system is that it makes it easier to close sales.
- Company is a licensed e-money institution which has the right to execute activities related to issuance of e-money and provision of payment services around the European Union.
- These tools allow non-finance or non-fintech merchants to accept payments.
- Simply put, it means that the financial service is integrated within a product.
- And we are in fact talking about five different markets and not one homogenous market,” says Tony Bach Christensen.
In short, this is what embedded finance does – it offers a frictionless, contextual financial experience. Embedded finance is when a non-financial company integrates a financial service into its product. The ultimate goal for this cooperation is to offer customers more convenience.
Understanding the Opportunity
Sign up for the PaymentsJournal Newsletter to get exclusive insight and data from Mercator Advisory Group analysts and industry professionals. When shoppers don’t encounter purchasing friction, they make spending decisions much faster and are less inclined to abandon their carts. A speedier process inspires more impulse buys, garners higher sales overall and leads to repeat store visits. And, since software integrations are automated, it’s a win-win for eCommerce sellers who profit from lower transaction costs and more conversions.
Reporting a Problem
For a long time, fintech companies were disruptive and change-bringing. As some examples in history have shown, cooperation is better than the competition. Indeed, it looks like fintech companies finally understood that the market is not a zero-sum game. Emarketer.com revealed that Starbucks takes second place in proximity mobile payments. They achieved this position by allowing their customers to avoid standing in line. Shopify enabled merchants to accept payments from VISA, MasterCard, and others.
Whether you’re looking to become a payments company or want a risk-free embedded payments solution, Nexio transforms your payment strategy into a scalable, revenue-driving asset. Embedded finance can also include setting up financing or insurance at the same time as buying a product or service. For example, a customer might get the option to buy travel insurance as part of buying a plane ticket. While some forms of embedded finance have existed for a while, this market has begun to take off due to the growth in financial technology.