API Economy Paves Path to ‘Embedded Everything’

Within financial services, a “plug and play” approach that’s been made easy by a surge in simple API installations is paving the way toward embedded everything.

Not only is there a blurring of the lines between all manner of interactions, where functions as distinct as subscriptions, investment management and payments all flow seamlessly together for end users.

For non-banking firms, that means expanding their offerings to include money movement.

Call it the embedded economy, where the complexities of consumer facing and back-end office workflows are reduced through digitization, as is the reliance on paper checks, cash and invoices.

In that sense, the “Uberization” of daily life (i.e., payments are part of the journey, part of the very convenience of the app) is extending well beyond the confines of the ride-hailing experience, and into all aspects of commerce.

One highly visible example of emerging embedded options consumers can be seen with the continued rise of buy now, pay later (BNPL) offers at the point of sale, where tapping into the functionality offered by FinTechs such as Sezzle, Afterpay, PayPal and others helps merchants boost basket and ticket sizes.

PYMNTS research has shown that there’s value in merchants’ offering BNPL among their payments choices: 46% of customers who could not access traditional credit options used BNPL offerings to make purchases they could not have afforded otherwise. And 47% of consumers said they would be interested in BNPL for expensive, one-time retail purchases.

Read more: PYMNTS Intelligence: Leveraging BNPL to Beat the Cost-of-Living Crisis

Embedding financial experiences (through third parties) into platforms and apps boosts revenue for those forward-thinking businesses.  And not surprisingly, in order to do that they are overhauling their own back-end processes to fully embrace digital channels.

A bit of clarification is in order here. Often, terminology is used interchangeably: Embedded finance is not necessarily the same as banking as a service (BaaS). BaaS is what powers the rise of embedded finance itself. And BaaS has the power to help companies improve operations, cash flow and margins.

As reported by PYMNTS, in just one recent example, restaurant team management platform 7shifts has recently announced that it’s added instant digital tip payments to its platform. That functionality, powered by Ingo Money, has makes it easier for restaurants to pay tips out to workers, digitally and instantly, eliminating the divvying up of cash at the end of shifts, and trips to the bank.

At the center of it all, underpinning it all, as the “embedded economy” takes shape, is the “API economy,” which enables the consumer-permissioned data sharing in the first place. Payroc, for example, last week debuted a new API suite and developer documentation site, a press release said, which will give technology providers more embedded payments flexibility. Collaboration between companies that develop their own APIs (banks and other firms), and enterprise clients that tap into their respective data streams, can craft the services on demand from end users, accelerating the time to market.