Buy Now Pay Later (BNPL) is a payment option that allows customers to buy products or services and pay for them over time through a series of interest-free or low-interest installments. BNPL is typically offered by third-party companies that partner with retailers and eCommerce platforms to provide financing options to customers. Embedded Buy Now Pay later programs are forecast to account for just over 50% of the embedded finance market by 2026, driven by the rapid adoption of BNPL and the expectation that online retailers accept deferred payments.

Look for providers that offer robust payment APIs, seamless integration processes, and a track record of working with similar digital platforms. Consider factors such as transaction fees, scalability, and the range of payment methods supported to ensure a smooth and cost-effective implementation. Natively building and managing the infrastructure required to bring embedded payments in-house can come with a significant amount of risk and cost.

A $51 billion market opportunity

When the customer uses the credit card, they are rewarded with members-only special deals and a faster checkout process. Both embedded banking and embedded payments are part of the larger embedded finance group of services. Embedded finance takes these strategies further with additional services like in-app lending, insurance, and other offers. Yet despite the rapid growth of embedded financial services, there has not been much quantitative exploration of the industry’s dynamics. To that end, we set out to quantify the size, growth profile, and economics of the key offerings powering the rise of embedded finance, focusing on the US market. The third stage aims to integrate financial processes through the existing platform.

This could dilute customer relationships, and it doesn’t allow for tailoring to specific market verticals. Insisting on owning your merchant contracts is equally important, as this can give you greater oversight of the parameters of each partner relationship. Selecting the right embedded payment provider, optimizing user experience, ensuring security and compliance, and leveraging data insights are crucial steps in implementing embedded payments successfully. With the roadmap in this practical guide, your platform can harness the full potential of embedded payment solutions and deliver exceptional value to your customers in the digital age.

Best Travel Insurance Companies

These offerings are supported by an army of well-funded fintech enablers, which help platforms deliver products and services. End users increasingly prefer the convenience of using payments, lending, insurance, and other financial services embedded in their day-to-day software, rather than accessing standalone services from traditional financial institutions. Simply put, embedded payments are the money movement functionalities within a bank that have been exposed to upstream applications (e.g., the mobile app or bank website) that enables the user to transact.

By logging into their e-commerce or accounting platform, they can open a deposit account, order a debit card, and meet most of their financing needs. Rather, they are software companies that partner with banks and technology providers to embed financial products into a single seamless, convenient, and easy-to-use customer experience. This new form of partnership between banks, technology providers, and distributors of financial products via nonfinancial platforms underpins what has been hailed as the embedded-finance revolution. Sitting at the intersection of commerce, banking, and business services, payments has been one of the first use cases of embedded finance, and a large number of the aspiring embedded-finance providers originate from the payments industry. Embedding financial services allows you to integrate payments, debit cards, loans, insurance, and even investment instruments into almost any non-financial product.

Products

Embedded finance has created quite a buzz in banking and fintech circles, and for good reason. It is estimated that revenue from embedded financial services will reach $230 billion by 2025, a 10-fold increase from $22.5 billion in 2020. Enabling in-person payment acceptance requires an understanding of terminal features, integration and connectivity methods, and data security impacts. Digital invoices streamline accounts receivable processes and improve cash flow.

• Embedded
  finance challenges and risks include ensuring the security and protection of
  personal financial information, ensuring data privacy and regulatory compliance,
  and the risk of cyber attacks.
• Providing frictionless B2B process is an opportunity for businesses not only to grow revenue but to differentiate themselves in the market.
• One way would be to move up the value chain and offer enabling services, as JPMorgan Chase did when buying WePay, or to procure stakes in platforms.
• British Airways offers travel insurance on its website when you purchase your flight.

The banking industry talks a lot about the fintech revolution, and some financial institutions are going so far as calling themselves tech companies. However, just beyond the normal lip service given to this topic is the real revolution that is happening behind the scenes at most U.S.-based financial institutions—payments transformation. We hear a lot about digital embedded payments examples transformation as an umbrella topic, but the conversation sometimes lacks substance. We don’t tend to hear too much about payments transformation, maybe because it’s not visible to the typical consumer, it’s not the fancy mobile app or the new slick UI on the website. Instead, it’s the embedded payment functionality, which makes the UI function slick.

Why Is Embedded Finance Important in 2023?

Embedded financial services include payment acceptance, bank accounts, lending, insurance, payroll, and more. This article focuses on embedded payment solutions, often the first rung on the embedded finance ladder for software companies interested in marketing integrated financial services to their customers. The complexity increases as you move from payments to debit, credit, insurance, and investment. But if you are a marketer or brand in any sector, you want your offerings to customers to be as attractive as possible. Today, customers have to interact with their banks to get debit and credit cards, sofa, car, or home loans, and there are many disputes between the customer, the bank, and the seller.

Connect, often used in conjunction with other Stripe embedded finance solutions, is a way for platforms to benefit from embedded payments, without the workload and liabilities of building everything in-house. The embedded payments industry is growing at a rapid pace, with revenues expected to grow from $43 billion in 2021 to $138 billion in 2026. First, it can provide a more flexible payment acceptance option for customers who may not have the funds to make a large purchase upfront. Second, BNPL companies often offer interest-free or low-interest financing options, which can be more affordable than traditional credit cards or personal loans.

The 2022 McKinsey Global Payments Report

These trends are the result of digital platforms’ increased ability to embed payments directly into their website or mobile app, rather than redirecting customers to an external payment gateway. Making the purchasing experience a seamless part of your product experience has the potential to be a low-lift investment that can yield powerful returns. Not only do embedded payments help improve your customer experience and retention, but they also accelerate revenue growth.

One often-cited example that represents the potential for embedded payments is that of Uber, which automatically charges the payment method on file at the end of a ride. The company has embedded payments within its technology to the point that the ride-hailing and payments experiences have merged into one, rather than separate steps to be taken by the consumer. For decades, payments have been the purview of large companies and payment processors. Software companies have traditionally had to rely on third-party integrations to allow their customers to accept payments using their platform, which has caused a disjointed customer experience between software and payments. There are multiple benefits of embedded finance both in context of B2B and consumer scenarios.

Traditional payment facilitator (payfac) model of embedded payments

These segments lead other products in terms of digital maturity, revenue generation, and use cases currently served. It has become increasingly important for business-to-business (B2B) companies to extend their clients an easier way to buy online or digitally pay for invoices. A finance manager should have access to business tools that extend the same level of efficiency that they experience as a consumer. As more companies switch to paying with commercial cards, the amount that suppliers pay in transaction fees rises. For businesses that accept a lot of purchasing or government cards, qualifying for Level 3 Interchange rates can produce significant savings. Software providers that extend this feature to customers can stand out by helping their customers reduce the cost of payment acceptance.