Let’s be clear — if a platform does not offer embedded payment functionality, then their clients are going to go looking for it. This means that clients might leave for another software platform that offers payments. Or, if the client does stay with a platform that does not offer payments, then the platform will have to integrate and troubleshoot for the third-party payment solution of the client’s choosing. Keeping up with the changing payments needs of partners and vendors is critical for organizations as the future of work becomes both more virtual and more global. Being able to collect and manage all this information in one repository while also facilitating near-instant payments could grant companies a key advantage over others as they look to compete on the expanding global stage. When a customer makes a purchase for the first time, the company’s embedded payment system saves their payment information.
The line between embedded payments and banking has blurred as payment-centered apps add on new features. PayPal, for example, allows users to store cash on a PayPal debit card as well as open PayPal credit accounts, in addition to facilitating payments. 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. The embedded finance market is slated to exceed $138 billion in 2026, up from $43 billion in 2021 per Juniper Research.
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“We are pioneers in native in-car payment and are already working on the integration of further services,” he says. The integration into nonfinancial businesses’ infrastructures enables these companies to offer services without redirecting customers to traditional financial institutions. A simple example of an embedded payment is taking a loan from a company like Klarna instead of visiting a conventional bank. By creating a frictionless payment process, embedded payments offer consumers a more convenient, faster way to purchase. On the side of businesses, they can boost customer satisfaction and significantly improve conversion rates.
This involves analyzing your digital needs and deciding which tools you want to embed. The first step of that is to identify your company’s goals for its embedded finance project. These could be things like improving customer service, growing an existing customer base or launching a new venture to meet a specific target audience or a specific need. For example, if you are seeking to improve customer service and satisfaction, an embedded payment could be one method to explore. A BNPL model could make goods or services more accessible to certain customers.
More Likely to Attract Additional Clients
Even though instantaneous funds transfers aren’t new, the trend has been evolving over time and will soon reach its peak. Only in the early to mid-2010s the business industry began to benefit from the trend called platformification. It’s a trend when a component of one company is integrated into another business’s infrastructure. The fintech industry embraced this trend due to its risk reduction and speed-to-market benefits.
This trend reflects the increasingly severe consequences of lagging payments and outdated infrastructure on firms’ business relationships as well as their own bottom lines. The hunt is on for solutions and technologies that can help streamline B2B payments, from automating historically cumbersome processes, such as invoicing or data collection, to researching newer, speedier payment methods. Another challenge is understanding the role your company would play in the ecosystem. For example, service providers provide access to the tech stack, while license holders, such as banks or e-money institutions, assist with the regulatory covering by carrying out financial activities and controlling the fundamental infrastructure. 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. The era of embedded finance is taking hold, and with an estimated market value of over $138 billion in 2026, it’s clear that it’s not just a financial fad, it’s the future.
What Are Embedded Payments?
This means consumers are barely aware that a transaction is taking place at all – and that’s the whole point. For embedded-finance providers, success demands clear differentiation in the form of product breadth or depth, or the provision of ancillary program management services. By using Lightspeed Restaurant POS embedded payment systems + Payments and other accompanying tools such as built-in reporting, Maynard was able to streamline their processes and save more than two hours a day. The solution has allowed them to simplify their operations and drive efficiency. Visit our blog to learn more about integrated and non-integrated payment systems.
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. When businesses use embedded payment solutions, they get to offer customers a much better checkout experience.
The 2022 McKinsey Global Payments Report
Embedded payments are becoming a major selling point for SaaS platforms and marketplaces. 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. This helps companies recoup significant revenue otherwise lost in payment processing fees paid out to third parties. For every $100 million processed, businesses can realize an additional $3 million in revenue, according to current payment processor rates. Outside the accounting department, this means your engineering team can refocus on core products.
We may all take this kind of tech for granted now—largely because it’s so intuitive— but just a few short years ago, this kind of convenience and secure integration was almost unimaginable. Embedded payments make the process of “paying” close to invisible, allowing customers to make purchases with just a few clicks, and in some cases, no clicks at all. It replaces tedious form-fills and several redirections, and instead, reconciles the transaction all the way back to the merchant in an automated fashion. Starbucks has more liquid cash at its disposal than most mainstream banks do.
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Additionally, with the right provider, embedded payments are highly secure for both businesses and their customers. With embedded payments, merchants do not need to integrate with additional services to accept payments from their customers, which results in a frictionless payment experience, increased sales opportunities, and lower technical debt and overhead. If you’re a software platform or independent software vendor, then your clients are going to expect embedded payments to be part of their platform experience. While there are several types of integrated commerce solutions, such as embedded lending and embedded banking, we’ll focus primarily on payment innovations in this article, and how merchants and software providers can leverage payment technology.
- To get a better understanding of this, we’ll take a look at vegetarian restaurant Maynard, powered by Lightspeed since 2020.
- With embedded payments, hardware is always up-to-date and compatible with the provider’s software.
- Platforms that move fast with the right technology and partnerships will thrive, while those without will risk falling behind.
- Businesses can now pay their suppliers by any payment method they choose, while enabling the supplier to get paid the way they want.
Embedded insurance could make it easier for you to become a one-stop-shop concept. But in order to pick the right solution, you first need to understand your needs. Like all new concepts, for those just becoming acquainted with the idea, it can be challenging to get a grip on what this term means. Simply put, embedded finance is the use of financial tools or services — such as lending or payment processing — by a non-financial provider. For example, an electrical shop could offer point-of-service insurance for goods sold in-store. Embedded payments pave the way for platforms to offer a complete suite of embedded financial services.
Embedded vs. non-integrated payments
That added revenue builds up over time, as attested by JP Morgan’s findings that the platforms that embed payments see a 2- to 5-time increase in revenue per client. Embedded Buy Now Pay later programs are forecast to account for just over 50% of the embedded finance market by 2026, driven by the rapid adoption of BNPL and the expectation that online retailers accept deferred payments. In sum, it’s going to be increasingly difficult to separate embedded payments from the growing democratization of the payment experience. Lightspeed was able to provide its users with better offerings, build a stronger differentiation from competitors, and open up new revenue streams with embedded payments.