Streamline transactions: The transformative power of embedded payments

What are embedded payments?

The growing use of digital payments is prompting many companies to focus on how to optimize payment experiences to meet evolving customer expectations, differentiate and boost efficiency. Embedded solutions are key. Within your existing systems, you can enable your users — customers, vendors or employees — to send and receive payments in the same platform, application or system they use for business or personal activities.

Seamless payment flows we know as consumers, like the ease of paying in a rideshare app, have raised the bar. We now want the same invisible transactions everywhere. Embedded solutions make it possible to move money directly within your existing systems using a range of payment methods. Your company owns the entire user experience, while your banking partner provides the technology to expand your payment capabilities.

Here are three ways you can apply embedded payment solutions to your business:

• Direct integration with your customer platform enables frictionless payments that elevate how people do business with you to enhance value and loyalty. Embedded solutions using bank APIs can also be a growth-driver. It’s expected that by 2026, $7 trillion of total U.S. transactions will come from financial services embedded into e-commerce and other software platforms, according to a Bain & Company report.
• Integrate your systems with a fintech partner to streamline and automate workflows in your finance operations to reduce costs, errors and risks. Improving cost-saving efficiency is high on the radar for many companies. Among CFOs, 44% rank it as a top priority and 57% say automating payment initiation and reconciliation is “very important,” according to a U.S. Bank survey.
• Money movement on behalf of others can enable you to facilitate secure payments through your platform, managed via a segregated “for benefit of” (FBO) account. Behind the scenes, the FBO account is owned by a federally insured bank that can move money in all U.S. states, hold your customers’ funds and process payments. This approach to embedding payments helps increase compliance, customer trust and deposit insurance.

What are the benefits of embedded payments?

Enabling users to meet all needs in one place through embedded solutions helps keep your customers and employees focused on what matters most.

“Typically, payments have been all about how to optimize costs,” notes Anu Somani, senior vice president and head of Global Payables and Embedded Payments, U.S. Bank. “But now the focus can be, how can we create differentiated experiences or revenue generators, or operate more efficiently and improve productivity?”

How do you evaluate what your company needs?

To help you identify how to get the most value from embedded payments, you’ll want to take a close look at your customer journey and internal workflows. What are the challenges and pain points? For example:

• Are friction and complexity frustrating customers and increasing churn?
• Is managing secure transactions increasing your compliance concerns and risk?
• Are your current systems struggling to handle high transaction volumes, making it harder to scale or expand to new markets?
• Is manual reconciliation costing too much in time and overhead?

When considering embedded solutions, be sure to get a range of perspectives by engaging all the relevant stakeholders. The effort might be spearheaded by your CFO or controller and should include other leadership such as your chief product officer, chief technology officer, chief risk officer and even a director from your customer experience organization. It’s also valuable to engage your banking partner, as they can provide insights into payment technologies and capabilities, compliance and more.

This evaluation helps you identify opportunities where having more robust, integrated payment processes could eliminate friction and reduce costs and risks. From there, you can map out a plan for how you want to customize embedded payment flows to meet precise needs and objectives.

Can embedded solutions work for any industry?

Embedded payment solutions are built for flexibility and scalability and are designed to meet the needs of companies across many industries. Payment workflows can be embedded in the platforms or systems of technology providers, insurance carriers, healthcare organizations, hospitality chains, real estate and title servicers, investment brokers, gig economy and more.

Let’s look at a use case example of embedding payments. A brokerage platform wants to enable faster, more secure money movement between investors and its broker-dealer. Embedding instant payment capabilities directly into the brokerage’s apps and websites provides 24/7/365 access for investors to fund accounts and receive instant disbursement to their bank accounts.

When an FBO account is integrated as part of an embedded payments solution, you can take advantage of additional capabilities. Because the FBO account is bank-owned, it eliminates the need for your company to have money transmitter licenses in the states where you do business.* You can facilitate payments through your platform on behalf of your customers, while avoiding the complexities of being involved in the fund flows.

Here are some use cases to see this in action:

• Gig work platforms gain the ability to manage earnings, tips and reimbursements for each gig worker in real time. An FBO solution can deliver faster payouts and better user experiences while enhancing regulatory compliance compared to holding customer funds directly.
• Fintech apps can offer frictionless payments within their platform — like transfers, request for pay and bill payments — and manage transactions for each client through virtual accounts within the FBO account.
• For B2B platforms, embedding payments with an FBO virtual account structure enables secure, automated handling of multi-party transactions such as supplier payouts, commission splits, property management or escrow.

What other benefits can embedded payments deliver?

We’ve covered three of the top benefits of embedding payments:

• enhanced customer experiences
• reduced costs, errors and risks
• increased operational efficiency for internal teams

Now here’s one more critical advantage to consider. Embedded solutions enable you to leverage rich payments data to fuel deeper insights into customer behaviors and payment trends. It can fill important gaps to better understand user preferences and identify risks. When you have the data to follow transactions end-to-end, it helps inform product improvements, refine targeted marketing, and identify opportunities for personalization and engagement.

Customers are demanding better integrated payment flows. To capitalize on the opportunities and balance the constraints, embedded solutions offer a new path forward.

“Our embedded payment solutions help our clients be more efficient, differentiate and become a better provider to their customers to create a better experience,” says Mike Jorgensen, head of Emerging Solutions and Strategy, U.S. Bank. “Ultimately, it helps companies by allowing the bank to do the heavy lifting, so they can focus on what they do best.”

To learn more about embedded payment solutions at U.S. Bank, visit our website or reach out to talk with an expert.

*Confer with your legal counsel regarding the money transmitter license requirements for your business operations.