What are Embedded Payments? The Definitive Guide for Merchants

By embedding payments into your platform offering, you gain full control over a functionality that’s crucial to the small and medium sized businesses (SMBs) that frequently use your platform. GoCardless integrates with BNPL providers to collect payment in installments via direct debit, working easily with embedded payment links on your website. There’s no need for your business to bring the processing in-house – instead, everything is handled through the provider.

How do you decide which embedded payment provider is the best for your business? Co-owner Ben Nourse says Lightspeed Payments has streamlined the business’ checkout process, specifically in regard to their hardware. Their previous provider had unreliable equipment and customers often had to tap their cards more than once, Nourse says. When customers are out shopping, for example, they probably don’t consider what goes into a transaction when they pay for something.

The benefits of embedded payments

However, insurance firms use outmoded tech stacks that are challenging to integrate. In addition, embedded cards offer a higher level of security than traditional cards, as they are not subject to the same type of fraud. As recently as 2021, 30 percent of consumers anticipated maintaining three or more digital wallets (for example, Samsung Pay, Google Pay) on their phones. Conversely, the share of respondents expecting to rely on a single wallet rose from 21 percent to 31 percent over the same period.

Rather than referring platform users to third party payments partners, platforms can make payments a part of their product offering by embedding them into their service. Paying with a single click makes the checkout experience much easier for consumers, which also increases purchase frequency. For all these reasons, it’s well worth considering working embedded payments into your e-commerce strategy.

Traditional payment facilitator (payfac) model of embedded payments

Over the past five years, BNPL has proliferated across e-commerce platforms, alongside the rise of unicorn enablers Affirm, Klarna, and Afterpay. Catalyzed by pandemic lockdowns, BNPL and PoS lending proved useful for consumers to access goods and services, even if they didn’t have all the money required at the point of purchase. For B2B embedded card payments, as with consumer payments, we expect enabler take rates to face some pressure over the next few years. Platform take rates will rise slightly, leading to a 2026 revenue split of $1.5 billion for platforms and $0.8 billion for enablers, which reflects the overall increase in embedded B2B card payment growth. For this report, we define embedded finance as a nonfinancial software platform providing an adjacent financial service, for which it takes some degree of economic ownership. This allows the platform’s customers to take advantage of a value-added offering within the native customer journey.

By providing people with greater access to financial products and services, embedded finance can help increase financial literacy levels worldwide. In addition, embedded payments are often more secure than traditional online payments since they are not processed through a third-party processor. As a result, they offer an extra layer of protection for merchants and consumers. There’s a myriad of benefits of embedded finance, both to your platform and your users. While your platform opens up new revenue streams, you increase stickiness by providing tailored financial services that truly benefit your users day-to-day.

What are some examples of embedded finance?

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. As the CEO of a company offering virtual cards, I’ve seen a number of companies streamline their employee procurement process, control spending limits and easily track and reconcile charges without manually reviewing every purchase. With the expansion of embedded financial services, you can embedded payments trends add an extra layer to your offering through embedded bank accounts and let users open and manage their business bank accounts directly on your platform. They’ll be able to manage their money where they manage their business, without having to log into different interfaces. Though the domain of embedded finance expands by the day and draws in more financial offerings, we focus here on the key segments of embedded payments, lending, banking, and cards within the US.

Not only do embedded payments help improve your customer experience and retention, but they also accelerate revenue growth. Our own research into embedded finance found that 70% of business leaders would roll out embedded finance projects faster if there was an increased customer demand for embedded financial services. Financial inclusion refers to the ability of people to access financial services and products that meet their needs.

Embedded bank accounts

Overall, embedded payment systems empower entrepreneurs to run their businesses in a more efficient way. Let’s look at two businesses that use the embedded model to better their business operations. With embedded payments, on the other hand, payments are natively built into existing software. Businesses only have to deal with one system–no APIs and multiple vendors required. We’ll cover what you need to know about embedded payments, how they work, and what they can do for your business.

Empowered by numerous vertical partnerships with different platforms, dominant enablers would be able to secure better prices and direct developments in the market. As we survey the competitive landscape, platforms will continue to serve as the prime owner of the customer relationship, taking an increasing share of the embedded finance profit pool. When customers reach the checkout, they’re much more conscious of the money being spent if they’re required to input their card information or ACH details. This increases the likelihood of customers choosing to delay their purchase – or abandoning it altogether. Just as near-instantaneous payment experiences reduce cart abandonment, they also increase the likelihood of impulse purchases by removing one of the biggest barriers from the shopping journey.

The Growth of Embedded Finance and Payments

Find out what’s shaping the industry and gain data-driven insights you can use. Between 2020 and 2021, the coronavirus crisis caused businesses to rethink and accelerate their digitization strategies unlike ever before. Digitization projects planned for years in advance were completed within months.

• Becoming a payment facilitator is the most complete way to embed payments into a software platform, as this model allows software companies to act as the payments companies.
• If you’re a business owner, you’ve probably heard of or used integrated payments, non-integrated payments, ACH transfers and more.
• The result is that Starbucks owns the whole transaction, improving payment processing costs.
• The exceptions here are large enablers that use their size to command a significant share of the economic rents.
• With the company’s kiosk solution, patients can pay co-pays and account balances while checking in for an appointment.

For example, online marketplaces and retailers bring banking services into their customer rewards programs. When the customer uses the credit card, they are rewarded with members-only special deals and a faster checkout process. Both embedded banking and embedded payments are part of the larger embedded finance group of services. Embedded finance takes these strategies further with additional services like in-app lending, insurance, and other offers.

A completely new proposition for financial services customers

On the other side, consumers who engage with businesses using embedded finance systems are able to conduct financial transactions quicker and easier — without needing to go to a bank. Another challenge is understanding the role your company would play in the ecosystem. One of the most notable examples of digitization is in the fintech sector, particularly how traditional businesses engage finance on a new level by integrating financial mechanisms into their overall business plan.