December 29, 2022
Written by
James Davis
Written by James Davis
Senior Technical Writer at United Thinkers

Author of the Paylosophy blog, a veteran writer, and a stock analyst with extensive knowledge and experience in the financial services industry that allows me to cover the latest payment industry news, developments, and insights. Read more

Reviewed by
Kathrine Pensatori
Product Specialist at United Thinkers

Product specialist with more than 10 years of experience in the Payment Processing Industry. I help payment facilitators and PSPs solve their various payment processing issues. Read more

Embedded Payments: Important Aspects and Features

Key Takeaways

Embedded payments are an essential paradigm in modern-time fintech industry (as our previous article explains). It is an approach that allows vertical SaaS companies and software platforms to incorporate payment experience into their core offerings. At the same time, it does not require as much effort as becoming a payment facilitator. Thus, a SaaS or software platform can get more control over payment experience without going through cumbersome certification procedures.

Embedded payments are the basic payment-as-service (PaaS) (payment-as-platform (PaaP)) tool. We should reiterate that payment-as-service (PaaS) is not just a payment gateway with merchant onboarding application “on top of it”. It envisions a truly unified API, where all payment and merchant management functions are properly integrated and harmonized.

Basic Embedded Payment Features

The most important technical features and solutions provided by an embedded payment system include the following ones.

  • Omni-channel payment functions (CNP, card-present, other)
  • Merchant onboarding engine
  • Efficient reporting mechanisms (including web hooks)
  • Advanced authentication functions (including web tokens), allowing merchants to seamlessly access the user interface of the gateway or PSP. 

One of the fundamental aspects of embedded payment is the integration between an underlying platform and the system of the PSP. This integration ensures seamless payment experience for both merchants and their respective customers. Many publications (including our recent article) cover such integration in the context of the two key processes. These are payment processing and merchant onboarding. In order to make these processes truly “embedded” and “seamless”, the integrator also needs to address other important aspects.

Omnichannel Payment Gateway

Advanced Embedded Payment Features

First, all APIs are, primarily, meant to allow the integrator’s software platform to use some specific functionality within the gateway. Sale operation is the most common example. At the same time, some transactions are initiated by the bank (and not the platform) following the respective customer request. Examples of such transactions are chargebacks, reversals, and returns. So, there is a need to deliver this information to the software platform.

Second, not all functions that the platform needs are available within its API. Moreover, it does not always make sense to implement these functions within the platform’s API itself. Examples of such logic include functionality accessible through user interface. These various UI forms are, generally, unavailable within the API. However, the platform does not necessarily need to implement them. Instead, its users can directly access the forms from the gateway’s interface.

The two listed scenarios call for implementation of additional technologies that we will briefly describe.

Web token technology is based on JSON standard. It is a mechanism, allowing one software system to authenticate its users within another system. The mechanism is primarily intended to allow users of the first system to access the interface of the second one. For example, a shopping cart software platform can authenticate its merchants within the gateway’s user interface. These users get the opportunity to lookup transactions, download reports, and access other critical functions.

Web hooks is a mechanism allowing to deliver notifications, that a software platform receives when some events take place in the payment system. Thanks to web hooks, a platform can react instantly and appropriately, so that merchants’ problems and issues are resolved as soon as possible.

More information on web tokens and web hooks is available in the respective articles on Paylosophy blog.

Let us consider an example.

Example: How Embedded Payment Features Work

A software company offers online ticket selling booths for cinemas. The software platform, which is the company’s flagship product, is integrated with a gateway. As a result, movie theater visitors can pay for their tickets on the spot, using the booths. The platform does not have any API allowing merchants to lookup transactions or generate transaction processing reports. It would be beneficial for the platform to use the existing interface of the payment gateway it is integrated with. Moreover, some cinema theaters located in certain areas have to deal with frequent chargabacks. The software platform needs to both monitor these chargebacks and keep track of theaters’ merchant account freezes through timely notifications. Within the gateway’s interface the listed reporting, chargeback management, and account deactivation functions are already available.

From time to time, the cinema network administration needs to lookup payment information regarding processed transactions. Using the web token technology, the software platform establishes a trusted connection with the underlying gateway. Using this connection, the cinema managers can access reports and forms, available from the gateway. For these purposes they can use the logon they use to access the ticket booth system. The arrangement is beneficial for all involved parties.

  • The software platform does not need to develop separate reporting applications for the cinema;
  • The cinema theater network gets advanced and transparent reporting experience.

Moreover, when the gateway issues a chargeback (some customer wants the money back), the software platform gets an instant notification. If all theaters have separate merchant accounts, and one of them is deactivated (due to suspicious activity), the platform is also instantly notified. Then it can initiate temporary suspending of the respective theater’s funding. These events illustrate the most common examples of web hook usage.

To Summarize

Embedded payments include a set of important features allowing to improve payment-related experience for both software platforms and their customers. Thanks to web hooks and web tokens, connection and interaction between the platform’s customers, and the underlying gateway becomes even more smooth and seamless. If you choose to incorporate embedded payments within your platform, make sure that your API supports these features. Feel free to contact us and learn how to optimally implement embedded finance paradigm to your specific business model.

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