Research by McKinsey shows that 30% of the global economy will be under the purview of integrated platforms by 2025 and that 71% of customers are ready for connected platform offerings.

These trends create an opportunity for your SaaS company to tap into a new source of revenue by integrating in-app payments solutions into your platform.

Embedded payments offer the most customer-friendly path to achieving this because they ensure buyers no longer have to jump through multiple hoops to make payments.

This article will cover all you need to know about embedded payments, how it works, its benefits, and how to successfully implement it on your platform.

What Are Embedded Payments?

Embedded payments refer to any type of financial solution built directly into an online platform or marketplace such as payment processing, loans, insurance, or investments.

Essentially, embedded payments solutions let users complete their transactions entirely on a single platform without having to temporarily visit another third-party website to complete any related tasks.

This differs from the process in traditional integrated payments, where the payments solution is usually based on a separate terminal, and customers must be redirected to the third-party portal to pay or carry out the relevant financial task.  

For example, let’s say a medical center uses specialized software to manage the hospital’s daily operations, a separate software for collecting payments, another software for payroll, and so on.

This means whenever customers try to pay for hospital services, they must always be redirected from the specialized software or app to a third-party platform to make their payment.

This system of juggling multiple software tools by different vendors can create a disjointed experience for customers. It is also tedious and expensive to maintain for the company.

In contrast, let’s say the hospital management opts to build or embed the payments portal directly into the specialized hospital management software platform, customers will be able to make payments at the same time they are registering for a lab test, scheduling a doctor appointment, and so on.

That’s the beauty of embedded payments. It blends payments so perfectly with the overall user experience that the customer won’t even notice that an independent task has been completed.

Given the substantial costs and flexible technological solutions required to build out the infrastructure that underpins embedded payments, most embedded solutions are offered by FinTechs and merchant service companies rather than traditional banks.

These financial institutions will provide all the tools and services you need to facilitate native payments solutions on your SaaS platform without the need to take on the costs and risks of building the required infrastructure yourself.

Benefits of Embedded Payments for SaaS Companies

Enhanced user experience for end customers

Letting customers process payments directly on your apps and websites makes things faster and more seamless, inevitably leading to a more unified and optimized customer experience.

Also, when third-party providers handle your payments, you are at their mercy when problems occur. 

They get to determine how and when the issues get fixed, and the longer the issues remain, the more frustrated your customers become.

However, when payments are handled in-house, you can identify and fix issues quickly on your own without having to wait on an external vendor.

Increased revenue streams through fees

A faster and more seamless customer experience will automatically lead to higher conversion rates, which means more revenues for your business.

In addition, embedded payments also give you the opportunity to create new sources of income including payment processing fees and other charges for financial services rendered on your platform.

Strengthened customer retention and loyalty

Embedded payments drastically reduce the time users spend completing transactions with your business, which will only increase the value of your brand to your customers.

Your customers will be happier, which encourages repeat business, fosters loyalty, and helps differentiate your business in what is likely to be a competitive business landscape.

Streamlined operations and reduced friction in payment processing

Embedded payments refine your platform’s entire payment experience from point of sale (POS) to checkout.

You also have complete control over each step of the process since customers will no longer be taken to a third-party platform.

It will be easier to ensure the payments customer experience aligns with the existing standard on your company-controlled platforms.

This more streamlined experience will mean fewer abandoned carts and more sales.

Key Features of a Robust Embedded Payment System

When designing your in-house built-in payments platform or evaluating third-payment embedded payments solution partners, here are the key features to watch out for:

Seamless integration with your SaaS platform

Your embedded payments must ensure your platform users are able to complete all transactions on a single platform without any third-party redirects.

The entire experience must seamlessly align with the other parts of your ecosystem. This means the branding, UX, and UI must be uniform throughout the whole tech ecosystem. 

Strong security and compliance measures

Customer payment information must be stored and transferred through secure channels.

