Embedded Payments: The Premium Payment Experience for Software Platforms

Embedded insurance means people can get insured right on a non-financial website or app during checkout. It’s usually implemented through partnerships with fintech companies that have embedded insurance as an option. When users are about to pay for the product or service, they see a prompt offering insurance as an add-on. Thanks to embedded banking solutions, non-financial companies can offer users a branded checking account. It enables them to hold funds and complete payments without leaving the main platform.

Consumers benefit from embedded payments as well, which is a further benefit for merchants. When customers are able to enjoy an embedded payment experience, they experience less friction in the process. This not only makes it more likely they’ll complete the transaction, but it increases their satisfaction and loyalty. The fact that 55% of non-financial businesses plan to offer embedded financial services in the next two years (and 18% within the next 12 months) proves that the market will keep growing.

If your backend systems are connected, it’s easy for your users to support seamless cross-channel journeys, reconcile cross-channel payments, and enjoy valuable cross-channel insights. By layering in financial services when other businesses in your market niche don’t, you enhance your market position. Now, you can name solid reasons why your software product outperforms its alternatives, and everyone will agree with you. Customers see that your solution offers extra features not available in other products. The software collects information about user activity and preferences in real-time to tailor the experience based on this data. As a result, the customer may get a recommendation to buy an add-on when they would benefit from it most.

According to Finaria, expect the global digital payments industry to grow by 40% in the next two years. Recent global events have propelled embedded payment infrastructure to the forefront. This includes paying, payment methods have to keep pace with the rest of their digital life, or they will look somewhere else.

What is the future of integrated payments?

Popular BNPL programs such as Klarna and Affirm enable merchants to embed their tools directly into the checkout so that customers can pay for their purchase in installments. Apruve enables large enterprises to automate long-tail credit and A/R so you can stop spending 80% of your time and resources on 20% of your revenue. We embedded payment in 2024 partner with each of our customers to solve their unique credit, payment, and accounts receivable challenges and build the right credit solutions for your markets, customers, and goals. The ease of embedded payments purchases and the fact that transactions are essentially invisible to the customer reduce barriers to buying.

• The processes were physical, they took several days since different types of documents had to be obtained.
• Fintech companies are thus in a perfect position to take advantage of this projected growth in the embedded payments sector.
• With embedded lending, they can now apply for a loan and decide on their terms of repayment during the purchase pipeline.
• Embedded finance — where financial products and payments pop up in any number of consumers’ daily activities — is now an expectation, a “need to have” for banks and enterprises.
• Embedded lending, more often known as BNPL, is well-known in consumer-focused embedded finance due to the prevalence and success of big businesses.
• However, it is embedded payments that stand apart as the fastest growing aspect of embedded finance based on a universal need.
• Such transactions are frictionless, meaning minimum additional actions or risk of rejections.

Adding embedded payments to your solution is a strategic decision, and there are two specific points in the lifecycle of the solution development timeline when every ISV should consider it. Independent Software Vendors , Software as a Service , and platforms everywhere are tapping into consumer demand in unexpected ways that require advanced payment solutions. The company that embeds financial services, not being banking in nature, will always depend on one that provides services . As we have mentioned before, by integrating all financial processes in a single dynamic, agile and visual platform, a lot of value is added for demanding customers with the market by improving their shopping experiences. Uber, a company born in the middle of the digital age, offers payment and collection services from its application.

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Case in point, requiring a customer to “leave” the lending process to verify information or having them step through a time-consuming paper-based Know Your Customer process to apply for a loan creates friction. Embedded finance providers can be banks or alternative providers, such as fintechs. BaaS providers enable companies to offer valuable services to their customers without their customers knowing that a third party is involved. Embedded finance is the application of this same principle across a broader range of financial services such as pensions or loans, not just the payments element. Embedded finance is the embedding of financial services into the business processes of non-financial service companies. As it makes customers spending quicker and easier, it can promote revenue growth and sales.

They can connect and save the preferred payment method to use it for 1-click transactions. It enhances user experience, reduces bounce rates, and stimulates more frequent purchases and loyalty. A common example of embedded finance payments is the Starbucks app that saves customers’ debit or credit cards for future transactions. But what is it about the embedded payments benefits that make them so important for software vendors in particular? According to research from JP Morgan, software platforms that embed payments see up to a 5-time increase in value per client. In addition to increasing revenue, embedding payments also allows software platforms to own their payment experience and enhance the value of the platform for their clients.

This integration allows for a more streamlined user experience for customers, removing the need to manually hunt for the best deals, or filling out endless paperwork for a single purchase. For software platforms to realise the benefits of embedded payments, they should focus on engaging providers that can manage the build and integration process and reduce the compliance burden of processing payments. In the APAC region, companies value one-stop-shop options, so payments provide an opportunity to simplify payment flows. Simplified flows could mean the ability for customers to choose from a range of payment options and process payments in one menu.

The other differences include embedded finance being defined by front-end access, whereas BaaS is defined by the back-end financial functionality. Moreover, embedded finance is generally used to streamline the buying process, whereas BaaS encourages greater use of business as it offers additional financial products. Banking Application Programming Interfaces play a crucial role in allowing BaaS bundles to be offered by a non-financial organisation.

