There was a time when ride-sharing company Uber’s almost imperceptible, app-based payment system was an exception.
Uber’s payment process was one of the first forms of embedded payments, a concept that involves streamlining the payment process so that customers barely notice they’re clicking the “pay” button. Companies capture a customer’s payment information when they sign up for services and never ask for it again. Instead, the service provider automatically charges for each transaction.
Today, embedded payments are part of a broader movement towards the use of embedded financial services by service providers. Merchants and retailers not only offer payment services to consumers, but also sell them other services such as insurance, bank accounts and loans.
With the increasing use of embedded payments, this launch aims to provide industry experts and others with a better understanding of the role of this advanced technology in the market.
“When a payment is embedded, it means that the payment process is so seamlessly integrated into an app or website that it is almost invisible to the consumer,” Vinay Prabhakar, chief marketing officer at Jersey City, New Jersey-based payments company Volante Technologies, said of embedded payments.
“We actually never make a payment as part of the experience, the payment is a byproduct of the experience and certain actions we take,” he said.
Embedded payments have been around for years, but industry insiders like Prabhakar expect the process to become even more widespread in the coming years as retailers and other merchants look to streamline the checkout process and get their money faster.
The definition may vary depending on the questioner, but in general an embedded payment is “a payment that is integrated into a non-financial service”, said Terry O’Neil, Head of Connected Commerce and Strategic Growth for Citi Retail Services.
Some of the companies offering embedded payment services are banks, but others also offer these services to banks and merchants. These include Volante, digital payments giant Stripe, commercial credit card company Marqeta and Dutch payment service provider Adyen.
Adyen, which has a regional headquarters in San Francisco and a U.S. banking license, enables merchants who want to embed payment services into their websites or apps to use the Adyen network to get their money faster, said Blake Breathitt, senior vice president of global platforms and financial services at Adyen.
“We provide this payment processing infrastructure on which they can conduct their payment business,” he said.
While banks are still involved in the process (more on that later), when financial services like payments are “embedded,” you never have to leave the store, a company’s app, or the merchant’s website to pay.
Embedding the payment process in an app, website or service can save consumers time, Todd Pollak, chief revenue officer at Marqeta, said by email.
The process makes it It is easier for customers to make payments directly within a brand rather than being redirected to an external payment site,” he said.
And embedded payments benefit merchants by helping them build a long-term relationship with their customers, Pollak said.
The explosive growth of embedded payments
The number of merchants offering embedded payments is expected to continue to grow.
The global embedded finance market will more than double overall between 2024 and 2028, growing from $92 billion to $228 billion, Juniper Research predicted in a report published in April.
“This growth is being driven by increasing market maturity and consumer confidence, supported by greater adoption and use cases,” Juniper’s report said.
The Uber example shows “why there are technology companies and platform companies today that can create a seamless (payment) experience,” said Sunil Sachdev, head of embedded finance at Fiserv.
Why is embedded finance important?
The trend in payments is moving towards speed and convenience, and devices such as smartphones and tablets, which are becoming more sophisticated every day, offer more access to embedded payment and financial services.
“We live in an era where companies are saying, ‘I want to provide the best customer experience or consumer experience possible to the people I serve.’ And they want to bring payments experience into what they do,” says Mike Jorgensen, head of new solutions and strategy at US Bank.
Embedded payments make it easier for merchants to get paid directly by customers, says Jeff Tijssen, global head of fintech at consulting firm Bain.
Technological advances make this experience possible, says Juniper’s April report.
Breakthroughs in advanced artificial intelligence, which are increasingly used by the payment industrycould accelerate the introduction of embedded payments by further streamlining the process, said Agustin Rubini, banking and investment services analyst at research and advisory firm Gartner.
“AI contributes to user experience by providing the brain power needed to approve funding,” he said.
An AI program can perform the necessary checks and approve a money transfer in no time, Rubini said.
Banks also benefit
Just because payments are made directly through a company’s app or website does not mean that banks and other financial institutions are excluded from the process.
“We have seen so much interest from banks, insurance companies and asset management companies,” said Tijssen.
Merchants want integrated payment processing, he said, giving banks that offer integrated financial services the opportunity to work with more companies.
Lia Cao, global head of embedded finance at JPMorgan Chase, said the bank is actively looking for more ways to use embedded payments. JPMorgan already has viable use cases in healthcare and automotive, but is looking for more opportunities — potentially in the insurance and oil and gas industries, Cao said. said this year.
In another banking offering, US Bank provides the software that enables merchants to integrate payments into the shopping experience.
“US Bank places great emphasis on becoming a profit center and helping customers move money in a way that enhances their customer experience,” Jorgensen said.
Industry experts such as Jorgensen and Tijssen expect embedded payment methods to increase as consumers prefer convenience and businesses prefer speed.
“There is not a single bank that is not actively involved in this or has not launched an embedded financial offering,” said Tijssen.
