When credit cards were first introduced in the 1950s, the payments industry was relatively static. Major innovations came with the first debit card in 1966 and the birth of online payments in the 90s, but change was slow.
How things have changed; the last decade couldn’t have been more different, and nothing could have prepared the payments industry for the fintech revolution.
Today, new payment technologies are emerging constantly. One of the most impactful is embedded payments — payment capabilities and merchant services built directly into software platforms. With the exception of digital wallets, embedded payments have grown beyond any other recent payments innovations. Today, half of all merchants use an embedded solution, and the market’s trajectory and consumer preferences suggest that number will only grow.
In part one of this five-part series on embedded payments for software-as-a-service (SaaS) providers, we look at why conditions are so favorable for embedded solutions and why consumers and merchants are drawn to them.
How Embedded Payments and Finance Are Shaping the Future
Embedded payments (and more broadly, embedded finance) are financial solutions built into non-financial applications. For example, embedded solutions allow you to do things like receive instant financing when buying a new Mac or sign up for car insurance directly through Tesla. With in-app and software-based payments, everything is seamlessly integrated into the consumer shopping journey.
Embedded payments are now so advanced that, in many cases, business software users can get payment processing directly from the software vendors that power their daily operations.
Changing Consumer Preferences Are Pushing Embedded Payments into the Spotlight
Embedded payments aren’t just the future — they’re already here. Today, over 50% of merchants get their payment processing from a software vendor or tech-savvy independent sales organization (ISO). While that’s a surprising number to many, software-led payments are a natural progression for the industry considering that over 84% of card-accepting merchants in the U.S. already use a software-as-a-service (SaaS) platform.
As commerce becomes increasingly digital and software takes its place at the heart of more small businesses, the adoption of embedded payments will continue to rise. That’s because it offers merchants something incredibly valuable — convenience.
Convenience is a core driver of consumer payment preferences, especially among tech-forward Millennials and Gen Zers. Consumers now expect everything — including their payments experience — to be convenient, fast and frictionless. So much so that NMI research found that 84% of consumers said convenience was a key factor influencing their payment preferences. Half also cited transaction speed as a top priority.
To meet the needs of today’s consumers, merchants will need to adopt newer, more integrated payment technologies.
As a software provider, it’s important to remember that merchants are also consumers, and, like their customers, they expect fast and convenient experiences. On the business side, embedded payments deliver that by enabling merchants to get more services from a single software vendor. That simplifies life for merchants, saving them time, headaches and, in many cases, even money.
Software-Led Payments Are Making Better Experiences Possible
Modern merchants, like modern consumers, are looking for better experiences. Today’s payment innovations — especially software-led payments — aim to deliver that heightened user experience, not only to merchants, but to end consumers as well. As a result, independent software vendors (ISVs) and SaaS platforms are becoming an increasingly important part of the payments industry — a space they’ve traditionally had no role in.
In part two of this series, we’ll examine the role of software-led embedded payments and how they are powering the next generation of payments. In the meantime, to find out more about how NMI can power your SaaS payments journey, reach out to a member of our team today.
Don’t just turn on payments, transform the way you do business
- Generate New Revenue By adding or expanding payment offerings to your solution, you can start earning higher monthly and transaction-based recurring revenue.
- Offer the Power of Choice Allow merchants to choose from 125+ shopping cart integrations and 200+ processor options to streamline their onboarding.
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