A recent Economist article reports that payments platforms are rapidly fueling even more investments in the white-hot fintech sector, the value of which has “has risen to $1.1 trillion, equivalent to 10% of the value of the global banking and payments industry, and up from 4% in 2018.” Venture capital firms sold a combined total of $70 billion worth of stakes in fintech startups in the first half of 2021, “nearly twice as much as in the whole of 2020, itself a bumper year,” according to PitchBook data cited by The Economist.
This staggering level of investment – 20% of all money invested by VC firms in 2021 have gone to fintech companies – makes a compelling case that it’s high time to get a payments strategy in place. That said, the case for an embedded payments approach is plenty strong on its own, given the strategy’s advantages.
Embedded payments serve as a core component of a larger embedded finance capability. “Embedded finance” broadly defines the collection of financial processes and services a company offers directly to buyers and consumers in an efficient, unobtrusive manner. You’ve no doubt heard the phrase “friction-less” used to describe payments as well as all the processes – credit approval, invoicing, credit card processing, settlement and more – that accompany each transaction. A primary purpose of embedded payments is to make the payments process frictionless, so that transactions feel like a natural extension of customer engagement as opposed to a separate, toilsome activity.
The speed and ease of embedded payments mask the significant amount of transactional plumbing that must be installed and orchestrated behind the scenes.
Yet, the returns on investing in that plumbing are substantial; benefits include:
- Increased buying ease and convenience;
- Satisfying B2B purchasing stakeholders’ unique needs and expectations;
- Stickier customer relationships, higher shares of wallet, and higher lifetime customer values;
- Lower day sales outstanding (DSO) and improved cashflow management; and
- New revenue opportunities for B2B marketplaces.
While these types of benefits should motivate decision-makers to evaluate partnering with an embedded payments solutions provider, they should also drive home the urgency of embracing a new payments strategy as soon as possible.
After all, a confluence of factors — generational preferences regarding digital experiences, supply chain upheavals, rapid technological advances, business model transformation and other long-term retrenchments — are driving profound changes to B2B buyers’ expectations concerning their payments experiences. As a result, competition to “own” customers will intensify.
An embedded payments capability makes a company easier to do business with by letting the buyer interact, and transact, on their preferred terms. That ease, along with several other alluring factors, helps companies increase their share of the customer’s wallet while engendering stickier loyalty.
A new TreviPay eBook details what an embedded payments strategy looks like, the factors driving the approach’s value, the benefits embedded payments deliver and several adoption challenges that require attention.