The future of payment is embedded

06 Jul, 2021 . 4 minutes



For a future of streamlined payments, embedded payments don't require customers to go into a separate software product to pay for their purchase.

The tiny moment between after customers finalize their order and having to actually pay is crucial. The standard options either require people to enter their credit card information, open an e-banking application, or even dig into their wallets for cash. These hasty processes might contribute to customers having second thoughts about proceeding with their orders. With embedded payments, a customer can simply tap a few buttons in a purchasing app with an embedded payment program. Examples are ride-sharing apps like Uber or Lyft, where users have the option to complete the transaction in the app instead of giving cash directly or pulling out a card.

This type of payment is not new. Embedded payments are also found in lending, such as Klarna and After Pay, investments such as Acorns, insurance such as Tesla, and banking such as Shopify. All these brands have embedded software where users can direct their money or card information at the very beginning and let the apps take care of the rest when it is time to pay.

Benefits of embedded payments

The foremost benefit of embedded payments is that users have faster and more frictionless transactions through a more accessible interface that will surely increase purchasing convenience. For merchants and companies, embedded payments have many more advantages. It could also allow a company to find new revenue channels. Each time a customer uses the software to pay for an online order, the company can use this to earn revenue from additional fees. Several brands, such as Netflix, Headspace, and Spotify, see consistent and predictable revenues thanks to their embedded payment systems.

Having a convenient software interface will improve the overall customer experience, resulting in returning customers and even wider target customers. This could help a company understand their customers' behaviour even better as it can see and track how each transaction is conducted. It also means less shopping cart abandonment.

Not to mention that patterned transactions can also prevent fraud. This could be combined with a more secure and private system, such as two-factor authentication, biometric passwords, and any other upcoming technologies that allow a seamless and frictionless financial environment.

How to embed payments

Embedded software payment is often referred to as "built-in, rather than bolted-on." Companies have two options to embed payment: build it from scratch and register as a payment facilitator, or partner with a payment company that can integrate this functionality into their software. Regardless of the options, companies must prepare many steps to transition to embedded payments. Richie Serna, chief executive and co-founder of payments start-up Finix, shared these steps with Forbes.

Companies must first thoroughly understand how many payments are currently processed and how much it costs them. After companies are confident and sure that the current transactions will incur few to no additional costs, only then should they proceed. This leads to the next step, which is the need for assessment and estimation of the opportunity and revenues embedded payments could bring them. Companies must have robust data and anticipate possible problems that may arise in the future. It will even help them to have ready solutions. Such a case can be seen in Uber, which offers small loans to driver-partners to pay for their gas while working.

Then, companies must consider the complexity of the whole process, along with merchants and payment providers. Owning every single contract to each party contributing to the system is imperative. This will decide the future of the partnership. Embedded payment is not necessarily a must-have for every company, but there is a reason industry leaders have been applying this system. It is only natural for emerging companies to grow even further by accepting the ever-growing demand for seamless payments.

Source:

https://www.globalpaymentsintegrated.com/en-us/blog/2021/04/27/all-about-embedded-software-payments

https://thefinancialbrand.com/113288/future-of-payments-fast-seamless-safe-embedded-ibm-insights/

https://www.finextra.com/blogposting/19451/the-benefits-of-embedded-finance

https://www.finextra.com/blogposting/19524/6-examples-of-embedded-finance-changing-the-future

https://www.americanbanker.com/payments/opinion/embedded-payments-will-change-commerce-as-much-as-cards

https://www.paymentfacilitator.com/technology/what-are-embedded-payments/




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