Understanding embedded payments and their role

02 Dec, 2022 . 4 minutes

For most companies, payments have been handled by payment processors and large organizations. This has caused a confusing and frustrating experience for customers. But the rapid emergence and evolution of digital business have led to an increasing number of B2B and B2C companies implementing embedded payments to create compelling and engaging customer experiences. As the payment industry continues to evolve, it's becoming more apparent that embedded technologies are not just about payments. Embedded payments can help consumers and businesses improve their interactions with financial institutions and make transactions easier.

What are embedded payments?

A long checkout page can be a turnoff for e-commerce customers. With embedded payments, instead of adding additional steps, they'll get a single, clickable link they can use to complete the transaction. Some methods commonly used for this type of payment include PayPal or Klarna.

Amazon was one of the first companies to implement embedded payment technology. Through its "Buy Now" express purchase button, customers can complete their purchases by simply clicking on the embedded payment link. Once a transaction has been completed, customers no longer have to enter their shipping details or complete their payment. This type of user experience quickly became more prevalent in various apps, such as Uber and GrubHub.

In addition to payments, embedded technologies can enhance the customer experience in various banking services. For instance, a department store might integrate its rewards app with its credit card. Customers using their credit cards will receive rewards such as exclusive offers and faster checkout processes. Both embedded payments and embedded banking are part of a larger group of services known as embedded finance. These include insurance and in-app lending.

Importance of embedded payments

In times like these, when businesses try to make up for lost revenue and customer loyalty due to the pandemic, embedded payments can be a vital part of their strategy. According to a study by Omnicom Media Group, the percentage of consumers loyal to a brand dropped significantly during the first nine months following the economic shutdowns in 2021. To avoid a repeat of the decline in customer loyalty, many businesses are seeking to adapt their strategies by addressing the changes in their customers' preferences and needs. With the help of embedded payments, they can increase the volume and frequency of their orders.

Embedded payments benefit all parties

The use of embedded payments can change the relationship between a supplier and a buyer. The ability to handle transaction details allows both parties to focus on the solutions their buyers need. In addition, the ease of doing business with a supplier can boost the volume of orders. With the ability to accept payments through embedded technologies, small and medium businesses can now access the necessary financial services. They can also avoid the traditional fees and delays typically encountered when dealing with traditional banks. Due to the increasing number of B2C companies accepting payments through embedded technologies, consumer expectations for a better transaction experience have also increased. Traditional checkout methods that involve entering large amounts of information can no longer compete with the convenience and ease of embedded payment models.

The expectations of B2B buyers have also changed. Through embedded technologies, businesses can now offer extended terms and reduce the number of steps involved in the process. In addition, customers can easily pre-qualify for credit and track their invoices online. These platforms also have features that make the process easier, such as global trade capabilities and large credit limits.

Should you implement embedded payments?

Whether you prefer to accept payments through PayPal, Amazon, or BNPL, embedded payments have numerous advantages. It makes the process of processing payments easier, and it can boost conversion and brand loyalty. Abetter customer experience can also boost a business's profit margins. In addition, it can decrease the abandonment rate of shopping carts by removing some barriers preventing people from completing their transactions.

Despite the increasing number of businesses accepting payments through embedded technologies, the trend may eventually cool down due to the economic situation. However, many business leaders still focus on increasing their sales and driving efficiency. For instance, if a company seeks to expand its offerings, it is more likely to adopt a more effective payment method.

Before implementing an embedded payment solution, first identify the goals and objectives of your project. You should then set a clear path to implement the system in a phased manner. Having a well-defined strategy can prevent confusion and improve the customer experience.

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