What are embedded payments and why do you need them?

Do you operate a business that accepts payments? You may have heard of "embedded payments". But what are they and why do you need them?

In this article, we'll explain embedded payments, how they operate, and the advantages they can offer to your business.

What are embedded payments?

In a nutshell, embedded payments are payment flows whereby users are able to complete transactions without leaving the platform they're using. It typically involves third-party integrations that enable vendors to embed financial capabilities within traditionally non-financial environments, also known as embedded finance.

What about embedded finance?

You might have also heard the term ‘embedded finance.’ It refers to the integration of financial tools within traditionally non-financial services, allowing customers to access financial services (e.g. insurance or accessing loans) from platforms other than traditional banking websites or apps. Embedded finance technology can benefit both regulated and pre-regulated businesses looking to streamline financial flows while enriching purchasing experiences for customers.

What about invisible finance?

In the case of embedded payments, users can visibly see and select their embedded payment of choice on the platform. With invisible finance, the entire payment experience is completely invisible as its name intended.

The typical flow of an invisible payment is ‘embedded’ into users' lives in such a way that the presence of a transaction is not noticeable.

Imagine driving to the nearest petrol station, and it’s a ‘pull-up, fill-up and go’ type of experience with the payment being taken care of without you having to stop over at the till to pay.


How do embedded payments work?

Embedded payments work by utilising application programming interfaces (APIs) to facilitate payment transactions within the platform. Payment data is securely transmitted to the processor, which authorises and processes the payment.

The API then communicates the payment status to the customer, who can then take the necessary action (e.g. download a digital product).

What are the benefits of embedded payments?

Embedded payments offer a wide variety of benefits — here are a few:

Better customer experience

Embedded payments offer a more seamless payment experience for customers, which can lead to increased customer satisfaction and loyalty. By eliminating the need for customers to leave your website or app to complete a payment, you can create a more convenient and efficient payment process that encourages repeat business.

This can also result in higher conversion rates, as customers are more likely to complete their purchase if the payment process is easy and efficient.

Safer payments

Embedded payments can provide enhanced security features that protect against fraud and data breaches. Using secure APIs to transmit payment data, embedded payments can reduce the risk of sensitive data being intercepted or compromised during the payment process.

Better control over transaction costs

Embedded payments can provide more control over transaction costs, as they can eliminate the need for third-party payment processors. By processing payments in-house, businesses can reduce transaction fees and better manage their payment processing costs.

It can result in significant cost savings over time, especially for businesses with a high volume of transactions.

The future growth for embedded payment solutions

According to a recent study by Juniper Research, the embedded finance market will reach a value of over $138 billion in 2026, driven by the increasing availability of APIs from financial services vendors. This represents a growth of over 215%, up from $43 billion in 2021. The study also found that buy now pay later services, which embed lending in the eCommerce checkout process, will account for just over 50% of the embedded finance market in 2026.

So what does this mean? As Fintech continues to grow and more businesses move online, the demand for embedded payments is likely to increase. Banks are also likely to take an interest in embedded payments as demand grows.

With the ability to provide a more seamless payment experience and enhanced security features, embedded payments are becoming an essential component of modern payment processing solutions.

The role of BaaS in embedded payments for fintechs

Banking as a service (BaaS) platforms are integral for enabling embedded payments for fintechs. By using BaaS solutions, fintechs can access payments processing capabilities and create tailored payment experiences for their customers.

BaaS platforms provide access to two key components of embedded payments: a payment gateway API, which securely processes payments, and a transactional API, which enables additional features, such as recurrent payments and subscription management.

These features make embedded payments more efficient and secure, helping to create an optimal payment experience for the customer.

Interested in finding out how finance will become more embedded? Drop us a line and we’ll be happy to help.

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