For decades, payments have been the purview of large companies and payment processors. Software companies have traditionally had to rely on third-party integrations to allow their customers to accept payments using their platform, which has caused a disjointed customer experience between software and payments.
This has been true even though getting paid is a fundamental aspect of any business. Not every business has an inventory to manage or needs to manage payroll. But every business has to have a way to be paid for the goods or services it provides.
In recent years, software companies that provide other essential business functions, often to specific verticals or industries, have taken note of the fact that many of their customers’ payments needs have not been entirely met by the payment providers they partner with.
Many software companies are addressing this by becoming payment facilitators and embedding payments directly into their own software products. They are building payments in – developing a seamless product – rather than simply bolting them on. Embedding payments in their software platform allows their customers to have one cohesive experience between all aspects of their platform.
Becoming a payment facilitator is the most complete way to embed payments into a software platform, as this model allows software companies to act as the payments companies. This gives them utmost control over the payments process from start to finish, enabling them to provide a truly embedded experience for their customers.
Software companies embedding payments within their offerings is often the first step within a broader trend known as embedded finance, where business solution providers are also offering a host of financial services, including lending, insurance and investments.
Rather than making the customer – the merchant – jump through hoops to take payments, software vendors are bringing payments to the customer directly within the software they use to manage their business functions.
One often-cited example that represents the potential for embedded payments is that of Uber, which automatically charges the payment method on file at the end of a ride. The company has embedded payments within its technology to the point that the ride-hailing and payments experiences have merged into one, rather than separate steps to be taken by the consumer.
Many software companies have become payment facilitators, allowing them to provide similar experiences that are relevant to their own verticals. Healthcare platform provider Modernizing Medicine has streamlined the cumbersome process of paying medical providers by embedding payments into the providers’ interactions with their patients.
For example, payments are integrated with patient portals, so users can make payments at the same time they’re reviewing lab results or scheduling future appointments. With the company’s kiosk solution, patients can pay co-pays and account balances while checking in for an appointment.
WorkWave, which offers software for field service providers, enables workers to accept payments securely using mobile devices in the field. The company also offers online payment links so customers can pay immediately while viewing an invoice.
For providers, this approach has distinct advantages. It allows them to retain the payment processing fees as their own revenue, rather than handing it over to a third party. In many cases, this recurring revenue stream leads to investor interest and higher valuations.
It also helps the software provider become more of a one-stop-shop for its customers. They receive more of their business services directly from the software provider rather than going outside that relationship for payments.
Not only does this deepen the software provider’s relationships with these customers, it helps them offer a better experience. The merchants no longer have the frustration of having to try to help solve any customer service issues with multiple providers.
Embedding payments into their platform can also enable software providers to control aspects of the relationship such as merchant applications, onboarding and funding timelines. They can design experiences from the ground up, serving the specific needs of their industries.
While embedding payments isn’t necessarily for every software provider, it is a natural next step for many who are looking to grow alongside their customers as indispensable partners.