What Are Embedded Payments? | NMI (2024)

What Is Embedded Finance (And What Are Embedded Payments)?

Embedded finance describes any scenario where financial products (like lending) are integrated into software platforms. Embedded payments fall into this category; they are payment capabilities integrated directly into software solutions. Paying for dinner through an app, subscribing to a streaming service and buying something from a friend via social media are all examples of embedded payments.

Embedded payments aim to integrate payments with software so seamlessly, the end user doesn’t notice a transaction even happened. Since design, flexibility and a robust UI are fundamental, most embedded solutions have emerged from innovative software companies and Fintechs rather than traditional financial institutions like banks.

For instance, imagine a veterinarian’s office that uses specialized software to manage the clinic’s day-to-day operations. They use one piece of software for scheduling, patient management and storing charts. Then, when it comes time to collect a payment, they boot up a second system to process their client’s card. Although juggling multiple vendors is common, it can quickly become tedious and expensive.

With embedded payments, a developer could build that functionality directly into the existing clinic software. This would streamline the vet’s workflow, resulting in one less software bill to pay, platform to deal with and set of vendors to wrangle. Embedded payments can then be expanded to support an omnichannel experience and improve the experience and loyalty of consumers.

For example, the owner of a nervous pet may prefer to check out remotely or in the treatment room rather than in the lobby surrounded by other barking dogs. Embedded payments allow merchants to meet their consumers where they are.

Embedded vs. Integrated Payments

If you’ve ever looked into software-based payment processing options, you’ve likely heard the term “integrated payments.” While it sounds similar to embedded payments, there are a few key differences:

• Integrated payments allow developers to connect external payment systems to their software platforms, enabling businesses to process transactions within their existing software solutions. Although integrated payments offer a streamlined experience, the terminal is often separate, redirecting customers to a third-party portal to pay
• Embedded payments offer businesses a one-stop solution, enabling them to sign up for, access and manage their key merchant services directly through their primary software vendor. That removes friction from their operations because everything — processing, billing, security and advanced features, like fraud management — can happen in one place

In short, embedded payments take integration a step further by embedding payment capabilities so deeply that they become practically invisible to the end user. By blending the payment process with the overall user experience, customers won’t encounter unfamiliar branding or third-party terminals.

Why Is the Market Moving Towards Software-Driven Payments?

Today, a significant portion of businesses use SaaS (software as a service) platforms, such as business management solutions, from independent vendors. As more aspects of commerce (and our lives) become digitized, that number is growing. What may be surprising is that 50% of businesses also get payment services directly from their software provider.

What’s causing this market shift? Convenience.

Software-driven payments are reshaping the space, making transactions faster, more intuitive and more convenient. Now, embedded payments are a growing expectation among users. As more businesses focus on creating best-in-class customer journeys, the gap between companies using software platforms to manage their operations and companies also getting payments from those platforms will begin to close.

What Are the Benefits of Embedded Payments?

Embedded payments benefit everyone — the software provider, the business user and the end customer. For SaaS providers, the benefits center around revenue generation, user experience, ease of integration and the ability to future-proof software.

Here’s a quick look at each:

Turning Payments From a Cost Center Into a Revenue Generator

Many software providers offer integrated payments, allowing users to take payments through a connected payment service. With that setup, the platform spends money building an integration that is an ongoing cost center.

By embedding payments with the help of a partner, developers can turn that wasted cost center into a new revenue channel. This allows software platforms to generate significant income from a feature they already offer instead of handing potential revenue to a third party.

Improving the Merchant Experience

The more users can do with your software, the happier and more loyal they’ll be. Offering fully embedded payments directly through your software saves users time and money by eliminating an unnecessary vendor relationship. It also increases your software’s value and integrates you more deeply into your users’ operations. Over time, this will foster loyalty, reduce turnover and maximize the average lifetime revenue generated by each customer.

Ease of Payments Integration

With the right partner, embedding payments into your software can be a seamless process that requires fewer resources. With partner-side APIs (application program interfaces) and SDKs (software development kits), you can use pre-designed building blocks to integrate payment solutions into your SaaS platform. This saves your company the time and money you’d otherwise spend building from scratch, especially if your partner offers built-in compliance and security.

Future Proofing for Flexibility and Scale

The market is trending towards software-driven payments. Eventually, your target users will view payments as a necessary feature. Establishing a strong payments integration ensures your software will keep up with new user demands and evolve with the payments ecosystem. That makes you more adaptable and improves your ability to scale.

Finding the Right Embedded Payments Partner

Few software companies want the headache or risk of becoming a payments company. So, how do you offer embedded payments without impacting your team, depleting resources and distracting from your core mission of making great software? Partner with an embedded payments platform that can offer you a turnkey solution.

When seeking out an embedded payments partner, look for these key features:

A Modular, Developer-Friendly Approach

Modularity is crucial. It allows you to choose which payment products to integrate without being locked into a monolithic and expensive solution. Your partner should offer a variety of omnichannel payment products specifically designed to bolt onto your existing stack with minimal friction.

For instance, a great partner will enable you to easily embed solutions like pay by text, subscription payments, card-present, in-app, ecommerce payments and others in a unified, fully branded environment. This will create a holistic payment experience for merchants and their customers while showcasing your platform’s branding at every step.

Better Scalability

Large platforms like Stripe and PayPal were built for merchants and enterprises and later retrofitted for embedded platform use cases; they aren’t well positioned to support fast-growing platforms or disruptors that want speed to market with the option to customize and insource over time. These larger providers are intentionally difficult to unplug from when you’re ready to take on more responsibility and revenue potential. To maximize your long-term payments profit potential, look for a partner that will grow with you and provides pricing options fit for your stage of scale.

A History of Innovation

Partnering with an embedded payments platform removes the burden of keeping up with industry trends. You’ll need a partner with a long history of driving payments innovation to ensure you’re always ahead of the curve.

Built-In Security and Compliance

Compliance is arguably the biggest reason software companies turn away from payments. With the right partner, you can shift much of the regulatory burden and card brand mandates onto their shoulders. Look for a partner with strong expertise in security and compliance to ensure that the payment solutions you integrate into your software are compliant right out of the box.

Industry-Leading Support

Offering your merchants payments means that when things go wrong or questions come up, you need to resolve things quickly. To ensure support never becomes an issue, look for a partner who offers you 24-hour access to live support and, ideally, a direct account specialist who knows your business on a deeper level. That will ensure both you and your users are always supported.

Consumers overwhelmingly cite convenience (84%) and speed (49%) as their main reasons for choosing a payment method. As young, digital-native consumers continue to enter the job market and gain buying power, businesses around the globe will need to find new ways to revolutionize the buying experience. For many, the best path forward will be to innovate and adapt by offering in-app and in-software payment solutions.

NMI is a leading embedded payments platform that offers a complete, one-stop solution for SaaS companies, software vendors and payment professionals. Our modular, fully compliant platform can help you start earning from your payments volume without taking on the burden of becoming a traditional payments company.

To find out more, reach out to a member of our team today.