In sum, Starbucks has created an entire closed-loop ecosystem of embedded services that draw the customer deeper into the brand experience. Effectively creating its own currency is possible because Starbucks customers are habitual purchasers of their products and exhibit high levels of brand loyalty. By creating seamless user experiences that integrate multiple touchpoints, merchants can increase engagement with their unique services, which in turn boosts average order value and customer loyalty. The opportunity for financial services to expand into previously non-financial areas is unprecedented—and still in the very early stages.

What Is the Future of Embedded Finance?

Embedded financial services include payment acceptance, bank accounts, lending, insurance, payroll, and more. This article focuses on embedded payment solutions, often the first rung on the embedded finance ladder for software companies interested in marketing integrated financial services to their customers. Retailers, marketplaces and other non-financial services companies have started to offer traditional banking services within their customer loyalty apps or websites in a strategy known as embedded banking. For example, Walgreens now offers a credit card linked to the myWalgreens reward app. Customers use it just like any credit card, but they also gain access to members-only Walgreens sales and cash rewards and more streamlined checkouts. Together, extra rewards and the ease of the embedding banking experience can increase customer loyalty and buying to levels you couldn’t achieve with rewards programs alone.

Therefore, recent questions around the misselling of embedded finance accounts to those who would be better off without them have triggered new changes to Buy now pay later regulations. If there’s one thing for sure, it’s that the embedded finance solution offers a whole lot more convenience, both for customers and the vendors supplying them. This makes for a better customer experience with reduced friction all-round. Outside of regulation inhibiting the development of integrated payments in Australia, other factors make Australia’s embedded payments market different.

Best Covid-19 Travel Insurance Plans

However, software platforms that want to embed payments do not need to do it on their own. By partnering with a third-party payments provider, software platforms can enjoy all the benefits of embedded payments without the drawbacks. And some providers can have you accepting payments in a matter of days rather than the months or years it would take you to get up and running on your own. Embedded finance is the integration of banking, payment, lending, and insurance functionality into non-financial products. The main idea is that users can complete the necessary financial operations without leaving an app.

Let’s say that you’re on your lunch break and browsing for a new pair of sneakers. After comparing several brands, models, and sizing charts, you finally come upon the perfect pair. You head to the checkout – only to be confronted with a bunch of fields to fill out for your chosen payment method. According to Juniper research, embedded finance will have an estimated market value of over $138 billion in 2026 – up from just $43 billion in 2021. Providing a faster, smoother checkout experience with increased rewards helps bring this loyalty back up to previous levels. The processes were physical, they took several days since different types of documents had to be obtained.

That’s because many small businesses used the lull induced by lockdowns to digitise. This was partly driven by the short-term need for survival; many having to pivot to online services to stay afloat. But it was also driven by a long-term strategy of improving business efficiencies and agility by moving to the cloud. When the COVID-19 pandemic hit, many SaaS platforms catering to in-person businesses drew a deep breath and prepared for difficult times.

On top of processing payments, these integrations should improve data flows across the business, deliver efficiencies, and provide reporting that will drive stronger commercial decision-making. As SaaS platforms know, it’s no longer enough for a technology provider to deliver operational functionality. Its products should have features that drive strategic and commercial improvements too.

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It offers travel insurance to customers when they purchase a train or flight ticket. With embedded insurance, it’s no longer necessary to meet with an insurance https://globalcloudteam.com/ agent to get coverage for an upcoming trip or a new car purchase. Some companies have embedded the insurance application process into the checkout experience.

What do software providers need to succeed in Australia’s embedded payment market?

Embedded payments is fast gaining traction in the local APAC market, and is quickly becoming the new frontier for elevated customer experiences and value creation within software platforms. Effective embedded payment solutions meet the customer where they are and provide them with the financial option they require, whether it is a loan, payment programme, insurance plan, or something else. Customers and businesses alike expect financial services to be available and frictionless at the point of sale.

Simply put, embedded finance services enable consumers, businesses, and companies to accept, lend payments or provide insurance without conventional financial institutions. Without embedded payments, software platforms are forced to integrate with third-party software their clients want to use, which can be cumbersome and lacks any return. While the embedded payment service may still be third-party technology, the fact that it can be embedded directly into the software and white-labeled makes it appear to be a seamless part of the application. Vertically-integrated software platforms need strong customer retention to survive and grow. Embedded finance provides an opportunity for software platforms to establish new revenue streams while delivering a seamless customer experience.

As businesses transition their sales to websites and apps, the use of embedded payments has become the means of creating customer experiences that build brand loyalty and drive repeat business. In this article you’ll learn what embedded payments are, and why it is must-have technology for all merchants in the modern business environment. With the growth of banking as a service and open-access APIs, businesses now have the ability to leverage financial services technology to customize payment solutions for their needs. Embedded payments can also help SMBs automate processes to increase cash flow and decrease costs.

It gives you control over the payment workflow of users to ensure that everything happens smoothly. Apart from enhancing the customer experience, you get a chance to collect additional information about customer behavior patterns. Based on these findings, you can fine-tune your product to encourage more conversions. Shopify supports many embedded finance solutions like Shopify Pay or Shopify Balance. Yet, in this article, we want to highlight the Shopify Capital lending platform.

We have the example of wallets that do not need this regulation to operate. Some of those platforms that joined digitization at the time and grew exponentially, have now been able to offer financial services without this being their original business. As a quick definition, Embedded Finance would be the provision of financial services on platforms, applications, or web pages that, a priori, do not belong to the banking sector. Secondly, the growing concern over embedded financing is that consumers have found it too easy to access funding and were not well-informed about the risks .