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Embedded payments are helping businesses put the
customer back into customer experience.
The payments revolution
We have seen a paradigm shift in the payments industry – where the payment has become woven into the fabric of the customer journey, not separated from it. This means that the customer can focus on the product or service, not their payment. While some businesses have deeply entrenched payments within their customer journeys – think of taxi fares that are paid through the same app that hailed the taxi itself – others are now discovering new and innovative ways to make the processing of payments fast, seamless, and beneficial to all parties. What’s clear across the board, however, is that these solutions are putting the customer at the epicentre of the payment experience.
One key part of this revolution is the embedded payment. Put simply, embedded payments allow businesses to integrate the payment process into their own platform, eliminating the need for their customers to embark on a complicated user journey to a separate payment gateway. As a result, payment becomes just a natural part of the customer journey, providing a smooth and streamlined experience.
An embedded future
Of course, this benefits the customer by helping them easily complete their transaction, and, with increasing digital payment preferences, this is expected. Sixty per cent of the global population is predicted to use digital wallets by 2026, with embedded payments looking set to play a pivotal role in the future of the customer payment experience.
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In addition, embedded payments carry significant benefits for businesses, including their treasury functions, by offering greater clarity and control over transactions and potentially lowering transaction costs compared with card payments.
From an efficiency perspective, Faster Payments, which underpin the use of embedded payments, have the power to reduce payment times to just a few seconds, improving cash flow and boosting access to working capital. There is also a commercial benefit from a sales perspective – research has shown that if a consumer has to re-enter payment details, 30% will abandon their shopping cart. A more cohesive payment experience could result in a higher number of completed transactions and this means reducing leakage – smooth payment processes represent a ‘free’ sales upside for no additional marketing spend.
Embedded payment solutions
We can now embed our innovative payment services into your customer journeys and business processes, providing secure solutions that are faster and simpler to use.
Since embedded payments can be faster for the customer, and more efficient and effective for businesses, the transition towards mass adoption is highly likely to accelerate over the next decade. Market research firm IDC estimates that by 2030, 74% of global digital consumer payments will be conducted via platforms owned by non-financial institutions. One survey found that while 4% of businesses currently offer embedded payments, 83% have plans to implement them in the next five years.
Lloyds Bank’s own data supports this – we’ve seen a 19.5% increase in the average number of monthly transactions in the first half of 2023 using three of our core Application Programming Interface (API) solutions, compared with the first half of 2022. We’ve also witnessed a 58% increase in the number of active clients using the three solutions over the same period.
Looking under the bonnet
Benefits aside, how do frictionless payments actually work? The engine of embedded payments is API technology. In 2018, the implementation of Open Banking legislation, enabling banks and other financial institutions to share data securely with third parties, paved the way for the adoption of API technology to allow non-financial institutions to embed payment processes into their own platforms. APIs allow the customer’s financial information to flow securely between the platform and relevant banks to make the payment process easy, fast and frictionless.
At Lloyds Bank, our embedded payment proposition is powered by a suite of six API-based solutions. Since our transactional solutions use the Faster Payments service, any payments made using our solutions are completed almost instantly.
The University of Salford
Through the adoption of embedded payments technology, the University has been able to streamline processes, mitigate fraud risks, and generate substantial cost and operational efficiencies.
Achieving payment invisibility
The best payment experience is the one that is the fastest, safest and least obtrusive, so consider where your payment process is the most visible to your customers. Whether you need to process payments at scale, digitise cumbersome processes, enhance security and mitigate risk, reconcile, make and take real-time payments, or pinpoint exactly when funds have entered your business account, our embedded payment solutions can make your payment process smooth, fast and efficient.
Charting the rise of embedded payments
As digital transformation continues to surge through organisations, technology enabled solutions will play an increasingly important role in payment processes and, ultimately, the customer journey. Considering that embedded payments are already used by many businesses across different sectors, now is the time to be investing in them to maximise their potential for tomorrow.
We expect to see continued growth; not only in terms of adoption of embedded payments, but also in terms of innovation, especially when it comes to the breadth of use cases found for them.
Also on the horizon is an evolution in terms of the range of solutions available, such as account-to-account payments using either QR codes or through a link that can be sent via email or by SMS. In a nutshell, embedded payments will play a crucial role as the industry strives to make payments even quicker, simpler and safer.
BullionVault
With our embedded payments solution, BullionVault receive real-time notifications of payment activities within accounts, facilitating faster payments and eliminating the need for manual intervention.
While it will be some time before payments powered by APIs reach the ubiquity of card payments, the continued growth in adoption demonstrates an increased focus on the customer-centric payment experience, with businesses recognising that embedded payments make it easier for the customer to do business with them and, as a result, promote repeat custom. In short, embedded payment solutions mean that financial institutions are working at the forefront of the paradigm shift towards fast, flexible and tailored payment processes that prioritise the customer experience.
We have the technology to make your payment processes smooth and efficient – the question is, how could you put it into practice? Contact us today to find out how we could support you with our embedded payment solutions.
Article first published in The Treasurer.
Important legal information
Lloyds Bank is a trading name of Lloyds Bank plc, Bank of Scotland plc, Lloyds Bank Corporate Markets plc and Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH.
Lloyds Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ. Registered in Scotland no. SC327000. Lloyds Bank Corporate Markets plc. Registered office 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 10399850. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 119278, 169628 and 763256 respectively.
Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH is a wholly-owned subsidiary of Lloyds Bank Corporate Markets plc. Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH has its registered office at Thurn-und-Taxis Platz 6, 60313 Frankfurt, Germany. The company is registered with the Amtsgericht Frankfurt am Main, HRB 111650. Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH is supervised by the Bundesanstalt für Finanzdienstleistungsaufsicht.
Eligible deposits with us are protected by the Financial Services Compensation Scheme (FSCS). We are covered by the Financial Ombudsman Service (FOS). Please note that due to FSCS and FOS eligibility criteria not all business customers will be covered.
While all reasonable care has been taken to ensure that the information provided is correct, no liability is accepted by Lloyds Bank for any loss or damage caused to any person relying on any statement or omission. This is for information only and should not be relied upon as offering advice for any set of circumstances. Specific advice should always be sought in each instance.
Originally published at: Lloyds Bank
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