The last thing that a merchant wants is to see a consumer or business customer go through the process of identifying the product or service that they want and get to the finish line, only to abandon the transaction.
The key to avoiding such a scenario is to give the customer a range of payment options at the critical moment of interaction, so that friction does not force a re-consideration of making the sale. In short, it’s a job tailor-made for embedded finance.
Eric Foust, vice president of banking partnerships North America at Trustly, said the rise of embedded finance will drive down the cost of payments acceptance while making sure that this scenario doesn’t happen.
“It should not become this decision point where the consumer is going to proceed — or not,” he said of the payments. “They should just happen, and it should all be fluid.”
At a high level, “embedded payments isn’t something new,” he said.
Over the years, we’ve been used to manually entering account information, which has been part of the payments DNA for decades. What we’re seeing now is the rise of embedded finance, which cuts down on the cost of customer acquisition and payment acceptance while offering additional payment options that move beyond the confines of the credit card, Foust said.
Broadly speaking, embedded finance integrates a financial service-related activity into a non-financial services platform, Foust said.
The conversation was part of the continuing “What’s Next in Payments” series on embedded payments and finance options and how they are changing the nature of commerce.
The practice is pervasive, down to getting the weekly Starbucks order on a Saturday via the app, where consumers order and pay before picking up their drink. The embedded process is tied directly to the ordering process so that the payment is taken care of right when the order is submitted.
“They’ve embedded a non-financial services activity into their non-financial services platform, which is their application,” he said of Starbucks.
The payments flows happen no matter if the customer is at the coffee shop itself or using the drive-thru, he said.
No matter the setting, the ease of use and ease of payments are paramount.
There are several providers — Trustly included — that in many applications and use cases enable an embedded payment to take place as consumers link their bank accounts directly to transactions, Foust said. In doing so, that money is debited from accounts without users having to enter account-specific information such as account data or even 16-digit credit or debit card numbers.
For the businesses themselves, “you’re getting the ability to facilitate payments that typically delights customers — and things are a bit more innovative than just typing in account information.”
The rise of open banking in the United States and the availability of faster payments rails will speed innovation in embedded finance, he said.
But fostering that innovation requires connectivity, linking disparate stakeholders — from banks to merchants to end users — together, Foust noted.
API integrations serve as the conduit between the entities that make up the financial ecosystem, as FinTechs also benefit from the sharing of real-time information to speed up applications, payments and financing offers at the point of sale (and even before the point of sale), he said.
As regulations take shape in the U.S., Foust said consumers will become more comfortable with permissioning third-party entities to obtain consumers’ information. Final rules regarding that data-sharing (through what’s known as Section 1033) were issued Tuesday (Oct. 22). They will propel open banking more firmly into the embedded payment space, he said.
“There’s going to be an epic shift in the United States, from enabling card payments as the primary vehicle for payments acceptance to open banking that leverages the banks’ rails — and it’s all going to happen quickly,” he said.
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