All about Embedded Software Payments

What are Embedded Payments?

The term "embedded payments" refers to payment processing functionality that is included within a software solution such as business management software. The functionality allows merchants to accept payments within their software, rather than having to use a separate software product. Embedded software payment functionality is often referred to as "built-in rather than bolted-on."

What are the Benefits to ISVs Offering Embedded Payments?

Embedded software payments provide benefits to both ISVs and their merchants. First, they can provide an additional source of revenue for ISVs. With revenue sharing, an ISV can monetize payments and grow their business.

Embedded payments also allow ISVs to become a "one-stop shop" for merchants, separating themselves from their competition. Merchants can find both their business management solution and their payment processing solution in one place. ISVs can further sweeten the deal by including additional value-added services such as commerce enablement tools within their solution.

What are the Benefits of Embedded Payments to Merchants?

Embedded software payments help merchants provide their customers with a more streamlined and efficient user experience, as they don’t require customers to go into a separate software product in order to pay for their purchase. They can also help automate accounting processes for merchants.

How to Embed Payments

An independent software vendor (ISV) who wants to include embedded payments functionality in their software solution has a couple of options.

One option is that they can decide to become a payment processing company. They can do so by meeting certain requirements and registering to become a payment facilitator.

Since that can be a time-consuming process, many ISVs instead choose to partner with a payment processing company who can integrate payment functionality into their software.

Embedded Finance

Many in the fintech industry consider embedded payments to be the first step toward the overarching concept of "embedded finance," which defines as "where business solution providers are also offering a host of financial services, including lending, insurance and investments."

An example of embedded lending is already being seen in the use of alternative financing, where an online shopper is offered the option of a short-term loan at the point of sale (POS), enabling the customer to purchase a product now and pay later, in installments.

Embedded insurance involves a customer purchasing insurance that is included as part of another product or service. An example is the carmaker Tesla, who allows buyers to purchase their required insurance coverage at the same time as they purchase their vehicle.

Embedded investing is when stock market investing is seamlessly integrated into a platform. For example, a social media or retail platform might allow users to invest in the stock market without having to leave the platform they’re currently using.

Infographic showing the components of embedded finance

While some of these components of embedded finance are still in their early stages, offering embedded payment functionality is quickly becoming table stakes for ISVs.

Global Payments Integrated can help ISVs embed payments into their software solution, as well as assist them in adding additional value-add services to their software offering in order to stand out from their competitors. To learn more, contact us today.