Industry standards like PCI DSS (Payment Card Industry Data Security Standard) require that customer data must be secured using AES-256 encryption standard to ensure the highest level of protection from unauthorized access.

Compliance with regulations like PCI DSS and GDPR (General Data Protection Regulation) is mandatory. 

If you will be working with a partner payment facilitator, you must ensure the company complies fully with all relevant financial regulations and industry standards.

Tokenization is another security measure increasingly used by financial institutions to store payment information securely.

It involves replacing sensitive information on your platform with data strings called tokens, while the actual information is moved to a secure third-party vault.

That way, if hackers ever breach your systems, they will only recover data strings (tokens) that are useless without the actual information stored externally.

Reporting and analytic tools for financial insights

Embedded payments make it a lot easier for you to track and record all transactions on your platform.

This will of course generate tons of data you can use to obtain key insights about the status of your business.

You will be able to track customer purchasing habits, sales, seasonality, customer segments, optimize fraud detection, and much more.

How to Choose the Right Embedded Payment Solution

Below is a five-step process to help you select the best embedded payments solution provider for your SaaS business:

Step 1: Identify your platform’s specific payment needs

The functionality of each embedded payment solution differs from one company to another. 

The unique needs of your company may even differ from those of a fellow competitor in the same industry niche.

So, you must first decide on the core features you want from your embedded finance platform before building it out or partnering with a third-party provider.

For example, if your SaaS product is based on a subscription sales model, then you would want to embed a payments system that makes it easy for you to manage recurring payments.

In contrast, an online marketplace platform structured around an eCommerce model will want a payments system with secure payment gateways, refunds management functionality, and a full-featured API for integrating diverse third-party apps.

Once you have a decent idea of what you need from your embedded payments solution, you can then use that information to narrow down the most suitable partners for your company—provided you are not building an in-house system from the ground up.

Step 2: Decide between a Payfac-as-a-Service solution and an in-house embedded payments solution

The right choice for your SaaS company will depend on your resources and how much risk and responsibility you are willing to incur.

Below is an overview of the two options available to you:

Payfac-as-a-service solution

This approach involves working with a third-party FinTech company or payment services provider who will provide you with an out-of-the-box embedded payments solution and maintain the backend payments infrastructure on your behalf.

You won’t have to take on any major responsibility or risks except the minimal integration work your developers will do to embed the out-of-the-box solution into your platform.

It’s little wonder why this approach has become very popular. It comes with few compliance risks, and it's more cost-efficient and faster to deploy.

However, the payments revenues may be shared between your SaaS company and the embedded solutions provider. 

In-house embedded payments solution

This involves you building out and supporting the embedded payments system yourself. 

You will become a payments facilitator responsible for payments processing, settlement, data security, and regulatory compliance.

The upstart costs, associated risks, and maintenance costs will become your personal burden, though you will also rake in 100% of revenues generated from your payments services.

Step 3: Evaluate providers based on features, support, and fees

This step and the other two steps below are mostly relevant to those opting for a payfac-as-a-service solution. 

You should already have a list of likely vendors based on the list of requirements you compiled in step one.

Now, the goal is to narrow down that list to five or six platforms. 

These vendors should offer functionality and services that make them a perfect fit with your tech stack and their technology must be scalable and secure.

They must also offer robust onboarding support to make your embedded payments integration journey an easy one. 

Ideally, the provider should offer dedicated support, especially if you are a major SaaS company, and there should be other non-payment-related value-added services like APIs (application programming interfaces), SDKs (software development kits), and data migration support to help further distinguish them from other vendors.

In terms of cost, Payfac-as-a-service solutions are cheaper than in-house embedded solutions, but that doesn’t mean they won’t cost you a pretty penny.

Vendors always have a comprehensive suite of financial products and services and you may not need everything on offer at this current stage of your business.

That’s why we recommend starting small by only opting for embedded financial solutions essential to the current needs of your business and scaling up to more advanced features as your business grows.

That would limit your initial financial outlay, and also give you time to familiarize yourself with what can be achieved from having a native payments system. 

