Embedded Payments - Financial Integration
In the past few years, payments, like other financial services, have been subverted and transformed. Embedded Payments or Embedded Finance is now undergoing a transformation, attempting to change the entire ecosystem and service value chain.
What are embedded payments
Embedded payments refer to the integration of payment processing capabilities directly into various applications, platforms, or services, creating a seamless and integrated payment experience for users. Without a separate payment gateway or external systems, embedded payments can be an inherent part of the user interface or workflow.
This integration allows users to make transactions or payments without leaving the application or platform they are using. It streamlines the payment process, enhances user convenience, and can contribute to a more cohesive user experience.
The evolution and dominance of payment processing: A shift towards embedded payments
Payment processing (businesses that accept payments), once considered a dull, low-potential market, was operating within traditional closed loops and hardware architectures. With the widespread of mobile devices and continuous innovation on applications running on them, payment processing has been gradually shifting towards a software-first, mobile-first model, advancing into various sectors, including finance. As traditional payments cede market share to online, cloud-based, and software-centric enterprises such as Stripe, Block (formerly Square), Adyen, or PayPal, these major payment service providers are gradually dominating the market.
It is inevitable for traditional finance application to undergo system integration and facilitation. Service providers are moving towards solutions that go beyond standard functions, focusing on flexibility, comprehensiveness, and API-first solutions. In other words, it is no longer just about processing payments (or acquiring them); it extends widely to various merchant needs and intelligence. Leading companies, as mentioned above, now offer an additional layer of connection between their services and the merchants, serving as essential payment partners. They embed additional financial applications or products into the ecosystem, such as loans, card issuance, P2P payments, finance, taxes, and insurance, providing relevant value-added services (VAS) for differentiation and comprehensiveness. For example, Adyen for Platforms offers additional features that customers may need, packaged into a rapidly customizable and highly integrated turnkey solution. Stripe has done the same, with Shopify using Stripe (Stripe Treasury and Stripe Is Distributioning) to provide payment, account finance, and issuance services to over a million global businesses. The reason for such a strong demand is simple— the mutually beneficial chain formed by platforms, markets, and customers is an excellent business model for present and future dominance between enterprises and finance. Imagine being able to provide not only payment services but also more valuable online, payment, card management, account management, fraud prevention, loans, and other services to your customers. These services not only make their lives more convenient and enhance user experience but also help them generate more business. As a payment service provider, the essence of this will be both interesting and valuable.
Strategic Evolution: Unleashing the power of embedded finance in payment services
By embracing a highly digitized and integrated approach and incorporating Embedded Payments or Embedded Finance into their thinking, payment service providers will pursue more sophisticated operational strategies. These strategies may include:
- Drive ecosystem symbiosis
- Enhance profitability, improve the success rate of adoption and financial monetization
- Diversify revenue models
- Focus on value-added business rather than just pricing
Embedded finance, as we know it, is fundamentally changing one of the many ways businesses use financial services. Embedded Payments and financial solutions establish a unified platform, allowing payment information to run automatically from the store’s sales terminal system, website, or backend software, while simplifying the information transmission process. The ultimate result will be increased productivity, improved customer experience, and more time to focus on core business areas.
As the penetration rate of digital wallets and payment applications continues to rise, the future global payment methods will continue to evolve and become more intuitive and seamless. Therefore, consumers ultimately expect payments to be universal, widely usable, secure, and trustworthy. At the same time, every link and enterprise involved in the payment ecosystem also hopes for faster, safer, and more accurate fund flow, while saving costs