As we have seen these last two years, the popularity of digital payments is undeniable. In light of this, forward-thinking businesses have seen the light. Address the needs of those savvy customers or lose them to someone else.
Consumers today expect a simple and easy experience in everything they do. This includes paying, payment methods have to keep pace with the rest of their digital life, or they will look somewhere else. Case in point, requiring a customer to “leave” the lending process to verify information or having them step through a time-consuming paper-based Know Your Customer (KYC) process to apply for a loan creates friction. This friction fast turns to customer frustration. Best to make it easy, or they will walk away.
Consumers want finance alternatives, easy to use in a single digital experience. It is for this reason that embedded payments are becoming commonplace. So what are embedded payments, and why are they growing in popularity? Furthermore, what 7 benefits can lenders expect them to bring?
The world of payments and all that goes along with it has evolved significantly over time.
And now we are on the precipice of a new era, embedded payments.
Embedded payments enable any company to seamlessly integrate the entire payment journey into their end-user experiences. Merchants are using embedded payments to transform what was previously a strictly functional payment process into a personalized, intuitive experience. Integrating a simple API into the check-out process, embedded payments offer a convenient, frictionless experience that customers have come to expect.
To expand further on the above, VoPay partner Plaid offers up an excellent description of embedded finance.
“Embedded finance refers to financial services offered seamlessly in consumers’ everyday experiences through non-financial products and services.”Plaid
Effective embedded payment solutions meet the customer where they are and provide them with the financial option they require, whether it is a loan, payment programme, insurance plan, or something else.
Example: An insurance or payment plan offered by Home Depot with the purchase of a new lawnmower is a financial product ’embedded’ in a non-financial shopping experience.
The growth of Embedded Payments
It started with the rise of digital payments, and it keeps going. According to Finaria, expect the global digital payments industry to grow by 40% in the next two years. At the same time, the mobile payment segment will double by 2025. Recent global events have propelled embedded payment infrastructure to the forefront.
Further to the stats noted above, Juniper Research indicates that the value of the embedded finance market will exceed $138 billion in 2026, from $43 billion in 2021.
From our Starbucks app to Uber and Netflix, providing the consumer with a way to connect and save a payment method for later use with the click of a button is, well, brilliant. The impact of this payment trend already making waves will continue to shake up the payment ecosystem.
The 7 benefits for lenders
So why should lenders consider implementing embedded payments?
Time is money; getting money into the hands of those that need it fast is vital. It is necessary for lender survival to speed up the lending application process and all that goes with it. Let’s face it, applying online and then transferring to a different platform to pay is a major hassle. Fortunately, new technology allows you to incorporate your payments into the loan application process, ensuring borrowers get the seamless shopping experience they are looking for.
Here are 7 reasons why you should consider implementing this new technology in your business right away.
1. Increase Revenue Potential – Monetize Payments Generates New Revenue Streams
Lenders can monetize payment processing and diversify their revenue streams. By tapping into the payment charged by merchants, lenders can add a small but significant share of stable revenue to their books. Additionally, they enable lenders to charge processing fees and enter into revenue-sharing agreements. Further to this, it provides the ability for lenders to deliver their services more cost-effectively, adding more to the bottom line.
2. Onboard New Clients Quickly – Underwrite and Onboard Clients Without the Lengthy Process
An embedded payments approach allows lenders to onboard clients quickly, improving metrics even further. Embedded payments allow for more flexible infrastructure and a wider reach. Payment facilitators have mastered the underwriting and onboarding processes. This enables them to significantly improve the speed of processes, such as onboarding, far more than traditional payment processors could.
3. Enhance the Client Journey – Customer Experience (CX) is King
Providing a positive buyer experience is more important than ever. By implementing an embedded payment model, you can reduce the number of “bolted-on” payment systems your company relies on, thereby improving their overall experience.
In the internet age, products compete based on minute, critical differences. Allowing users to pay directly on your platform provides a simple, streamlined experience.
4. Transaction visibility and transparency – Eliminate the payment and data silos
Embedded payments provide lenders with invaluable data. Increase the transparency and visibility of transactions with the transaction data from all parties in the lending process. This means better visibility into cash flow, all the way down to the accounting level.
5. Gain a competitive advantage over competitors – Companies That Use the Right Technology Leave Rivals in Their Wake
Payments embedded in your platform can also increase the value of your offering and provide a leg up against competitors. It enables your company to capitalize on market inefficiencies to gain a competitive advantage, which will naturally increase your valuation.
In today’s lending industry, embedded payments can mean the difference between a satisfied customer and one who abandons the process in favour of one that is easier to navigate. Because embedded payments contribute to a positive user experience, this technology can convert visitors to repeat customers.
6. Provide Extra Value-Added Services – Expand Your Platform and Maintain Market Relevance
Payment processing is the most common use case for the embedded-services model, but it is not the only one. A payment facilitator can offer various value-add services that enable lenders to diversify their offerings and expand into new markets with the click of a button.
These platforms enable value-added services such as credit, insurance, and structured payments. Leading embedded payment platforms are now offering investments and personalized account services. Using such services can assist businesses in raising their profile and expanding their customer base.
7. Safer More Secure Transactions – Fraud control, Put Guardrails Around the Process
Leading embedded payment solutions come with bank-grade security and more. Lenders need to keep their consumers safe and at the same time protect themselves. Today’s current payment processes pose a hazard for lenders. With cybersecurity risks on the rise, the challenges come from all sides. Embedded payments have become the way to combat the security issues of storing sensitive data, credit card fraud, identity and information theft.
VoPay’s industry-leading payment solutions built for lenders
VoPay is the leading lending payment platform across Canada. Lenders and Loan Management Software companies prefer our developer-friendly API payment technology.
Empowered by VoPay, lenders can offer efficient and cost-effective embedded real-time funding options while reducing NSFs and returns during payment withdrawals through data-driven EFT and Interac e-Transfers.
A VoPay Bite-Size Business Case: With embedded payments, VoPay Lenders can simplify the issuance of the loans and disburse them to customers automatically once a loan is approved and automate the collection and recurring payments using our multi-channel payment platform.
Schedule a demonstration with a payment expert today!
VoPay is a proud member of the Canadian Lenders Association and Smarter Loans Canada.