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Co-authored by Richie Serna, CEO and co-founder of Finix and Rachel Costello, Head of Marketing & Revenue Operations of Finix
In June 2024, the EY-Parthenon team, in collaboration with Finix, a leader in payments technology with a full-stack processing solution enabling businesses to accept and send payments, conducted a survey targeting platforms and merchants (i.e., any business that accepts payments) to examine the evolving adoption, demand and trends associated with embedded payments. Embedded payments enable companies outside of traditional financial services (FS) organizations to offer payments solutions within their digital platforms.
Embedded payments benefit both the merchant customer (e.g., user experience, efficiency) and the non-FS platform enabling the solution (e.g., new revenues, better customer retention).
Embedded payments are the integration of payments products within a non-FS company’s customer value chain and offers brands the ability to shape a seamless customer experience.
Non-FS platforms offering solutions to consumer-facing businesses (e.g., field services, childcare providers, health care providers), must evaluate whether embedding payments can help them realize their strategic goals (e.g., unlocking new revenue streams, increasing customer engagement and retention).
Some of our software clients now make the majority of their revenue from payments … despite not considering themselves a payments business.
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Read moreThe continued integration of financial solutions into non-FS platforms is redefining the role software solutions and providers play in the payments landscape. By offering payments as part of their overall business management solution, non-FS brands are picking up where “traditional” payments propositions often fall short by only offering a one-size-fits-all solution that fails to meet the specialized needs of niche markets (e.g., field services-specific invoicing solutions). Non-FS platforms are able to leverage what they know about a merchant’s business and industry, as well as incorporate this knowledge into a more tailored payments solution.
At Finix, we’re seeing more forward-thinking companies embedding payments directly into their platforms and unlocking new levels of customization, efficiency, and revenue growth. This shift is fundamentally transforming how platforms operate, creating exciting opportunities for businesses and their users alike.
Merchant demand for embedded payments solutions is only increasing, with the volume of payments through embedded channels expected to reach $6.5 trillion by 2025. Payments offered in the context of a business management solution provide merchants with a solution tailored to their business with more relevant capabilities, critical integrations and operational efficiencies. Merchants are increasingly able (and using) non-FS platforms as “one-stop-shop” providers, enjoying the same frictionless experience they get from their app when using payments solutions.
According to our research, embedded payments is on track to grow at a 23% compound annual growth rate between 2021 and 2026. With this trajectory, the growth opportunity for non-FS platforms is steep and lucrative. Overall, we estimate that non-FS platforms with moderate portfolios of merchant customers transacting through their platform can meaningfully shift their revenue mix, diversifying their revenues by earning a material percentage through payments monetization.
Since launching our embedded payments program with Finix, we have increased our payments-related revenue by over 100% in less than three months without even scratching the surface of the available opportunity in our portfolio. Embedded payments have opened up an entirely new revenue stream for our SaaS company, allowing us to offer more robust software solutions at a lower price for customers who participate in our payments program.
Yet, despite the promise of growth, many companies still view payments as a token utility — a necessary function rather than a strategic asset. This oversight is costly. Our research indicates that brands embracing embedded payments as a growth driver see marked increases in customer lifetime value, with ancillary benefits that include heightened loyalty and a richer data pool for personalized offerings.
For non-FS platforms, a strategic shift in mindset is necessary to unlock the full potential of payments as a growth driver. With 70% of survey respondents viewing payments as a utility, payments are often relegated to the back office, seen as a necessary but an unremarkable part of doing business. However, the landscape is changing. Innovative brands are now recognizing that payments can be much more than a transactional tool — they can be a cornerstone of customer engagement and a significant source of revenue. By integrating payment solutions into their core offerings, these brands can drive innovation, enhance customer experiences and tap into new markets.
Payment service providers (PSPs) are in a strategic position to help non-FS platforms embed and offer payments capabilities. Non-FS platforms cite that resource limitations (41%) and conflicting business priorities (26%) are the main challenges they face when looking to embed payments. PSPs can capitalize on the fact that 40% of non-FS platforms have never integrated payments into their offerings by making it easier for them to do so through managed services offerings, for instance.
Payments is an incredibly complex function and simplifying these processes has been a big priority for our business. Not only are our developers able to quickly and easily set up new functions, they also improve the customer experience too and give us more flexibility with how we manage payments for different situations.
Consumers want to ‘consume’ financial products differently than they did in the past. Embedded payments provide banks and other financial institutions a way to maintain their relevance in light of this shift.
When opting to strategically leverage payments as an offering, non-FS platforms have paths they can take to offer and monetize payments. Generally, the greater the revenue opportunity, the greater the risk exposure and degree of ownership and responsibility the non-FS platform must be ready to take on. Given this, it is critical for non-FS organizations to evaluate their goals and align on the amount of the payments value proposition, the economics of which it controls, owns (vs. outsources) and retains.
Kevin Bailey also contributed to this article.
Embedded payments are a game-changer for nonfinancial services businesses, offering a path to enhanced customer experiences, stickier relationships and new revenue streams. By providing seamless, customized payments experiences, these solutions align closely with business models and consumer demands. To fully capitalize on this transformation, nonfinancial services platforms must reframe payments as strategic assets, essential for driving customer engagement and revenue. Payment service providers play a pivotal role in this transition, aiding brands in expanding their offerings and deepening customer relationships.
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