Best Upcoming Embedded Payment Trends
More leading businesses implement embedded payments into their networks. It’s a type of payment that enables companies to offer more solutions to their clients, thus meeting their needs.
The embedded finance industry is growing, so business leaders should keep an eye on some of the most promising trends. This article should be valuable to small businesses that want to focus on implementing innovative trends and staying competitive within their industries.
What is embedded payment?
Embedded payment, or embedded finance, is the integration of financial services into nonfinancial businesses. Financial services may include:
- payment processing;
The integration into nonfinancial businesses’ infrastructures enables these companies to offer services without redirecting customers to traditional financial institutions. A simple example of an embedded payment is taking a loan from a company like Klarna instead of visiting a conventional bank.
How does it work?
Embedded payment systems work thanks to APIs that integrate a payment processing mechanism into an app or website of a nonfinancial business. As a result, nonfinancial companies can control the digital payment process from beginning to end.
Paypal and Stripe users don’t even need to log into their bank accounts from their online banking apps to make payments. Embedded payments are a part of a larger fintech industry called embedded finance. It refers to financial services that nonfinancial businesses can integrate into their infrastructures.
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Top embedded payment trends
Researchers estimate that the embedded payment industry will grow by 40.4% annually. Moreover, it should reach $124,755.7 million by 2022 and $380,573.2 million by 2029.
This information proves that more companies integrate embedded payment mechanisms into their infrastructures. But what trends are the most popular? Let’s check out the top 5 most popular embedded payment trends.
Buy-now-pay-later (BNPL) is a short-term financing type which enables clients to receive products or services now but pay for them later. Typically, the payment is interest-free, so consumers don’t overpay.
BNPL is becoming more popular among users, especially since most clients buy online today. BNPL is a $100 billion global industry, and only in the U.S do people aged 18 to 24 use BNPL more often than their credit cards.
Given this data, businesses should consider integrating BNPL mechanisms into their websites or apps. They might experience an increase in customers while also receiving payments in full.
According to this strategy, a bank or a financial institution lends money to the client while also transferring the full amount to the merchant. The customer must pay 25% upfront and follow a fixed payment schedule in the future. Typically, clients have to pay within a few weeks or months, in contrast to credit card payments, when clients pay a fixed amount each month for a longer period.
When the embedded finance industry was developing, it mainly targeted the end customer. However, the situation is different today, and most fintech companies now offer B2B applications to optimize nonfinancial businesses.
Business-to-business (B2B) is an application that aims to streamline business operations, simplify complex business processes, and meet specific industry needs. B2B apps link businesses, clients, and employees.
Verified Payments, an EU-based and EU-regulated Electronic Money platform, offers its customers full-service business solutions in addition to getting payments on time. Verified Payments enables customers to access working capital, open multi-currency accounts, conduct global money transfers, acquire virtual cards, etc.
The usage of B2B apps will increase over time. The data shows that the B2B market was at $6,883.47 billion in 2021, and it should grow annually at a rate of 19.7% from 2022 to 2030.
The proliferation of APIs
Only in the early to mid-2010s the business industry began to benefit from the trend called platformification. It’s a trend when a component of one company is integrated into another business’s infrastructure. The fintech industry embraced this trend due to its risk reduction and speed-to-market benefits.
Since then, many companies have begun offering their service and products via an application programming interface (API). Companies received an opportunity to offer additional valuable services like lending, payment transfer, and insurance to their client base.
Today, companies have a huge range of APIs to choose from and integrate into their infrastructures, giving more options to clients. Three main sectors benefit the most from integrating APIs:
- e-commerce and retail;
- transport and logistics;
Even though the integration of APIs isn’t a new trend, it’s still growing and considered one of the biggest. Almost 55% of businesses use APIs to build B2B products, 36% for mobile products, and 26% for employee productivity.
Real-Time Payments (RTP)
The fintech industry neglected this concept due to a lack of innovative technologies. But today, real-time payments have a chance to expand. RTP is a concept that massively benefits businesses and clients alike. Even though instantaneous funds transfers aren’t new, the trend has been evolving over time and will soon reach its peak.
The statistic shows that around 72% of global businesses are planning to develop a real-time payments infrastructure. Today, the RTP is evolving to include the following options:
- The ability to meet the needs of different customer groups, such as regular customers, businesses, platforms, and other network participants.
- Signing up additional partners to increase the network’s reach.
- Include advanced data in payment messaging.
- The expansion from the usage of traditional banking to include digital wallets and other non-banking financial institutions.
With low expenditure and reliability, RTP offers numerous advantages to businesses and clients. Financial institutions, including banks and non-banking organizations, can improve the customer experience. They can optimize their infrastructures and add new products or services to their networks.
Merging of different industries
The COVID-19 era disclosed a new range of possibilities, given that most customers have been spending time online in a digital world. Consumers have a big demand for digital services that enable them to access various things without going to a physical location.
It seems that the trend of integrating embedded payment solutions is going beyond traditional industries, like retail and e-commerce, transportation, etc. Today, even such industries as healthcare, education, employment, and real estate have a demand for embedded payments.
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