*Originally published on CUInsight.com
The banking industry talks a lot about the fintech revolution, and some financial institutions are going so far as to call themselves tech companies. However, just beyond the normal lip service given to this topic is the real revolution that is happening behind the scenes at most U.S.-based financial institutions—payments transformation.
We hear a lot about digital transformation as an umbrella topic, but the conversation sometimes lacks substance. We don’t tend to hear too much about payments transformation, maybe because it’s not visible to the typical consumer, it’s not the fancy mobile app or the new slick UI on the website. Instead, it’s the embedded payment functionality, which makes the UI function slick.
So what are embedded payments anyway?
Simply put, embedded payments are the money movement functionalities within a bank that have been exposed to upstream applications (e.g., the mobile app or bank website) that enable the user to transact. But that’s only the first step. The real value occurs once the bank layers in the ability for external third parties, like Fintech companies or new economy digital players (e.g., Uber, GrubHub, etc.), to take hold of those functions and embed them in their user experiences.
For example, embedded payments allow individuals to connect and save payment methods for later use, with just one click of a button. From the user’s perspective, the payments are invisible, as they don’t have to think about them. The payment just happens as a part of their interaction. A recent study found that 47% of SMBs would be willing to pay the same amount or more for embedded finance solutions over solutions provided by traditional financial institutions.
From the financial institution’s POV, embedded payments are a true innovation enabler. When I talk to the market about potential use cases for real-time payments, I often find myself talking about the art of the possible. What could faster money movement enable, not so much focusing on the money movement itself, but what experience could one build upon the money movement functionality? It’s a key building block in rethinking the entire product portfolio. Look at where you can extend beyond the banking products of the 20th century that were limited by analog-digital money movement functionality (e.g., batch-based or paper-based products). Start to focus on what your customers truly want and need, products that offer advice, reassurances when warranted, and solutions that meet needs that go beyond just dollars in one account to dollars in another.
Understanding embedded payment solutions
Now that we know what an embedded payment is, it’s easy to extrapolate from that what an embedded payment solution is. It’s a system that allows users to complete a transaction within an app or platform without leaving the experience.
Rather than redirecting customers to a separate payment service or gateway, embedded payments integrate seamlessly into the existing software provider’s interface, creating a smoother, faster checkout experience.
Businesses use embedded financial solutions to offer streamlined payment capabilities, improve conversion, and reduce friction in the buying process. These solutions are especially valuable for non-financial platforms—like e-commerce, ride-sharing, and healthcare apps—that want to offer payment options as part of their native ecosystem.
Whether leveraging a PaaS model or working with a third-party payment processor like Stripe, embedded payment systems rely on real-time integration with existing payment systems and APIs. This allows payment providers to deliver services such as ACH transfers, card payments, and digital wallets securely and efficiently.
From a business perspective, these systems reduce transaction fees, accelerate settlement times, and provide valuable data and analytics to better understand customer behavior. For end users, the result is a more intuitive, invisible payment experience, where transactions happen as part of their everyday interactions.
As the payments platform space continues to evolve, embedded solutions are quickly becoming the standard for both consumer convenience and operational efficiency.
How solutions for embedded payments work
Integrating payment capabilities directly into non-financial software platforms is achieved through a combination of:
- APIs that connect the platform to a payment processor or payments platform
- Payment systems such as ACH, card networks, or real-time rails to move money securely
- Software providers embedding this functionality into their checkout, invoicing, or user workflows
- Third-party services (e.g., fraud prevention, KYC/AML checks) that support compliance and security
For example, a SaaS billing platform can use embedded payments to offer customers multiple payment options (like ACH or debit card) directly within their dashboard. The platform doesn’t process the transaction itself—instead, it routes it through an integrated payment service provider.
This integration gives end users a frictionless payment experience while offering businesses valuable data and reduced transaction fees. It also helps create a scalable ecosystem in which non-financial platforms can act as financial facilitators, without becoming regulated institutions themselves.
Benefits of Embedded Payments
Embedded payments offer numerous benefits for both users and businesses. For that reason, they are quickly becoming the norm in our personal lives. One of the biggest benefits from a user perspective is a seamless user experience. This eliminates complete reliance on going to physical bank branches to obtain financial services such as loans or credit. It also caters well to tech-savvy customers (Millennials and Gen Z) who demand speed and convenience. This also helps businesses understand consumers’ spending habits and needs.
From the business side, embedded payments allow businesses to receive payments quicker compared to traditional invoicing. This access to alternative forms of funding and a streamlined buying process also leads to increased customer satisfaction and brand loyalty, which in turn also helps increase revenue. In a recent survey, organizations discussed their drivers for a faster rollout of embedded finance: 33% cite the need to improve the customer experience, 26% the demand for financial services, 22% part of their planned business model, and 17% to accelerate new revenue streams for growth. Only 2% said it was because a competitor was doing it.
What about real-life examples?
- Uber uses insights from payments data to create a support program for drivers without cash to buy fuel, helping struggling drivers to keep earning.
- Apple pay enables individuals to make purchases with just a click of a button without having to reach for your wallet
- Shopify offers integrated payment processing and lending services to their sub-merchants
- Tesla offers an insurance program that allows customers to purchase coverage almost instantly, eliminating the insurance agent/broker from the purchase process.
Embedded payments are the fuel that will make the digital transformation journey possible. The industry is expected to grow rapidly, the IDIC predicts that 74% of digital consumer payments globally will be conducted via platforms owned by non financial institutions by 2030. So what are you waiting for?
Want to learn more payments terms? Read the What Are Integrated Payments? blog.
Today’s legacy and siloed banking technology infrastructure limit financial institutions’ ability to rapidly innovate. It’s time to look at money movement in a new way. Alacriti’s Orbipay Unified Money Movement Services does just that. Whether it’s real-time payments, digital disbursements, or bill pay, our cloud-based platform enables banks and credit unions to quickly and seamlessly deliver modern digital payments and money movement experiences. To speak to an Alacriti payments expert, please call us at (908) 791-2916 or email info@alacriti.com.