Step 4: Prioritize providers with experience in your industry

You must keep up with trends in your industry to maintain your competitive edge, so you would naturally want an embedded solutions provider who can take that burden off your back, at least in the area of payments.

That means narrowing your list further to providers with a credible track record of working with other SaaS companies in your industry niche and a proven history of adaptive innovation to stay ahead of the curve of your industry’s evolution.

The best way to gauge a vendor’s suitability based on this criteria is to read customer reviews and user testimonials.

Customer reviews will give you information from actual users on the quality of the provider’s services and its reliability.

User testimonials will give you a solid idea of the types of businesses that have successfully used the vendor’s solutions to transform their business for the better. Based on this, you will know if the provider is an ideal fit for your peculiar requirements and challenges.

Step 5: Test run the embedded solution

Your shortlist should be down to two or three providers by now.

So, it's time to trial the products on offer to see which out-of-the-box solution best integrates seamlessly with your SaaS platform.

Pay attention to each product’s user-friendliness, modularity, speed, reliability, and compatibility with your existing tech stack.

You should also listen to your developers and other employees since their buy-in is crucial for a trouble-free integration of the out-of-the-box solution.

Steps to Successfully Implement Embedded Payments

Once you have decided on an embedded solutions provider, here is a step-by-step process to help you implement and launch the new payments system.

Step 1: Define clear objectives for your payment strategy

There must be clearly defined outcomes for your investment in a native payments solution.

These objectives can include one or more of the following:

• Creating new revenue streams

• Reducing checkout page bounce rate with a better checkout experience 

• Improving SaaS platform user experience 

• Boosting customer retention

• Boosting brand reputation and attracting new customers

• Staying competitive

Your company objectives will likely include many of the goals on this list, and they should all be written down and shared with the key decision-makers in your organization.

Step 2: Assemble a team of relevant stakeholders

Disparate teams in your organization will likely be involved in the process of successfully bringing the new embedded payments system to your customers.

Your product engineering, customer support, operations, and marketing teams are almost certainly going to be involved.

Each of them must master the ins and outs of the new payments system so they can better perform their respective roles.

For example, product engineering staff must master the system to ensure it integrates seamlessly with your SaaS platform, while marketing teams must master the features and benefits of the new system so they can promote it to your existing customers.

Step 3: Test the system extensively before launch

This is the stage where you identify and fix issues like slow loading speeds, UX errors, delays, etc, before going live.

Test everything, including payment gateways, accuracy of transaction charges, in-app notifications, order confirmations, checkout processes, and so on.

You should also test whether add-ons and third-party software tools that are already part of your existing tech ecosystem integrate seamlessly with the new payments system.

Once you are sure everything works just fine, you can then do a staged roll-out with select customers, before a full-blown launch once you are fully convinced that the system works as advertised.

Step 4: Monitor performance and gather user data for continuous improvement

Once the payments system goes live, use its in-built analytics functionality to monitor its performance in real-time so you can make adjustments as needed.

You must also have a list of clearly defined metrics for tracking how well you are achieving your stated objectives.

The year-on-year numbers of metrics like transaction volumes, customer retention rates, new signups, monthly active users, and revenues will give you a decent idea of the success of your payments endeavor.

Ultimately, customer satisfaction is the goal, so you must pay special attention to their feedback and consistently improve the system to resolve any complaints.

Challenges in Implementing Embedded Payments

Regulatory compliance and navigating financial regulations

Your embedded payments system is a banking product, which means regulations like PCI DSS and GDPR are applicable.

In an age where data breaches and destructive hacking attacks have become the norm, your security capabilities must always be more advanced than those of malevolent actors.

This brings to the fore one of the advantages of working with a fintech embedded solutions provider. 

The provider will take on the security responsibility and risks on your behalf, which won’t be the case if you opt for an in-house solution.

Technical complications in integration and scaling

Building an embedded payments solution from scratch requires resources and expertise that are often beyond the capability of most small businesses. 

