The Coming Era of Embedded Payments

Nov 2, 2022
4 minutes Read
Enhance customer experience with embedded payments: seamless checkouts redefine shopping, merging convenience and speed.
The Coming Era of Embedded Payments

A major benefit of online shopping is that the store exists only for you. There are no line-ups. There’s no waiting for a sales associate to help you. And there’s no need to pull out your credit card or fumble around for cash. But the digital checkout process has its own complications. There are payment methods to choose. Card numbers and expiry dates to enter. Delivery details to specify. Authorization steps to go through.

Wouldn’t shopping be great if you could skip the checkout process entirely?

Embedded Payments on the Rise

Enter embedded payments. These are digital payment processing solutions that are integrated directly into a store’s website or other digital touchpoint. With embedded payments, the checkout process is instantaneous and nearly invisible, and customers make purchases with a single click.

Most shoppers are already familiar with embedded payments from the “Buy Now” button on Amazon or the “Hail Ride” or “Place Order” buttons on Uber and Grubhub. These apps store their customers’ payment card details and delivery addresses for use in subsequent transactions. Shoppers don’t need to enter any additional information and aren’t directed to any third-party websites at the moment of payment. All that’s needed is the press of a button and the transaction happens instantly.

Embedded payments and embedded banking are part of an overall trend towards embedded finance in the marketplace. In simple terms, embedded finance lets non-financial companies offer financial services as an integral part of their brand offering. The benefit for retailers? They retain full control over the all-important customer experience.

Customers in Canada that shop at The Bay, for instance, can acquire a Bay Mastercard, link it to the store rewards program, and receive bonus loyalty points on all purchases. Similar benefits are available for shoppers who’ve signed up for President’s Choice Financial (PC Financial), the financial service brand of the Loblaw chain of supermarkets and pharmacies. Shoppers using PC Financial cards get higher rewards at Loblaw Companies stores and access to other financial products, such as 24/7 no-fee personal banking.

A Powerful Tool to Restore Customer Trust

The pandemic was tough on retailers. Supply chain and delivery challenges made it hard for them to keep goods in stock and get them in customers’ hands on time. When lockdowns prevented stores from opening, customers developed new shopping habits and routines overnight. While many stores made the rapid necessary switch to eCommerce and contactless payment solutions, many still suffered extensive customer losses.

In an IPSOS survey conducted in 2021, 42% of Canadian consumers reported having less trust in products and services because of the pandemic. Embedded payments are proving to be a powerful tool for brands to rebuild damaged customer trust. They give retailers a way to regain end-to-end control over the purchasing channel. When payment methods connect directly to a store’s loyalty program and involve higher rewards, customers are more likely to choose that store over competitors – again and again and again. What’s more, those rewards effectively become a currency for brands since they need to be used in that specific store. The result is a convenient, closed-loop ecosystem that integrates customers more deeply into the brand experience.

Embedding Payments Drives Sales and Delivers Value

Customers are already showing their appreciation for embedded payments. Business Insider’s Embedded Finance Explainer reported that embedded finance in the United States generated approximately 22.5 billion USD in 2020. That same report estimates that the market will reach over 230 billion USD by 2025. Stores that persist in asking customers to enter information or enter a multi-stage process at checkout risk falling behind as they are less appealing to modern customers.

When shoppers don’t encounter purchasing friction, they make spending decisions much faster and are less inclined to abandon their carts. A speedier process inspires more impulse buys, garners higher sales overall and leads to repeat store visits. And, since software integrations are automated, it’s a win-win for eCommerce sellers who profit from lower transaction costs and more conversions.

Different software integrations offer different functionalities to sweeten the payment offering. For instance, some embedded payments can offer Buy Now Pay Later (BNPL) or instalment payment options.

Crucially, embedded payments and embedded finance are not just B2C solutions, but are revolutionizing the B2B space as well. Some APIs, for instance, let suppliers onboard buyers at checkout, set terms and even extend credit. For any customer, whether B2C or B2B, it’s the ease, immediacy and seamlessness of the process that makes purchasing more enticing.

The Future of Embedded Payments

As partnerships emerge between innovative fintechs and financial institutions, embedded payment solutions are poised to become the norm for eCommerce businesses of all sizes. Brands will be able to serve customers better with tailored functionality that blurs the line between placing orders and making payments. “Invisible” payments establish a more integrated connection between brand offerings and payment rewards, keeping customers connected, engaged, and clicking.