Fuel your SaaS platform with embedded payments

If there’s one thing consumers love, it’s convenience. In an increasingly fast-paced world, finding ways to save time and money remains a top priority for most companies. One area in the business landscape that’s undergone a major paradigm shift is digital payments infrastructure.

Gone are the days when customers would have to navigate lengthy checkout pages and re-enter their bank account or credit card information time and time again. Today, SaaS company customers can complete a purchase and check out with as little as one click, while smaller businesses may never even directly need the services of a traditional bank again. The driver behind these revolutions? Embedded payments.

The market is hot for embedded finance. With a $237B valuation in 2022, the global SaaS market is projected to grow to $908B by 2030. And while it’s a rapidly expanding and shifting market as companies move away from more traditional payment methods, there’s still a lot of confusion around the topic. What exactly is embedded banking and finance? What are its benefits? How do you enter the landscape? In this article, we’ll answer all these questions on embedded payments and more.

What is embedded payments?

Embedded finance is the process of providing a financial product as part of a non-financial experience or platform (like an app or a website), with embedded payments being the most common usage of embedded finance. Essentially, it allows users of the platform to make or receive payments alongside the other services that the platform offers.

Embedded payment examples

Lyft offers various services like ride-hailing, bike sharing, and food delivery, all via their app. When users want to make a payment for the service they’ve just used, they don’t need to go to their bank account and send an ACH transfer to Lyft, or manually enter all their credit card information to make a payment. Instead, once they’ve linked their payment method to the app (such as their debit card or Apple Pay), they simply need to select their payment of choice, and the transaction is completed.

Embedded payments were popularized by Amazon’s “1-Click Order” button, which saved the customers payment and shipping info. By simply clicking on the embedded link, users could complete a purchase in a matter of seconds. Today, embedded payments can be found in all types of apps, like DoorDash or Uber. From healthcare companies to HR organizations, there’s a plethora of businesses out there using integrated payment solutions.

What’s embedded finance?

Embedded finance goes beyond embedded payments, as it enters the banking sphere. Companies can, for example, embed traditional banking services as part of their rewards program, like CVS’s ExtraCare card. By making a purchase with that card, a customer can receive in-store sales, personalized coupons and deals, and points—all tied to that one card, similar to a credit card with a rewards program.

Today, what makes embedded finance even more exciting is that it’s being fully integrated into customers’ digital lives. From their digital wallet (like Apple Pay or Google Pay), to customer loyalty programs that can be accessed online, to tasks like using project management software, payments are being seamlessly integrated into the overall customer journey, providing an unparalleled, seamless customer experience unlike anything before.

While the embedded finance market might be seemingly omnipresent, there’s an important question we haven’t answered yet: who can actually provide a SaaS company the embedded payment service? Today, it’s very rarely done by traditional financial institutions like banks. Instead, there are non-bank platforms, called payment facilitators (or PayFacs) that offer these services.

Basically, a PayFac acts like a service provider for a merchant account. For example, if you run a SaaS company that offers a project management solution, you’d probably want your customers to be able to invoice their clients and get paid. Instead of having them do that outside of your platform, you could let your customers do it all directly via your software platform.

To do so, you’d need to work with a payment facilitator. The PayFac would provide the payment processing software necessary for your customers (or sub-merchants) to get paid. Additionally, the PayFac would handle the onboarding, monitoring, and support of any sub-merchants, ensuring that everything runs smoothly and everyone gets paid on time—allowing you to focus on running your SaaS company.

In a nutshell, using a payment facilitator makes it easy as 1-2-3 for companies to offer embedded payments, all via their own platform.

Why should you implement embedded payments?

There’s a reason that embedded finance has taken the world by storm, (we’ve already hinted at it). In a sentence: embedded payments offer a hassle-free user experience for your customers. It makes the payment process a breeze, reducing many of the barriers associated with making a payment—and it translates into benefits for software and e-commerce companies, too!

A smooth checkout experience usually means that customers are willing to make more frequent purchases, which can boost conversion rates and pad your overall revenue. When customers don’t need to jump through as many hoops, you’re in more control of their customer journey. Instead of redirecting them to other companies, you can provide a unified and tight brand experience.

Building a closer and deeper brand relationship with your customers can help foster brand loyalty, which is absolutely invaluable in competitive spaces. Plus, by partnering with a reliable PayFac, you’re likely to pay lower payment processing fees, which can add up to considerable savings down the road.

In short, offering embedded payments to your customers will absolutely pay off in dividends in the long run—not only for your customers but also for your SaaS company’s financial health.