Embedded payments are simplifying transactions for consumers and small businesses

When was the last time you spent the evening shopping, only to get to the end of the checkout line and realize you left your wallet at home? Or the last time you paid a restaurant bill with cash, but didn’t have enough to cover the tip? What about that time you got a late fee on a bill you didn’t even know you had, because your significant other accidentally threw out the mail?

Outdated payment methods are cumbersome. Carrying around wads of cash and keeping track of paper invoices and receipts can be stressful, especially when you’re unable to pay a bill or get hit with an unexpected fee.

In 2023, 53% of US consumers reported using digital wallets more often than traditional payments, with 91% of respondents aged 18 to 26 using digital wallets as their primary payment method. In 2022, more than 40% of the global population used a digital wallet, according to a recent survey.

Paying with cash and cards isn’t as convenient as it once was. Shoppers don’t want to carry physical wallets when they can simply use their palm, scan a QR code or tap their watch on a merchant’s phone to pay. With Gen Z consumers being more willing to switch brands for a more favorable shopping experience than any other generation, offering fast, convenient payment options is crucial for businesses who want to stay ahead.

Thankfully, embedded payments make it possible for even the smallest merchant to meet their customer’s expectations—whether they still prefer cash and cards or rely on more modern payment options.

What are embedded payments?

Embedded payments are digital payment systems integrated into software platforms. When you order dinner through an app or pay for drinks with a QR code, you’re using an embedded payment solution.

The best embedded payments make paying for a product or service so seamless, the experience is practically invisible.

Consider the last time you hailed a ride through an app: you typed in the address, selected your ride (by price, speed or experience) and, eventually, arrived at your destination. You didn’t have to quickly count out change or fumble for your card to pay, you just got out. Besides being prompted to leave a tip and a review, everything happened automatically, behind the scenes.

That simplicity is what embedded payments are designed for.

Whether you’re signing up for a streaming service or paying a contractor for your home repairs, software-based payment solutions make it easy for you to pay, and for businesses to get paid. It’s a win-win for everyone, from consumers and business owners to the software and payment providers facilitating those transactions.

Benefits of embedded payments for consumers

If you’re debating between two restaurants, and one only takes cash and the other offers a variety of options, which are you more likely to choose?

Research shows that convenience is the top driver of consumer payment preferences, followed closely by speed. No one wants to go out of their way to pay for something: the easier the payment process is, the happier and more loyal customers will be. This is especially true among younger consumers, who tend to use their smartphones as wallets.

By 2030, Millennials and Generation Z will make up 48% of total global retail spend. Not long after, they’ll account for the majority. As the first generations of true digital natives, they aren’t interested in swiping, dipping, tapping or (god forbid) using cash or checks. Mobile and digital options are the only way they want to pay, and with good reason.

Embedded payment solutions offer a variety of consumer benefits, including greater convenience, speed, security and flexibility.

Convenience and speed: Digital, software-based payments streamline the checkout process by making it faster and easier to pay. Instead of swiping a card, shoppers can simply tap their smartwatch or mobile device to the POS system, scan a QR code or pay via app. In some situations, consumers don’t have to check out at all—their phones connect directly to the store’s unique sensors upon entering. Then they are charged automatically for anything they purchase as they exit the store.

Security and trust: Embedded payment systems are inherently more secure than traditional card payments because they use advanced security features such as encryption, tokenization and AI-powered fraud prevention and detection.

Diverse payment options: No single solution will make every customer happy. Some still prefer using cash, while others won’t buy anything at all if they can’t use the digital wallet on their phone. Having a variety of payment options enables customers to check out when, where and how they want—raising the likelihood that they’ll not only complete their purchase but return in the future.

Benefits of embedded payments for small businesses

Offering modern payment solutions may seem daunting for small and medium-sized businesses operating on a budget, but it doesn’t have to be. The recent boom in embedded solutions has made digital payments more accessible and affordable for everyone, whether they operate in-store, online or both.

Embedded payments enable businesses to meet customers where they are, offering the optionality and flexibility shoppers demand from modern payment experiences.

But adopting new technologies doesn’t just benefit the consumer—it also helps businesses capture more sales. According to one study, “digital wallet users spend, on average, up to one-third more than consumers who use more traditional payment options across all purchases.”

In addition to higher sales, businesses using embedded payment solutions can also enjoy increased operational efficiencies, opportunities for growth and happier customers.

Operational efficiency: Embedded payments automate a variety of payment processes, reducing the need for manual data entry and minimizing errors. Because embedded systems integrate directly with financial systems, businesses don’t have to spend as much time on administrative or reporting tasks.

Scalability: Digital payments help businesses improve their sales and reach a broader audience. With increasingly affordable embedded options (in-app purchases and tap to pay technology, for example), small businesses can take card and digital wallet payments with their phones, without having to purchase expensive hardware. Over time, these savings, combined with greater flexibility, will enable merchants to expand to new markets and grow.

Enhanced customer experience: The more options you offer, the greater your customer experience will be. Modern shoppers don’t like being locked in a box—they want options and flexibility in how they pay. Offering fast, convenient payment solutions will keep your customers happy and loyal for years to come.

Getting started with embedded payments

If you are a business owner, software provider or payment specialist, there’s no better time to start investing in embedded payment solutions.

If you are a business owner, there are two main ways to get started in embedded payments: partnering with a payment processor or partnering with a SaaS platform with built-in payment solutions.

Partnering directly with a payment processor such as an independent sales organization (ISO) is a great way to get personalized payment solutions for your business. As payment experts, they understand the nuances of government compliance, security standards and unique hardware requirements and can help you customize your payment suite.

Another option is to partner with a SaaS platform for your payment needs. For instance, many SaaS providers will embed payments into their existing business management systems, so you can take payments from the same platform you use to manage your inventory, set schedules and monitor finances. Many SaaS providers are also vertical experts, meaning they will have extensive knowledge of your unique industry.

If you are a SaaS platform provider or Independent Sales Organization (ISO), the best way to start offering embedded payments is by finding a provider who specializes in modular, flexible digital payment solutions. When vetting a potential partner, be sure to ask about their experience, customer support and revenue-sharing models. Embedding payments into your existing solution is a great way to open new revenue streams while giving your merchant customers a strategic leg up.

As consumer sentiments shift, and buyers demand more convenient digital-first payment options, embedded payments will become a key differentiator for everyone—business owners, software providers and ISOs alike.

by Vijay Sondhi, CEO, NMI

About NMI

NMI is a global leader in embedded payments, powering more than $203 billion in payment volumes every year. From our industry-leading payment gateway technology to our seamless merchant acquiring, underwriting, onboarding and management platform, we enable our partners across the entire payments ecosystem.

We help our partners deliver frictionless payment solutions to their customers, offering modularity, flexibility and choice wherever and however consumers want to pay—online, in-store, in-app, mobile and unattended. And we’re constantly innovating, empowering ISOs, software vendors and payment professionals as they embrace the future of fintech.

Learn more about NMI solutions and the future of embedded payments at www.nmi.com.