This way of bringing payments in-house often comes with considerable upstart and ongoing costs, in addition to major security and compliance considerations. The precise type of embedded finance commonly used and its scale varies depending on the type of industry and whether they work embedded payments trends in the B2C or B2B world. In the B2B world, for example, invoice financing is a particularly popular and effective service. At TreviPay, we specialise in providing effective embedded B2B financing solutions, from different types of invoice financing to payment and Net 30 terms.

• The rates of third-party payment processors show this benchmark as the level at which fees paid out eclipse the cost of an embedded payment platform.
• For most software programs focused on small and midsize businesses (SMBs), consumer payments are typically one of the first financial services to be embedded, given the friction those customers face in setting up payment acceptance.
• With the company’s kiosk solution, patients can pay co-pays and account balances while checking in for an appointment.
• “If you use Venmo to authenticate your bank account, those types of services are embedded finance, and it definitely makes it quicker and simpler for consumers to check out, and it makes it better from a trust perspective,” Abdulrazaaq said.
• Not only does this deepen the software provider’s relationships with these customers, it helps them offer a better experience.
• By embracing embedded payment solutions, brands can retain much more control over the user experience and eliminate key points of friction.

For example, online marketplaces and retailers bring banking services into their customer rewards programs. When the customer uses the credit card, they are rewarded with members-only special deals and a faster checkout process. Both embedded banking and embedded payments are part of the larger embedded finance group of services. Embedded finance takes these strategies further with additional services like in-app lending, insurance, and other offers.

Who distributes embedded finance, and what products do they offer?

In 2022, the overall embedded finance market was valued at $65.46B, and is expected to see a compounded annual growth rate of 32.2% from 2023 to 2030. → Using Plaid IDV and Transfer, embedded finance startups can safely and securely gain access to the financial and identification data they need to onboard new customers and fund accounts. As I outlined in December, the most important considerations when preparing to transition over to embedded payments are processing volume and payments complexity. Today, the story has shifted to nearly every software company becoming a payments company. That’s, of course, an oversimplification, but it’s not an exaggeration to suggest that companies from nearly every sector are actively looking into how to embed payments in their offerings.

Modernizing Medicine uses Adyen’s unified approach to simplify payments processing operations by streamlining provider onboarding, payment acceptance, and disbursement. In just a few clicks, users on their platform can order, send, and manage new POS terminals and seamlessly collect payments from their customers online and in person. ROLLER used Adyen for Platforms to streamline operations and more effectively meet the payments needs of their users. Their embedded payments solution ROLLER Payments allows users such as Scenic World to easily refund, upsell, and upgrade their guests, creating better experiences for visitors.

What do you need to do in order to embed finance into your business?

Payment acceptance is different from functions of core software such as sales, inventory or staff scheduling. Our embedded payments model is a 3-way partnership—PayJunction, software provider, merchant—where we team up with ISVs to deliver best-in-class software and services that better serve the needs of customers. The rise of digitally-connected experiences happening online and in apps blurs the boundaries of which entity—software company or payment services provider—is responsible for accepting and routing payment transactions.

However, fintech has expanded companies’ ability to offer branded credit cards and increased the use cases where it makes sense. For example, payments are integrated with patient portals, so users can make payments https://www.globalcloudteam.com/ at the same time they’re reviewing lab results or scheduling future appointments. With the company’s kiosk solution, patients can pay co-pays and account balances while checking in for an appointment.

As Cybercrime Increases, Financial Institutions Must Remain on Guard

Relevant services could include some credit and market risk functions, as well as sales and support services, such as collections, which touch customers directly. This already occurs in payments, where platforms are becoming payment facilitators to maximize vertical integration and profits. For B2B embedded card payments, as with consumer payments, we expect enabler take rates to face some pressure over the next few years. Platform take rates will rise slightly, leading to a 2026 revenue split of $1.5 billion for platforms and $0.8 billion for enablers, which reflects the overall increase in embedded B2B card payment growth. Card transactions accounted for $0.7 billion of revenue, split evenly between platforms and enablers, while ACH accounted for $1.2 billion of total revenue.

Revenue growth will stem primarily from a substantial increase in transaction value through embedded finance platforms. We will see increasing penetration in certain industries and significant revenue multiples across smaller subsegments, such as business-to-business (B2B) payments and BNPL. Our sizing focuses on the largest embedded finance markets today, namely payments, lending, and banking, as well as the subcategories within them. We expect the US market to more than double from $22 billion in 2021 revenue to $51 billion by 2026 across those three markets—a 19% compound annual growth rate (see Figures 3 and 4). For this report, we define embedded finance as a nonfinancial software platform providing an adjacent financial service, for which it takes some degree of economic ownership. This allows the platform’s customers to take advantage of a value-added offering within the native customer journey.

A completely new proposition for financial services customers

The growing need for convenient financial services and the increasing number of online transactions fuels the growth of platform ecosystems — just like the growth of the entire embedded finance concept itself. This option is more suitable for platforms that want to provide a fully customized payments experience offering. Platforms looking to evolve their product suite by offering native payments can go about it in different ways.

Earlier this year, the company announced its expanded embedded payments strategy with its suite of Citi Pay® products, citing that 85% of Americans want retailers to have flexible payment options at checkout. Embedded rewards eliminate the need for separate loyalty cards or accounts and provide a seamless experience for customers. Both embedded payments and embedded banking fall under a broader fintech umbrella known as ’embedded finance’, which refers to a range of financial services that can be offered by non-financial businesses. Put simply, embedded payment systems operate via open APIs that ’embed’ an upstream payment processing tool within a different app or website. This allows merchants who are not banks or financial institutions to oversee the entire payment process from beginning to end. Some tools such as Stripe and Paypal have taken this a step further into the realm of embedded banking, where interactions with a formal bank account can be made without needing to log into an account from the bank’s website or app.

Smarter payments: how businesses at the frontier are using embedded finance

By 2026, we project that consumer payment transactions through embedded platforms will more than double, reaching $3.5 trillion and earning platforms and enablers $21 billion in revenue. This will flow from faster penetration of embedded payments among industries including retail and food services, where it will nearly double to capture 70% of SMB transaction volume. We might also see new vertical categories emerge as digital payments become more prevalent.

Unit is an embedded finance startup offering companies an easy way to store, move, and lend money. Using Unit, businesses can build custom offerings that allow their customers to request cash advances, get a branded credit card, or track expenses. By handling the backend building side of embedded finance, Unit helps more businesses leverage the power of embedded financial services. With the growth of banking as a service and open-access APIs, businesses now have the ability to leverage financial services technology to customize payment solutions for their needs.

Embedded Insurance

Behind these services are new BaaS platforms such as Solarisbank and some banking institutions such as BBVA which, via BBVA API Market, makes a robust catalog of APIs available to its technology partners and developers. The PayFac, in both instances, provides the necessary APIs and infrastructure and handles much of the payments-related heavy lifting. Or you can go with the technology-only approach and become a PayFac yourself with tech from an enablement partner. While these payment terms are often used interchangeably, there is one technical, but important distinction between them—merchant management.