Tracking the Growth of Embedded Payments

We have seen the COVID-19 pandemic accelerate the need for businesses to move their operations online. This has also increased the demand for seamless online payment options to improve the buyer experience. Embedded payments have successfully met this need in the payments industry by providing great convenience to both the buyer and seller. In fact, the embedded payment market is projected to grow by over 40% in 2022, reaching US$124 billion in total. With an estimated CAGR of 23.1%, its revenues will touch US $380 billion by 2029.

So, What Are Embedded Payments?

Payment processing features that are built into the software solution are referred to as “embedded payments.” This feature enables businesses to accept payments within their software, which is “built-in” rather than “bolted-on.” Merchants can provide a much more streamlined user experience through this solution that automates accounting practices.

It is done by integrating the payment infrastructure to develop a seamless payment flow inside an app or platform. Embedded payments are now an essential part of the value proposition of just about any e-commerce app or SaaS platform, with end-users using this feature intuitively daily. We see finance and digital payment processing being put together very conveniently in the ecommerce shopping journey. This is a considerable simplification from the previous procedure, wherein the customer would have to apply for financing with a third-party payment provider or banking service later.

Embedded Payments also enable a wide range of applications, including payroll automation software, e-wallet integration in E-Commerce apps, payment via educational institutions’ ERPs, subscription-based payments for SaaS, and many more. Several embedded payment systems allow users to pay in installments as well.

When it comes to embedded payments, it’s critical to understand that it does not require collaboration with a payment gateway to accept funds. One of its distinguishing features is that it typically enables a company to morph payments from just a cost center to a revenue generator.

Why do Embedded Payments Matter, and How Are They Redefining the Payment Process?

Businesses must manage many bank accounts, a large number of suppliers to pay, and customers to serve. As well as an increasing number of payment methods and formats to support. There are also complex cross-border payments to manage, ever-increasing regulatory compliance burdens, and new payment fraud risks.

Most businesses pay suppliers and individuals in a way that is too costly, takes too long, results in too many errors, provides insufficient visibility, irks payees, and creates too much risk. Businesses of all sizes are hastening their digital transformation efforts. The goal is to eliminate inefficiency, unnecessary complexity, and increase transparency. For many companies, disbursements are an excellent place to start. These issues are addressed by automating disbursements with an embedded payment solution.

During the pandemic, flaws in the way companies make and receive payments have been exposed and exacerbated. Payment digitization will not solve these issues on its own. Accounts Payable (AP) and Accounts Receivable (AR) professionals must reconsider the point solutions and closed-loop payment networks they use to disburse and receive payments to help their companies grow in the post-pandemic normal. Embedded payment solutions with standardized workflows will help accomplish this by eliminating inefficiencies.

How Can Merchants Benefit From Embedded Payments?

Embedded payment solutions can assist businesses in modernizing their payments. The greatest feature is that they integrate seamlessly with any legacy software or ERP application. Businesses and merchants can receive online payments and reconcile transactions instantly within their software rather than logging into a separate third-party site or physical terminal, thanks to the embedded functionality.

It provides merchants with greater flexibility as payments can be managed using familiar screens without logging into another system. Businesses with multi-rail capabilities can disburse or receive payments in just about any format or via any payment network. Payment can be done in real-time or scheduled for a later date. Payment preferences and payment terms for suppliers have been managed automatically. Rich remittance details flow with payments and are automatically uploaded to the supplier’s ERP. Furthermore, payment data is reconciled in real-time.

What Does the Future Hold for Embedded Payments?

Non-financial businesses are already incorporating financial services. Meanwhile, embedded payment solutions add new levels of convenience by demonstrating how financial services can be seamlessly integrated into daily activities. There has been a shift toward faster payments since 2020. This is likely to continue and outlast many of the pandemic trends we have seen. Businesses increasingly view the desire for instant availability of funds as a competitive advantage, and embedded payment systems provide this real-time capability.