As an increasingly accepted industry standard, embedded payment systems offer new companies a myriad of benefits. As a technology, it is fast and convenient for customers, it builds customer loyalty, and it can provide another stream of revenue. Below we take a deeper look into embedded payments and how companies can take advantage of this up-and-coming payment system.
What are embedded payments?
Companies that use embedded payments provide payment services for goods and services directly on their online platforms. This means customers do not need to re-enter their credit or debit card information every time they make a purchase. Instead, the online platform saves their payment information so customers can continuously reuse their card information with a click of a button.
Fintech companies can help non-financial companies develop embedded payment services for their customers. However, big tech companies create their own payment solutions for their customers. It’s likely that in the future, most online payments will become embedded payments. Fintech companies are thus in a perfect position to take advantage of this projected growth in the embedded payments sector.
How does embedded payment work?
Companies use embedded payments to generate online transactions. Through embedded payment systems, customers can seamlessly pay by moving funds directly from their bank to the company, instead of needing to visit a third-party merchant to make a payment.
When a customer makes a purchase for the first time, the company’s embedded payment system saves their payment information. Keeping this information allows the company to offer its customers a one-click pay experience, ultimately building profitable brand loyalty.
The impact of embedded payments
Non-financial institutions will process most global consumer-embedded payments within the next 10 years. Accordingly, embracing embedded payment technology can give these businesses an edge over the competition. By promoting embedded payments as a convenient and time-saving alternative to traditional payment methods, companies can attract more customers to their base and thus, reap the benefits of this technology
Every smartphone user has a payment app. Popular ride-sharing apps, store apps, and delivery apps all utilize embedded payment services. As consumers become more comfortable using apps for payments, this sector will only continue to expand. Companies that utilize the embedded payment system can generate millions of dollars in revenue.
How can embedded payment improve your operations?
There are many ways embedded payments can improve business operations. These include:
- Improved buying experience: Customers can make purchases without friction or cart abandonment which can happen with a standard merchant payment system.
- Convenient payment experience: Making purchasing easy for customers can help enhance customer loyalty.
- Collect valuable information: Embedded payments enable companies to collect data about the purchasing behaviours of their customers. This information allows companies to cross-sell or upsell other products their customers may want.
- Targeted marketing campaigns: Companies can differentiate their business from the competition by targeting products to specific clientele instead of using ineffective, generalized mass marketing campaigns.
Embedded payments enable companies to increase their overall business value. Case in point: customers who are happy with products and services tend to buy more from a company, resulting in an increase in revenue that will consequently enhance a business’s value. An embedded payment system also shows that a company has plans to grow its business, attracting investors who can help with expansion plans.
How to implement embedded payment systems
Before implementing an embedded payment system for your business, there are several different factors to consider:
- Analyzing cost and benefits: When considering a new payment system, a company needs to know how much it will cost. To do this, companies need to consider how much these types of systems will improve business operations and customer experiences, and if it will offset the costs of changing systems.
- Maintaining consistency: If a company already uses a web merchant service, it needs to consider if using embedded payments will be a better and more cost-effective option.
- Collecting information: A company will want to consider the type of information it wants to collect from customers and how it will market its products with an embedded payment system. In such data collection activities, it is crucial to comply with GDPR. Customers’ consent should be asked by informing them how the information is collected and used.
Integrating embedded payment services into an existing payment system can improve customer experience. Embedded payments are transparent and visible, so customers can always see and access their money. Some larger companies have dedicated payment teams that operate an online platform; However, even smaller companies will soon be required to incorporate embedded payment services. Integrating embedded payments into core business processes can improve customer experiences and boost company value.
The growth potential of the embedded payment industry is enormous. It offers massive potential for fintech companies to work with non-financial businesses to develop and expand the market. The embedded payment industry’s rapid evolution will occur over the next 4 to 8 years as investors continue to pour money into the sector.
How EMBank Can Help?
European Merchant Bank (EMBank) is a fintech-friendly challenger bank that can help fintech institutions expand their services in this expanding market. EMBank advises fintech institutions on leveraging embedded finance technology to provide customer-centric financial solutions.
Established in Lithuania and licensed by the European Central Bank, EMBank provides a Banking as a Service offering, combined with Safeguarding Account, Business Account, and Accumulative Account types as well as payment options through SEPA, Swift, and Target2.
Feel free to get in touch with us by sending an email to [email protected] to arrange a telephone call.
Please keep in mind that the above information has been prepared or assembled by the EMBank and is intended for informational purposes only. Some information may be dated and may not reflect the most current legal developments.