Convert More Sales With an Embedded Payments System

by Kieran Daly
October 3, 2023
Convert More Sales With an Embedded Payments System

Embedded payment platforms allow your customers to pay by card, auto-debit, bank transfer, crypto, or loan agreement — among many other methods. These platforms let customers complete a transaction and pay without ever having to leave your website, app, or store.

Embedded payments make it easier for clients to buy from you, reduce the number of abandoned shopping carts, and introduce brand-new revenue stream opportunities for your business.

In this article, we cover what embedded payments are as well as its nine major benefits. We’ll also look at the different options for adding embedded payment functionality into your business and what’s next for the space.

What Are Embedded Payments?

An embedded payment system allows customers to pay for their goods or services without leaving a retailer’s website or app.

The types of embedded payments consumers are most familiar with are:

  • Simple embeds: The most basic types of embedded payments permit payment by debit card or credit card, like when you shop on Amazon.

  • Buy now pay later (BNPL): BNPL payment facilitators, like Klarna or Afterpay, allow customers to pay in installments over a short period of time. Offering BNPL can help small businesses sell more during the holiday period.

  • Embedded finance solutions: This allows consumers to apply for a loan to buy more expensive items as part of the purchasing process.

  • Subscription services: Customers pay via auto-debit for services ranging from Netflix to SaaS platforms like Xero or QuickBooks. They can even change or cancel their subscriptions, too.

  • In-app purchasing: When customers pay for a ride via Uber or a meal delivery on DoorDash, the apps take payment from their card or bank account and then transfer funds to the driver and food delivery business.

With embedded payments, there may be several companies involved in the transaction process, but this is, to varying extents, hidden from the customer.

The 9 Major Benefits of Embedded Payments for Businesses

The most significant commercial advantages of embedded payment platforms for businesses include the following.

1. Streamlined Payments

In the early days of the internet, customers were transferred to third-party payment providers like WorldPay to complete transactions. This created friction in the buying process — slowing transaction completion times and leading to many abandoned shopping carts.

Embedded payments deliver a much better and faster customer experience. This is especially so when retailers allow customers to save payment details on-site, meaning they don't have to keep re-entering them for each new order.

2. More Payment Options, New Revenue Streams

Integrated payment providers also permit retailers and businesses to accept digital wallet payments (like Apple Pay and Google Wallet), bank transfers, auto-debits, cryptocurrencies, buy now pay later plans, specialized financial products, and more.

Embedded payments also provide an opportunity to add new revenue streams beyond one-off sales. You can introduce, for example, tiered pricing, pay-per-use systems, loans, and subscription models like those used by SaaS companies and Netflix.

The embedded finance market has also expanded as consumers become more willing to make high-ticket purchases online. For example, car dealers can make it easier for customers to order a new vehicle online by allowing them to apply for a loan as part of the online buying process. In addition, the dealer may earn a commission from their banking services partner to improve their margin on the sale.

3. Higher Conversion Rates

Embedded payment systems not only improve the user experience, but they also lead to higher conversion rates as customers have multiple ways to pay.

Recent surveys confirm the commercial argument for an optimized online payment experience. "Complicated checkout processes" and "not enough payment methods" were among the top 10 reasons customers abandoned their shopping carts, a survey of U.S. adults by Baynard Research found. Reports also indicate that offering buy now pay later as an option increases conversions by 44%.

4. Enhanced Security

The embedded payments industry bakes in high levels of tokenization and encryption to their platforms. In plain English, tokenization replaces sensitive customer and financial data with unique identifiers, which hackers find much harder to crack. On top of that, there’s also encryption, which scrambles data into unreadable strings of text until they reach the intended recipient.

Security is a key selling point for the financial institutions and software companies behind embedded payment systems. For the market to grow, customers need to be confident about handing over their data. Retailers, too, need to be sure that their embedded payments provider adheres to all legal requirements so their customers don’t find themselves victims of a cyberattack.

5. Increased Operational Efficiency

When companies embed payments into their software platforms, they significantly reduce the amount of personal and financial data that has to be manually inputted.

This gives staff more time to work on profitable tasks rather than unproductive but necessary paperwork. One embedded payment solutions provider reported a 25% increase in one client’s operational efficiency.

These benefits derive from the embedded payment platforms’ APIs, webhooks, and integrations that plug in to popular CRM and ERP software.

For example, your payment facilitator may take 50 payments from clients on your behalf during the course of a day. When they remit this to your bank account as one single payment, they simultaneously itemize each payment and match them to sales in your accounting software. These automations save a lot of time for businesses.

Accounting software providers have gotten into the sector, too. Many packages now allow businesses to place links on their invoices that direct customers to a payment page where they can settle their outstanding balance by debit or credit card. Some also offer the ability to accept auto-debit and Automated Clearing House (ACH) payments.

6. Faster, Larger Payouts

SMBs appreciate embedded payments because of how fast they get paid on sales. For smaller businesses, cash flow is often tight and receiving the money a day or two earlier than before will make financial management easier.

Some processors, including Stripe, now offer instant remittances to encourage retailers to accept payments through their platforms.