That’s why most SaaS startups and even established software powerhouses opt for out-of-the-box solutions. 

However, the process of integrating an external software solution into an independent SaaS platform can be complex and time-consuming.

It can also pose reputational and security risks if there are errors in the implementation process.

So, you want to ensure you are working with a reputable provider that can guarantee a smooth process and regular maintenance schedule that won’t have any negative impact on the enjoyment of your SaaS platform by your users.

Best Practices for Promoting Embedded Payments

The success of your new embedded payments system depends on massive customer adoption, so you must be able to effectively market and sell the benefits of the new functionality to your SaaS platform customers.

Here are a few tips to help you carry out an effective marketing campaign:

Educate your users about the value of built-in payments

The best way to get customers' buy-in is to clearly convey the advantages and value proposition of your new payments system.

Focus on highlighting meaningful customer needs, then explain how your new payments system can truly meet those needs.

For example, you can highlight how a native payments system can save time for customers by making it easier for them to pay at the same time they are requesting a service or access to a feature on your SaaS platform.

Use case studies and testimonials to demonstrate success

Instead of trumpeting the many qualities of your new feature; testimonials and case studies take a more subtle and arguably more effective approach to convincing customers.

They highlight the stories of actual customers who have benefitted from the new payments feature and the measurable improvements they have enjoyed.

Most customers tend to engage better with such personal stories than with generic marketing content.

Highlight payment features in your thought leadership marketing materials

Thought leadership content includes blog posts, social media content, whitepapers, and webinars that marketing teams use to engage their company’s target audience and boost awareness about their brand.

You should include promotional messaging about your new payments feature in your thought leadership content to spread the word and hopefully attract new customers.

It’s Time To Choose An Embedded Payments Provider For Your SaaS Company

This article has shown you the many benefits of embedded payments and how to implement it on your SaaS platform.

You have also learned that you get to choose between an in-house solution or an out-of-the-box vendor-supplied payments solution.

If you are opting for a payfac-as-a-service option, then you should know by now that the ideal provider must not only be reliable and experienced in your industry, it must also offer a flexible solution that can integrate seamlessly with your SaaS platform.

Preczn is a leading fintech platform with a robust suite of embedded finance products designed help SaaS companies implement and manage embedded payments. Get in touch and discover how we can help you streamline embedded payments and payment orchestration. 

FAQ Section

What is the difference between embedded payments and traditional payment gateways?

Embedded payments are built directly into the platform and all transactions are completed on a single SaaS platform, while traditional payment gateways are usually provided by a third-party payment services company and users must temporarily leave the SaaS platform to complete payments on the third-party payments portal.

How do embedded payments generate additional revenues for SaaS companies?

Given that embedded payment turns SaaS companies into full or partial payment facilitators, they will be able to generate additional income via credit card processing fees imposed on each transaction completed on their platform. They can also generate revenues by offering financial services like loans, insurance, cross-selling & upselling, and partnerships.

Are there specific industries where embedded payments are most beneficial?

More and more businesses are switching to embedded payments and it is perfect for businesses across all industries. In fact, the rate of adoption is expected to grow the market to $228 billion by 2028. That being said, businesses in the eCommerce, subscription-based, and travel & hospitality industries will gain a lot from switching as early as possible.

What security measures should I look for in an embedded payments solution?

The embedded payments solution must use AES-256 standard encryption to protect sensitive customer information. There must also be full compliance with key industry regulations like PCI DSS and GDPR.

Can I switch payment providers later if my needs change?

Yes, you can switch to another fintech solution or payments services provider if your current vendor is unable to meet your needs. Ideally, you want to switch to a new provider offering robust data migration support services and even dedicated support staff to help guide you through the process.

How long does it take to implement an embedded payments solution?

The time it takes to implement an embedded payments solution depends on the scope of financial products you want to add to your platform and the degree of frictionless synergy you have with your embedded solutions provider.