For a long time, businesses have had to use multiple solutions to accept payments from their customers online. They would have one platform for their online store, and then they’d have to use a third-party integration to complete a transaction. The result is a clunky, disjointed overall experience.

Enter embedded payments. A software company can include payments in its offerings by becoming a payment facilitator. This becomes a more appealing solution to merchants who want to improve their buying and checkout processes. As a result, merchants can accept payments directly on their current platform without sending their customers to another platform first.

What Are Embedded Payments?

Embedded payments are a payment processing function. Instead of “bolting on” a payment processor or using a third-party integration, embedded payments allow software companies to build into their current offerings. It’s part of a broader trend known as “ embedded finance,” a trend in which companies providing business solutions also offer financial services.

With embedded payments, businesses and merchants don’t have to piece together different types of software to take customers payments. The software company turned payment facilitator builds it all into one solution. Customers can quickly and easily pay for goods and services without having to jump through hoops first. At the same time, businesses don’t need to jump through hoops to accept those payments.

Ride-sharing apps are among the most popular examples of embedded payments. Customers use the app to get a ride wherever they need to go. These customers can also pay for the service within the app rather than having to pull out cash or a credit card to pay their driver. They can even save their card information, so they don’t have to enter it every time they request a ride. Instead, the app uses the card on file to automatically complete the transaction. Every related transaction is handled within the app, creating a smoother, more pleasant experience overall. 

Benefits of Embedded Payments

With embedded payments, software companies can create brand-new revenue streams. They can charge a payment processing fee that they keep rather than handing it over to a third party. At the same time, they can become more of a “one-stop-shop” for their merchants. Instead of having to find a payment processor to integrate into their current setup, businesses can get everything they need from one location.

Software companies can become payment facilitators and quickly underwrite and onboard new merchants with an embedded payments approach. They can improve the overall experience for their merchants by reducing the number of add-ons needed.

Embedded payments may also help increase the value of a software company’s business because they can offer something other companies can’t. Merchants using the software get a better overall experience — and can provide a better overall experience for their customers, in turn. This improved experience can help turn merchants into repeat customers for the software company.

How Embedded Payments Can Impact Businesses and Merchants

It’s not only software companies that benefit from embedding payments into their offerings. Merchants also benefit because they don’t have to shop around for multiple services. Instead, they can get everything (or almost everything) they need from one provider. For those merchants, that can mean fewer headaches, especially when it comes to customer service issues. It makes their lives easier while also allowing them to make their customers’ lives easier.

Starbucks is an excellent example. Using their app, customers can place orders and pay for them from their smartphones. Then, they can arrive at the coffee shop and get their orders without having to stand in line. The added convenience to customers has helped launch the company into second place on the list of most-used apps for point of sale transactions.

Here are a few other ways embedded payments can impact businesses and merchants.

Increase conversion rates

With embedded payments, shoppers don’t get redirected to a third-party site to complete the transaction anymore. Instead, everything happens in one convenient location, creating a more seamless, pleasant shopping experience. The easier it is to pay, the happier customers are likely to be. That satisfaction can help reduce cart abandonment and increase conversion rates.

Obtain more customer experience data

When customers are satisfied, they’re more likely to return again and again. Over time, businesses can collect customer experience data. They can analyze the information they have to identify patterns and customer behaviors.

With access to such data, businesses can see what’s working and where there might be problems. They can use this information to improve on their processes and continue offering their customers the best experiences possible.

Reconcile payments in real-time

Reconciling payments is an essential part of any business. Businesses match their records with their bank statements to ensure everything lines up. The process gives them insight into their cash flow and overall financial health. At the same time, reconciliation can help businesses avoid overdraft fees and bounced checks, identify patterns, and flag fraudulent activity.

The problem with payment reconciliation is that it can be time-consuming. Businesses also typically need to wait for their bank statements before they can start the process. With embedded payments, every payment gets reconciled in real-time, saving time, effort, and potentially significant headaches.

Online and face-to-face transactions

Many businesses operate online and face-to-face. Embedded payments enable different types of businesses to accept multiple payment options both online and in person. Customers can choose the one that works best for them, whether that means using a credit card, digital wallet, or another payment method. This adds even more convenience for customers, giving them a much more pleasant experience.

Create a Smoother Experience With Embedded Payments

Becoming a payment facilitator allows a software company to provide more for its customers. Businesses and merchants can get more of what they need from one provider, so they don’t need to use multiple platforms. At the same time, they can make the checkout process smoother for their customers, improving the overall experience. Embedded payments is a technology that offers benefits for everyone.