December 1, 2022 [molongui_author_box]

Do Embedded Payments Fit Within Your Business Model?

Key Takeaways

Embedded finance paradigm is becoming increasingly relevant. Multiple present-day companies would like to incorporate embedded payments into their offerings and monetize them. Let us take a closer look at embedded finance definition and historical context of embedded payments’ evolution. Vertical SaaS companies and software platforms are in the most beneficial position when it comes to embedded finance implementation. However, other businesses might enjoy the benefits of this paradigm as well. Would embedded finance fit your business model? In this article we will try to help you find the answer.

Introduction: What Is Embedded Finance?

If some business (usually, a software company) incorporates payment experience into its core product, this approach is called embedded finance.

In fact, we see many examples of embedded finance in our everyday life: from checkout buttons to supermarket apps and branded payment cards.

Now let us describe how embedded finance emerged and list the key advantages of the approach.

Where Embedded Finance Came From

Traditionally, payments were managed by processors and acquiring banks. As the number of merchants grew, processors and acquirers started to delegate payment and merchant experience to other entities. These included ISOs and payment facilitators. ISOs did not participate in merchant underwriting. Moreover, their payment management capabilities were quite limited. At the same time, industry-specific software platforms and vertical SaaS companies did not participate in payment management. They relied on third-party or outsourced payment gateway offerings.

At a certain point, SaaS platform providers had to face both software-related and payment-related issues. It was inconvenient for customers to address their support tickets and queries to different entities. So, it was time for software providers to take payments in-house.

This move had several advantages for SaaS companies, that:

  • consolidated functionality (both payment and software) within their solutions;
  • gained greater control over the process (including merchant underwriting and funding);
  • increased their solutions’ customizability potential;
  • opened a new payment monetization channel.

Thus, incorporation of embedded payments (including merchant onboarding and funding) into SaaS platforms was, indeed a smart move.

Omnichannel Payment Gateway

Embedded Finance: Conceptual Approaches

Depending on the degree of your software platform’s involvement in payment management, you can follow one of the following strategies.

  • Create various payment monetization channels, outlined in our respective guide.
  • Implement a classical payment facilitator model or become a white-label PayFac (as explained in our topical white paper).

An open-source licensable white-label payment gateway technology, such as UniPay Gateway can provide the basis for any of these strategies.

Again, the platform you integrate with should include a native API and support all payment and merchant-lifecycle-related functions. They include:

  • merchant underwriting
  • funding
  • transaction settlement
  • transparent statement generation
  • chargeback management
  • support of web-hooks, web-tokens, and payment pages.

What Makes Embedded Payments truly Embedded

It is not enough to put a merchant underwriting and onboarding logic on top of a payment gateway. If you use such a merchant onboarding app (third-party or additional native service), the approach has several disadvantages.

  • Integration might call for additional efforts to setup merchants and the gateway.
  • The process might require significant investments and involve additional costs.
  • Integrations with merchant onboarding system and payment gateway might require two separate projects.

As we mentioned, the truly embedded solution means that onboarding, payment processing, remittance, reporting, and chargeback management should are available through a unified API and properly integrated.

Embedded Finance: Additional Advantages

Both, the white-label solution and the payment facilitator model have their advantages and disadvantages. Everything depends on the amount of responsibility you are ready to assume and the amount of control you want to have. Some solutions, such as Zift.io owered by UniPay, allow you to smoothly move from one option to the other.

That is, initially, you can settle on a white-label solution, that includes basic features requires and does not cost much. Then, if choose to become a PayFac, you can go through underwriting procedure as a payment facilitator and convert MIDs. UniPay Gateway technology includes a standardized payment facilitator program. So MID conversion should not be a problem. Finally, as your processing needs expand, you can implement a licensable open-source-code solution. Then, you can deploy it to your own data center and customize according to your new requirements.

Today, consolidation of industry-specific software companies provides an additional booster for development of embedded finance market. At this market, unified technologies and effective 24/7 support are among the most valued success factors.

To Summarize

If you decide to implement embedded payments within your business model, you should pick the platform carefully. The solution you choose should have native support for all target payment and merchant management features.

UniPay Gateway technology accommodates the embedded finance related feature and enables smooth payment monetization for vertical SaaS and software platforms.

Contact us for more information on how to implement embedded payments within your business model with UniPay Gateway.

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