What are embedded payments and how do they work?

As consumer shopping expectations and preferences continue to evolve, it becomes paramount for businesses to ensure their checkout experience meets these needs. One such trend that has reshaped and modernised the customer experience is embedded payments, providing a new opportunity for businesses to maximise conversions at the checkout.

Specifically, Baymard Institute highlighted in their 2024 research that 22% of US consumers will abandon their cart at the checkout if the payment process is too long or complicated. Embedded payments can elevate the payment experience, eliminating checkout pain points and increasing the chances of businesses converting and retaining customers.

In this article, we’ll uncover what embedded payments are, how they work and how they can benefit your business among other things. Here’s what your business needs to know.

What are embedded transactions?

Embedded payments refer to payment solutions that are seamlessly integrated into a company's product, allowing users to make transactions without needing external payment gateways.

This means customers can easily make payments then and there on an app or website via a single button, ensuring a seamless and convenient checkout experience.

The customer simply selects a payment method like PayPal or Apple Pay, which has all their payment and shipping information pre-saved from previous purchases. Then they click the embedded link, which is typically “Buy Now”, “Pay Now”, “Confirm Payment” etc, to finalise the transaction in a matter of taps. This in turn significantly reduces friction and the chances of them abandoning the purchase.

Examples of embedded payments

Now that we’ve uncovered what embedded payments are, let’s dive into how they can be adopted by various businesses.

Ridesharing and food delivery

For ridesharing, a user will initiate the payment in the ridesharing app (e.g. Uber) and then the transaction will be processed after the ride is completed using the customer’s stored payment details in the app. This allows the consumer to seamlessly utilise the service, without the need to hand over cash or pay directly with a card. This is similar to the case for food delivery services like Uber Eats and DoorDash, where the customer orders and pays for food directly via the app.

Subscription services

Subscription services like Spotify and Netflix leverage embedded payments to enable seamless recurring billing. Customers enter their payment details once within the platform and the service then processes future transactions automatically without requiring additional input. By embedding payment processing directly within their apps and websites, these platforms provide a smooth payment experience that aligns with their subscription model.

Travel and hospitality

Travel platforms, like Airbnb, embed payment infrastructure within their apps to create a seamless checkout experience. After a user makes a reservation, the payment is processed as per their agreement, immediately or at a later scheduled time.

Benefits of embedded transactions

Embedded payments present many opportunities for businesses, from providing a faster and smoother checkout experience to improved conversion rates.

More flexibility for customers

Embedded payments offer customers greater flexibility by allowing them to complete transactions using their preferred payment methods, without being redirected to external platforms. By integrating one-click payment options like digital wallets or saved card details directly into the checkout process, businesses reduce friction and increase the likelihood of completed purchases. This seamless experience helps maximise conversions and meets the diverse payment preferences of modern consumers.

Improved checkout experience

With more and more consumers opting for mobile purchases and using social media to discover products, businesses must explore alternative checkout models to expand their reach. Embedded payments allow customers to complete payments then and there on the platform, without being directed to a separate payment page.

This is especially beneficial for subscription business models, allowing customers to seamlessly be billed, elevating the payment experience.

What’s the difference between embedded payments and Open Banking payments?

While both payments offer seamless payment experiences, they each operate in slightly different ways. As previously mentioned, embedded payments involve embedding payment processing into non-eCommerce platforms. This allows customers to complete transactions natively without being redirected to a separate checkout page to fill in payment information. Consumers will typically be required to approve the first payment, however, any subsequent payments will be approved without any further action from their end.

Conversely, Open Banking is a protocol that enables consumers to use their bank or financial institution to securely share their financial data with trusted third-party providers via APIs. During the checkout process, customers are typically redirected to their banking environment to authorise the payment, bypassing the need to enter any payment information on the merchant’s website. However, some newer Open Banking solutions allow direct payment approval within the app without redirection, depending on the provider.

How emerchantpay can help

With over 20 years of experience, emerchantpay is dedicated to making payments easy for businesses. We help businesses globally to optimise their payments strategy with our all-in-one payments solution, which includes:

• eCommerce, point of sale, subscription and over the phone payment solutions, with integrations available for leading shopping carts
• One-on-one support from a payments expert, with on-the-ground and vertical-specific specialists available
• A comprehensive payment method portfolio, which includes a broad range of local and global options like SEPA Direct Debit and Apple Pay
• Robust anti-fraud engine, with a dedicated Risk Analyst to help you manage your risk and chargeback strategy
• 24/7 technical support to help you every step of the way