Embedded Payments: Reaping The Benefits And Mitigating The Challenges

Posted on December 22, 2023

What if your platform could function in a way not yet considered? With 84% of business leaders bracing for potential economic challenges in the coming years, the pressure to boost sales, cut costs and enhance performance has never been more intense. Amid global instability and economic uncertainties, software service providers seek innovative strategies to increase revenue and retain customers. Many are turning to financial products as a means to achieve these goals.

This trend has given rise to a notable shift in the business landscape. This is why you see airlines offering internet, car financing companies providing life insurance and subscription services offering payments. By bringing new services into their offerings, enterprises harness a market share they already have—and keep them coming back for more.

The Future Of Embedded Payments

Every company is slowly (or in some cases, rapidly) becoming a fintech company. The awareness of embedded payment technology in North America has grown immensely over the last two years. Business owners and operators outside the fintech sector are coming to understand its potential.

Embedded financial services—the idea that telcos, car manufacturers, software companies and logistics firms will offer payment options within their products or services—are gaining momentum. By 2026, revenue generated by embedded B2B payments in platforms is expected to surge from $1.9 billion in 2021 to $6.7 billion.

What Embedded Payments Excel At

Enhancing Customer Experiences

Adapting to emerging trends is essential in an era of rapid technological advancements. Customers expect seamless, uninterrupted experiences. The payment process has evolved into a linchpin that can elevate or hinder the overall journey. By integrating digital payment technology into invoicing workflows, businesses enable customers and clients to access a self-service platform, making payments at their convenience. This agile payment process can align with their needs, helping ensure swift and hassle-free transactions.

Boosting Automation

The demand for increased automation in organizations is undeniable. The complexity surrounding money movement and payment management has prompted 90% of CFOs to seek greater automation. Manual payment methods often lead to inefficiencies, with 76% of CFOs reporting that manual tasks consume excessive amounts of their financial team's time. Traditional processes lack transparency, hindering visibility into cash flow and transaction statuses.

Embedded payment solutions address these challenges head-on. In fact, introducing payment automation can increase accounts payable (AP) operational efficiency by up to 16 days, as reported by PYMNTS.

Strengthening Data Security And Transaction Traceability

While the use of paper checks is declining, the threat of check fraud has doubled in recent years, posing a substantial risk to financial security. Embedded payment technology has emerged as a robust solution, fortifying the security and traceability of financial transactions. By replacing sensitive data with secure tokens and deploying real-time fraud detection mechanisms, embedded payments can effectively neutralize the risk of data breaches, enhancing security while streamlining processes and potentially reducing operational costs.

Unlocking New Revenue Streams

Integrated payment technology offers novel opportunities for platform monetization. Merchants can use embedded payment technology to transform a purely functional payment process into a tailored, unique experience that exceeds customer expectations. This innovation allows platforms to generate revenue from the payment activity occurring within their ecosystem, paving the way for unexplored cross-selling and up-selling opportunities.

Key Considerations And Challenges

Software products are built to solve their customers' pain points, but to do so effectively and at scale, many of them, if not all, will want to consider incorporating payment infrastructure. There are, however, various challenges to keep in mind when deciding how and when to implement such systems, as well as how best to integrate them into existing product designs.

Addressing Complex Payment Orchestration

The complexity of payment orchestration is a challenge embedded payments aim to address. However streamlining the payment process can be intricate, requiring businesses to navigate various technical components and requirements to ensure a seamless customer experience.

Impact On The Customer Journey

Integrating payment capabilities must be executed with precision to avoid negatively impacting the customer experience. Poorly integrated payment systems can lead to user frustration, affecting customer retention and satisfaction. Striking the right balance between convenience and functionality is paramount.

Managing Payment Method Diversity

Supporting various payment methods, including credit cards, digital wallets and bank account payments, to cater to a broad customer base can be technically and operationally challenging. Each method will have unique requirements that must be addressed.

Tackling Operational Integration

Integrating embedded payments into existing systems and processes can pose challenges. Compatibility issues, system disruptions and the need for staff training are all considerations that businesses must address when implementing embedded payments.

As technology and finance continue their convergence, a new unified economy is emerging. It's a world where businesses see their operations in ways previously unimagined, offering the potential for increased efficiency and significant growth. As we navigate this evolving landscape, embracing embedded payments and their possibilities may be the key to pioneering a new era in business efficiency.

In the face of economic uncertainties, one thing is clear: The future of business payments is here, and it's a future filled with promise and opportunity.

Embedded Payments: Reaping The Benefits And Mitigating The Challenges was originally published on Forbes on November 20, 2023.

Hamed Arbabi, CEO and founder of VoPay, a recognized leader in the Fintech industry. VoPay offers industry-leading financial technology to software platforms with a focus on Gig Economy Software Solutions. VoPay’s Fintech-as-a-Service platform embeds financial services and real-time payment capabilities into existing applications, products or services through a single and scalable API.

Discover how VoPay’s intelligent payment infrastructure can work for you at: https://vopay.com    

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