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Speaking of “embedded,” with the rise of voice-activated virtual assistants and smart speakers, brands should also consider integrating credit card functionalities into voice commerce platforms. This allows customers to make purchases, check account balances and access credit card benefits through voice commands. In addition to digital wallets and virtual cards, embedded finance is on the rise within the world of payments. Brands are increasingly exploring the concept of embedded rewards, where rewards and loyalty points are automatically earned and redeemed as part of the payment process. Back in 2010, the fastest way to get money on the same day from New York to London was to fly it there yourself.

Integration of biometric authentication, tokenization and advanced encryption methods can enhance the security of credit card transactions and instill customer trust. Embedded finance can help your business reach new customers, including those who may not have access to traditional financial services. Embedding instant payment technology into B2B trade is a win-win for all parties involved. Suppliers unlock cash instantly, providing them with the working capital they need to adapt to rising costs and invest in their business.

Mobile e-Wallets, Contactless Tap to Phone and QR Codes

Moreover, it should reach $124,755.7 million by 2022 and $380,573.2 million by 2029. Investors owning shares in the mega payments processors Fidelity National Information Services and Fiserv are pressuring those companies to consider divestitures that could lead them to break off chunks of their businesses. The installment payment providers, such as San Francisco-based Affirm, Sweden’s Klarna, Block-owned Afterpay, Australian Zip and Minneapolis-based Sezzle, are tightening underwriting as inflation bears down on consumers.

Business-to-business (B2B) is an application that aims to streamline business operations, simplify complex business processes, and meet specific industry needs. “These players are going to have to figure out how to be easy to use in physical locations, otherwise they’ll find themselves stuck in digital channels,” said Jason Barro, founder of Bain & Company’s NPS Prism, a customer experience benchmarking service. They’re also grappling with investors pressing for profits over growth, and bracing for regulation following last year’s Consumer Financial Protection Bureau report on the industry. Consulting firm Bain & Company has projected the transaction value of embedded finance will reach $7 trillion by 2026. “We are seeing a big focus on embedded finance” this year, said Jodie Kelley, CEO of trade group the Electronic Transactions Association, in an email.

SaaS payments: Everything SaaS businesses need to know

Eventually, real-time payments will also improve cross-border payments, but that won’t happen this year, according to Dadiomov. The new national system allowing payments of up to $500,000 to be made in seconds on any day and at any time may also allow the U.S. to catch up with other countries already speeding ahead with the technology. Rather than wrestling a physical card out of their wallet or purse, this capability allows customers to make secure and convenient transactions with their smartphones or wearable devices. HCL utilized a global Early Payment Program (EPP) to accelerate supplier payments and optimize working capital. As financial institutions continue to migrate towards the adoption of ISO messaging standards, J.P.

In some cases, the platform may also store customer payment information for a faster checkout in future transactions. The specifics of the implementation can vary depending on the platform and the payment gateway used, but the overall goal is to provide a smooth and secure payment experience for the platform and its users. The key is to be practical and clear about monetization strategies, focusing on how to reach the volume necessary to justify the expense of building new capabilities. It makes sense to outline participation choices early, staying close to areas of strength and core capabilities. A fair share of what banks need they probably already have, so externalizing these services can become part of the first-draft architecture.

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Many of those companies began to offer their service via an application programming interface, or API. These effectively let a company bolt-on service to their existing offerings — like payment transfer, credit or insurance. A few banks and fintechs, including Cross River Bank and Banking Circle, fulfill both of these functions. Having built their own technology layer on top of their own balance sheet, they provide embedded finance to distributors such as retailers, business-software providers, marketplaces, and OEMs by themselves, with no need for additional partnerships. There are many payment, regtech and fintech trends that we have not discussed in this long-read. If there are trends that you would like us to explore and write about, please don’t hesitate to let us know.

• This is particularly the case for the underbanked and unbanked population that may have a harder time accessing traditional lending channels, such as banks or credit unions.
• Slow and late payments are a serious burden to suppliers across the board, and stifle small and medium-sized businesses of much-needed cash.
• BNPL platforms offer embedded lending for B2C businesses and travel operators offer insurance.
• As embedded payments become more popular, banks must work quickly to meet their business clients’ needs.
• Clients scan the QRC with their built-in camera and an app takes them to the checkout page.
• The key is to be practical and clear about monetization strategies, focusing on how to reach the volume necessary to justify the expense of building new capabilities.

With a large portion of small and midsize companies in the US relying on software solutions for managing their business.3McKinsey Merchant Acquiring Survey, 2022. In addition, as digital natives came of age, they expanded the pool of consumers and businesses open to receiving all their financial services via digital platforms. In 2019, we wrote about the burgeoning movement of fintech from a business model unto itself to a key ingredient in the software platform stack—the “fourth platform.” Since then, the transition has been swift and unrelenting. Several platform archetypes have emerged, including e-commerce (such as Shopify), food delivery services and rideshare apps (Uber, DoorDash), and wellness (Mindbody). These offerings are supported by an army of well-funded fintech enablers, which help platforms deliver products and services.

Diversification of services

Meanwhile, other fintechs may close down amid challenging economic conditions, including rising borrowing costs and the threat of a recession. The next decade of payments promises to be even more transformational than the last. Embedded lending can also be used to support small-dollar loans, such as payday loans or instalment loans, which are typically used to cover unexpected expenses or bridge cash flow gaps.

This will facilitate further interoperability between domestic and international payment systems, including real-time cross-border payments and enhance security and compliance. A host of fintechs are pouncing on the opportunity to sell embedded financial services to software companies that haven’t monetized payments, said Maast CEO Tom Bell. Maast is a subsidiary of Synovus Bank, which sells banking and payments services to software providers. FinTech Magazine and its entire portfolio embedded payments trends is now an established and trusted voice on all things FinTech, engaging with a highly targeted audience of 113,000 global executives. We provide key industry players with the perfect platform to showcase their brands, develop content syndication plans, webinars, white papers, demand generation as well as a global set of events (In-Person & Virtual). Consumers are growing used to finding payment experiences grafted directly onto companies’ websites or mobile applications.

Expert insights: how to navigate the future of US payments

Efficient, high-functioning payment solutions on platforms answer a growing need in the market. McKinsey estimates that 30% of all global economic activity will be mediated by platforms by 2025, and a report from IDC Financial Insights projects that non-financial institutions’ platforms will conduct 74% of global digital consumer payments by 2030. Building a successful embedded finance proposition will require a fundamental rethinking of the capabilities needed, especially in terms of risk. Having a certain share of nonbanked customers unconditionally processed through a real-time credit decisioning engine will challenge most banks’ tolerance for risk. Banks and regulators will have to get comfortable with platforms and enablers making credit decisions that may affect traditional balance sheets, based on real-time and contextual data held outside of the bank.

Some larger platforms may decide to bring in-house certain enabling services in order to unlock marginal gains across that large scale. 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. Over the past five years, BNPL has proliferated across e-commerce platforms, alongside the rise of unicorn enablers Affirm, Klarna, and Afterpay. Catalyzed by pandemic lockdowns, BNPL and PoS lending proved useful for consumers to access goods and services, even if they didn’t have all the money required at the point of purchase.

The Power of AI and How It’s Transforming the Financial Landscape

Second, many technology providers are seeking to capture a larger share of embedded-finance revenues by expanding across the value chain. In lending, for instance, they are looking to increase their share of revenues by finding ways to share in the risk, such as offering repurchase agreements for loans originated by balance sheet providers. Bank transfers are also leading in Poland, with BLIK earning over half of all e-commerce transaction value.