From retailers and service-based businesses to niche verticals like rentals and logistics, industries of all types are uncovering new use cases for leveraging software. This “platformization” of business is occurring rapidly and creating significant opportunity across the world of payments. As the digitization of business gains speed, businesses that effectively embed payment flows through software platforms can enhance buying experiences for their customers, streamline their own operations, and create new revenue streams within their business models.
To delve deeper into the world of embedded payments, we recently collaborated with PYMNTS.com to look at how software companies are capitalizing on this rising trend. Titled, Platform Business Survey: The Rise of Embedded Payments, the study is designed to help payment facilitators (PayFacs), independent software vendors (ISVs), and marketplaces understand the opportunities that exist with embedded payments.
3 key takeaways from the report:
1. Embedded payments are becoming ‘must haves’ for software platforms
ISVs and marketplaces are leading the way in embedding payment acceptance into their systems, especially in the retail sector. Conversely, PayFacs are supporting in-store payments for retail and wholesale trade companies more than other segments, as more than half of payment facilitators support in-store and digital payments for customers in these segments.
- More than half of ISVs (54%) enable payments acceptance within their software services
- Nearly three-quarters (74%) of marketplaces enable payments
Embedded payments are valued because they enable a more efficient and profitable payment flow, creating a competitive edge, opening new markets, and offering opportunities for expansion and innovation within each software vertical.
2. New revenue streams
A primary goal of software companies embedding payments is to maximize revenue streams by offering opportunities to monetize the payment process and related services. The potential increase in revenue generated from embedded payments is very promising:
- 83% of ISVs expect an increase in their revenue share derived from payment acceptance in the next 12 months
- 68% of marketplaces expect an increase in revenue from embedding payments in the next year
- 65% of ISVs and marketplaces not currently offering payment capabilities plan to add embedded financial products for payment acceptance next year
The ability to create new sources of revenue is paramount, and payment features are increasingly entering the spotlight as one way to do so. After all, adding payment features to services allows ISVs and marketplaces to generate revenue through payment processing fees.
3. Emphasis on value-added services
Payment facilitators also see an enormous growth opportunity by adding value-added services to their embedded finance offerings. Currently, these businesses generate 66% of their revenue from payment processing and can increase their share of revenue by adding value-added services. For instance:
- Companies enabling embedded finance products and value-added services believe that 51% of their revenue will come from this next year
- Two-thirds of PayFacs that support digital wallets will further innovate their digital wallet support in the next year
- Invoicing has become a key driver for revenue; 76% of PayFacs offer invoicing and consider it highly important for the success of their business
Sparking innovation and adding new payment options will help software companies enhance experiences and help generate growth for PayFacs, ISVs and marketplaces. Payments digitization is a natural progression in improving the customer experience, and how these providers are successful in maintaining and facilitating payments will help drive their market viability and medium- to long-term growth.
Download the free report here: Platform Business Survey: The Rise of Embedded Payments
