Embedded Payments: What ISVs and SaaS Need to Know
Independent Software Vendors (ISVs), Software as a Service (SaaS), and platforms everywhere are tapping into consumer demand in unexpected ways that require advanced payment solutions.
And while they all face unique challenges, we hear the same problems when it comes to their payments: complexity, control, and scale.
ISVs and SaaS companies have changed, and so have their payment needs.
Consumers have become accustomed to having their needs anticipated. Businesses need to know everything about their customers: what they might want to buy, how they want to pay, and how to keep them in their digital ecosystem longer.
They can do that, thanks to the “magic” of unified commerce – a strategy that integrates all consumer-facing solutions and channels into a single view that includes shopping history, product and payment preferences, and other detailed reporting information.
Unified commerce creates highly personalized shopping experiences, delivering you and your customers a number of benefits such as:
- More revenue
- Superior customer experience
- Sticker products and solutions
- Better data and insights on your customers
Ultimately, unified commerce creates the perfect opportunity for innovation, including the ability to monetize or embed payments.
What Are Embedded Payments?
An embedded payments strategy allows consumers to make financial transactions anytime and anywhere through connected devices like digital wallets, cars, appliances, wearable technology, and even the metaverse. Embedded payments boost the convenience factor and increase the speed of payments because they’re a natural function of the solution, app, system, or device being used.
Experts anticipate that embedded payments will be valued at over $138 billion by 2026, with the majority of growth happening in Europe. A whopping 96% of European companies plan to implement embedded payments.
Watch: Joe Garza, Chief Innovation Officer at Payroc, speak about the demand for embedded payments.
The applications are endless
J.P. Morgan recently published a payments framework titled “Payments are eating the world,” in which a multitude of applications for embedded payments was identified. Also referred to as “invisible banking solutions,” some of the applications are available today, others are not as far away as you might think.
For instance, modern, connected cars could collect and share data through a standardized API, removing the friction that would prevent consumers from sharing their data multiple times. Customers benefit from the convenience and speed of making coffee and gas purchases, making restaurant reservations, earning loyalty points, and earning rewards inside their “wallets on four wheels.” It elevates the customer experience and can be a huge incentive to encourage more purchases, which means more revenue.
Other applications include:
- Replacing contactless cards and mobile payment apps with wearables that allow consumers to merely flick their wrist to make a purchase.
- Leveraging the IoT (internet of things) to create a smart fridge that allows customers to order groceries and meals delivered quickly to their door.
- Virtual reality, augmented reality, and metaverse applications of the future are on the table as well.
When we look at the applications of embedded payments, it’s easy to see the benefits.
What Are the Benefits of Embedded Payments?
Embedded payments increase the lifetime value of each customer by making solutions stickier in several ways.
Superior customer experience
With multiple touchpoints and intuitive purchases, embedded payments take the hassle out of shopping. Take Uber, for example. Customers can search for, request, track, and pay for transportation in one app that does all the thinking for them.
Customers pre-enter their payment information and select default payment types ahead of time. So, when a ride happens, the payment happens almost automatically and without the hassle of finding a credit card or calculating a tip.
Frictionless checkout with invisible payments
Consumers know a substandard experience when they see it and can certainly feel it when there’s friction. With embedded payments, the payment aspect becomes so seamless and integrated into the customer experience that it almost becomes invisible.
“You’ve only done a successful embedded payments transaction if it’s beautifully frictionless and yet entirely unnoteworthy.” –Terri Harwood - Chief Experience & Integration Officer, Payroc
Increased impulse purchases
The beauty of embedded payments is it feeds into customers’ need for instant gratification. When it’s that easy to make a purchase, there are fewer opportunities for the customer to talk themselves out of it. And if a solution offers buy now, pay later as an option, even the most frugal customer will be tempted to simply tap the “buy” button.
For ISVs that are developing software, apps, and device technology, the question is knowing when to include embedded payments.
Are Embedded Payments Right for Your Solution?
Adding embedded payments to your solution is a strategic decision, and there are two specific points in the lifecycle of the solution development timeline when every ISV should consider it.
You’re planning for business growth
Obviously, if your long-term goal is to intentionally grow your small or mid-size solution into a larger, more robust solution — or if you plan to integrate within a unified solution — embedded payments should be part of your roadmap.
Otherwise, you aren’t getting economies of scale when it comes to payment processing costs, and enhancements like adding point of sale (POS) come with endless project costs and missed deadlines.
Your business has expanded
Let’s say you originally developed your solution to work with an off-the-shelf third-party payment processor. They’re usually easy to work with and offer a host of capabilities, but they also have their limitations. It’s becoming more critical to offer multiple payment options, including alternative payment types.
And there’s the cost and time associated with managing and maintaining multiple vendor relationships.
For example, if you originally developed your solution for card-present payments, the pandemic probably forced you to patch in options for e-commerce card-not-present payments, kiosk-enabled unattended payments, and more. Each of those payment processors is a separate integration with your solution.
Keep in mind that a solution will appeal to more merchants if it’s optimized for innovative functionality and emerging technologies.
A Robust Embedded Payments Solution to Handle Any Scenario
To embed or monetize payments within your software, you have to enable these main functions:
- Onboard clients
- Enable transactions through a gateway or terminal
- A staged approach to risk & underwriting
- Produce canned and custom reporting
That can seem like a lot of work, especially for ISVs that are already scaling their development roadmap, putting out new features and new products, and trying to improve their customer experience. But you don’t necessarily have to do all or any of that work yourself. At least, not when you choose the right partner.
There are a host of embedded payment solution providers that require ISVs to invest resources to migrate to their platform. At Payroc, we give you the option to do that, or we do it for you.
The best approach for your payment solution
At Payroc, our team performs the discovery, pinpointing the best solution for your business model and your goals.
We have a fully customizable REST API and an expert team of solution architects that can handle any integration and solve any development problem, regardless of how unique it is. Our modular backend design provides the foundational building blocks to make almost any implementation seem like a turnkey solution. And our payments consultants can help you determine the most appropriate implementation — now and down the road, giving you a spectrum of options to choose from.
For example, some of our ISV clients prefer to work as referral partners where they integrate with our payment gateway and refer merchants to set up accounts within our platform. On the other end of the spectrum, we help ISVs become full payment facilitators where they take on the underwriting risk, compliance funding, and so on.
What about the middle? That’s where many of our clients live — and thrive.
Unlike other platforms, we allow our clients to pick and choose features, roles, and responsibilities in an a la carte fashion. So, as your volume starts to increase, you can take on more of the responsibilities while enjoying the economies of scale.
This approach not only helps ISVs bring their solutions in the embedded payments fold as quickly as possible; it allows them to expand their role as they grow and can allocate more resources. Payroc is one of the few full-service acquirers that allows clients to easily transition from the entry level to advanced to professional stages, all the way to sponsoring them as full registered payment facilitators.
Let's review your payments strategy together because you deserve frictionless payments technology that’s designed to help you keep up and scale up in the modern digital economy.