Payments residing natively in your software may be the next step in your journey to business growth.
The embedded payments market is booming. According to Juniper Research, in 2023, it represented $32 billion in transactions, and embedded payments will reach $59 billion by 2027.
Unlike integrating a payments platform with your solution, “embedded payments” are designed to reside natively within your software, website, or app, and are often part of a Software as a Service (SaaS) package.
What’s driving embedded payments?
The ease of use and convenience of embedded payments are the primary drivers for this model. When you don’t have to direct the customer to a different site or payment page to pay, the customer experience is smoother and faster, sometimes even allowing payments with one click. With embedded payments, ecommerce customers can complete their transactions without the inconvenience of leaving the retailer’s website, make a payment while playing a video game, or renew a software subscription while working in the application.
This payments model also has advantages for merchants. Because there are fewer hoops for customers to jump through to make a purchase, transactions are quicker. So, customers are less likely to get distracted or change their minds before completing the sale. Additionally, if merchants experience technical issues, they know they can call their software provider to address them and can count on quick resolution. Merchants who have spent time with customer support with both their payments company and their software company will appreciate a model that makes troubleshooting and resolution easier.
How to make embedded payments work for your business.
While making payments more convenient for consumers and removing management complexity for your clients are both good for business, embedded payment can also directly contribute to an ISV’s growth. Software developers often use the payment facilitator (PayFac) model with embedded payments. With payment solutions built into their solutions, it’s smart to stay in control of the approval and onboarding process, payment processing fees users pay, the payment methods, and services they can use.
When becoming a PayFac, payment company partners set up a master account and bring their clients on board through their merchant identification (MID) number. They also become responsible for underwriting and digital due diligence to meet all Know Your Customer (KYC) and anti-money laundering rules and regulations.
PayFacs differ from payment company integration partners in other ways, including receiving funds on behalf of their clients and creating schedules for their distribution. Importantly, they also control the fees they charge.
In short, by assuming greater responsibility for the risk of the transaction, they can build more revenue, for example, through the following.
- Improved customer experience at checkout, which leads to increased conversion rates and more transactions through your software.
- Subscription fees for services related to payments, such as chargeback mitigation and fraud prevention.
- Greater customer satisfaction with faster, easier onboarding, easy payments implementation, and internal support that resolves issues more quickly, which can keep customer churn to a minimum.
- Controlling payments data, which can provide better insights that help you offer an improved solution tailored to your clients’ needs.
Next steps toward providing embedded payments.
If you are ready to embed payments into your solutions, make sure you research your options. There are many advantages to this model, but there are also risks and pitfalls to avoid, and you need the right payments partner to support your business.
North American Bancard can help you move forward with embedded payments and the PayFac model that makes offering payments as a part of your solution manageable and lucrative.
Contact us to learn more.