The ability to collect payments from bank accounts is a significant development, too. Compared with credit and debit card fees, auto-debits and bank transfers are either very low cost or no cost in many cases. On the other hand, accepting digital payments via wallets or credit cards may come at an extra cost, depending on your payment processor’s fees.

7. Improved Analytics and Reporting

When you implement embedded payments onto your website, you can capture data on user behaviors, transaction times, cart abandonment, buyer locations, and more.

This information can be very useful for marketing, web design, and C-suite management teams when deciding on future strategies.

8. Brand Consistency

Companies can customize their payment gateway to have the look and feel of their brand.

This ensures consistency at all points of the customer journey up to and beyond the point of purchase, helping to build customer satisfaction and trust.

Some service providers also offer customer loyalty program functionality within their platforms, which can help to drive further sales.

9. International Reach

Many major embedded financial services providers are international in scope, so processing payments in multiple currencies and using localized payment methods is made much easier.

Suppose you collect auto-payments here in the U.S. In that case, your payment solutions provider may be able to offer you Direct Debits in the U.K., iDeal in Belgium, Giropay in Germany, and Alma in France. These solutions streamline the process of expanding abroad by making it easier to adapt to local preferences and different currencies, reducing the cost of entry into new markets.

Options to Consider When Choosing an Embedded Payment Provider

The embedded payment ecosystem is diverse, comprising fintechs, traditional financial institutions, and software developers.

Whatever solution you choose, especially if you create an in-house platform, you should ensure that it complies with regulations specific to your industry and PCI DSS for card transactions.

Your options include:

  • Payment gateways: This is better for smaller firms as it requires the least investment. Major players include Square, PayPal, and Stripe, all of which provide pre-built plug-ins you can use on popular e-commerce platforms like Shopify and Wix.

  • Point of sale: Ideal for companies with e-commerce and real-world outlets, these systems combine online and offline payments, making it easier to track customers by their method of purchase and run loyalty programs that work on your website as well as in-store.

  • White label: These embedded payment solutions let you build a tailored payment platform to your own specific requirements.

  • Specialist developers: You can commission companies like Plaid and Adyen to build customized platforms from scratch for you.

  • Blockchain technology: This is more speculative, given the number of times Bitcoin and other cryptocurrencies have been on the brink of entering the mainstream only to fizzle out. Blockchain advocates believe crypto will lead to lower fees and better security. Choices are currently limited, but Coinbase and BitPay offer buy buttons you embed within your payment platforms.

What’s Next for Embedded Payments?

Embedded payments have some way to go yet before they become mainstream. A recent survey suggested that embedded finance was used in 5% of U.S. transactions in 2021. So what might we see in the space going forward?

  • Regulatory oversight: In the EU and U.K., open banking (a way for banks and non-banks to share financial data by API) is widespread. Although this is less so in the U.S., expect eID (electronic IDs linked to digital wallets) and eKYC (“Know Your Customer” checks) to become prominent here and overseas to prevent money laundering.

  • Further omnichannel integration: In the future, customers may be able to pay for goods and services via X (formerly Twitter), WhatsApp, SMS, and other platforms to streamline the shopping experience and increase sales opportunities. In overseas markets like Kenya, this may include integrating M-Pesa, the text-message-based money transfer service, onto embedded platforms.

  • Voice commerce: With the increasing popularity of smart home devices like Amazon's Alexa and Google Home, customers may be able to make purchases using voice commands, further simplifying the transaction process.

  • Buy now pay later: In Europe and North America, there has been a huge surge in the number of consumers using buy now pay later services. The size of the U.S. BNPL market is expected to reach over $124 billion by 2027. This figure does not include B2B BNPL transactions, which may in coming years be as commonplace as business credit card use is today.

Get Started With Embedded Payments via B2B Buy Now Pay Later

Embedded payments have come a long way since e-tailers like Amazon began taking debit and credit card remittances on their websites. There are clear benefits to both businesses and consumers in streamlining the payment process, with the latest breakout use case being buy now pay later.

Backd has launched a B2B BNPL service of its own. You can now offer it as an option on your website, allowing customers to pay over a period of up to 12 months. They’re taken through to an easy-to-complete application form, and upon approval, you get paid instantly.

Backd clients already using the system report an increase of over 150% in order values. Depending on how long it takes for a customer to repay in full, there’s a chance to earn extra revenue on every deal we fund.

Simply log in to your Backd portal to see and manage your orders, check your status, and send email links to your customers so they can complete their purchases.

To learn more about Backd BNPL for Business, visit our BNPL partner page.

What would you do with the right amount of capital?

Working Capital Advance

Easy payment structures offer amounts with fast turnaround, Simple and easy process to access working capital.

  • Flexible - no collateral required
  • $10K - $2M
  • Terms up to 16 months
  • Automatic daily or weekly, or semi-monthly payments

Business Line of Credit

Get instant access to revolving credit with unlimited terms, and the best rates for your business.

  • Draw funds anytime
  • $10K - $750K
  • Unlimited terms, incredible rates
  • Soft credit pull that doesn't affect your credit score