Before diving into the use cases and value propositions surrounding embedded payments and finance, let's clarify the role of an Independent Software Vendor (ISV). An ISV is a company that develops and sells software products intended for use by other businesses or end-users. These software solutions can range from specialized enterprise applications like SalesForce and Marketo, to consumer-focused marketplaces like AirBNB and Uber, to various vertical-specific Point of Sale (POS) systems such as Vagaro, LightSpeed, and Payanywhere. ISVs play a crucial role in the wider software ecosystem, driving innovation and providing tailored solutions to meet the needs of merchants and consumers.

By definition, embedded payments add transaction processing directly into a software platform or application. This seamless integration makes the connection between software and payment nearly invisible to the end user. Embedded payments differ from the early digital adoption of integrated payments because with embedded payments, the software company selling the application controls the payment experience. This offers an enhanced user experience, reduced cart abandonment rates, and increased control over the checkout process compared to integrated payments. Instead of relying on standalone payment gateways or third-party platforms, payment processing capabilities are embedded directly into the native workflow of an application. This integration not only streamlines the payment experience for end-users but also enhances the overall value proposition for the ISV, allowing the software company to earn a share of the transaction processing revenue.

One common implementation of embedded payments is through the use of Payment APIs (Application Programming Interfaces) and SDKs (Software Development Kits). For example, consider an ecommerce platform seeking to incorporate hosted payments in an app without users leaving the native application. By leveraging solutions like the iFrame JavaScript SDK, developers can embed secure payment processing functionality directly into their checkout process, eliminating the need for users to navigate to a different site or app run by an external payment gateway. This integration also eliminates the need for manual reconciliation between disparate systems, streamlines operations for merchants, and offers the software provider a new income stream through a revenue sharing model with the payment processor.

For merchants without development teams, there are even no-code and low-code ecommerce payment options available such as EPX Hosted Checkout. This customizable solution allows merchants to provide an ecommerce checkout experience with a customizable user interface (UI) directly embedded into their application. With this embedded solution, a website's branding and theme are carried from the main UI through the checkout experience, increasing shopper confidence and reducing cart abandonment. Additionally, payment APIs and SDKs such as EPX Hosted Checkout reduce the burden of PCI compliance on merchants because sensitive credit card data is never stored on merchant servers.

Embedded finance integrates third party financial services into non-financial applications. Think about the last time you purchased a flight and were asked if you wanted to add travel insurance. That travel insurance was provided by a third party, and their digital service was embedded directly into the purchasing flow for your plane ticket. This approach enables ISVs to offer add-on financial services, tailoring their software to the needs of consumers while allowing the ISV to focus on their core software competency. This provides another revenue stream for the ISV through profit-sharing with the third party vendor.

Another example of embedded finance is the integration of financial management tools within a merchant dashboard. Consider a platform like Payments Hub by North, a merchant dashboard for small and medium business owners that allows merchants to see transactions, create invoices, and review payment activity. Payments Hub has embedded additional financial services directly into the software, including automated sales tax management capabilities provided by Davo. With Davo seamlessly embedded into Payments Hub, merchants have their daily sales tax obligations automatically calculated and set aside based on transactions and geographic data. At the end of each accounting period, Davo facilitates the filing and payment of sales tax on behalf of the merchants, eliminating manual work and reducing compliance burdens for the merchant.

Embedded payments and finance represent a transformative opportunity for ISVs to enhance the value proposition of their software solutions. By embedding payment processing and financial services directly into their platforms, ISVs can streamline operations, improve user experiences, and unlock new revenue streams. For software developers and business decision-makers, embracing embedded payments and finance can pave the way for innovation and differentiation in the increasingly competitive landscape of FinTech.

Whether you're exploring embedded payment solutions, seeking to streamline a POS integration, or looking to enhance your platform with embedded finance capabilities, understanding the potential of embedded payments and finance is key to driving success in today's digital economy. Embrace the power of embedded payments and finance to unlock new opportunities and deliver value to your customers.