By Frank Young
The terms integrated and embedded payment are all over the SaaS world right now. But what do they mean? What’s the difference between them? In this article, we’ll explore everything you need to know about integrated and embedded payment solutions.
Types of Payment Solutions
When it comes to payment solutions, SaaS companies have two main options: integrated payments and embedded payments. The terms are often used interchangeably in the payments industry. While there are many similarities between the two payment solutions, there are also some key differences.
Integrated Payment Systems
Integrated payments typically entails connecting a separate payment processing service to your existing software or system. Depending on the payment provider, users may be redirected to a separate payment page or interface to complete a transaction.
Although a payment integration provides payment processing functionality, it may not offer the same level of seamlessness as embedded payments.
Embedded Payment Systems
Embedding payments into your software helps create a seamless user experience, enabling users to complete transactions without being redirected to an external payment platform.
Eliminating the need for separate payment processes reduces friction points. Embedded payments enhance convenience, efficiency, and overall satisfaction for users. This approach can drive customer loyalty and increased conversion rates.
Which Should You Choose?
The goal of both integrated and embedded payment solutions is essentially the same: provide a secure and efficient way for your clients to accept payments. They both have advantages and disadvantages.
Either an integrated or embedded payment system is a far superior option than manual or offline credit card processing.
Payments are a complex and challenging endeavor for your clients. Integrating an external payment gateway into an existing system requiring substantial effort and technical know-how. Many businesses do not have the means to integrate payment services into their business software on their own.
Without an integrated or embedded payment system, your clients will have to manually reconcile transaction information with your software. This takes a substantial amount of time and has a high chance of human error.
Choosing either an integrated payment system or an embedded payment system is far more beneficial to your company than not offering any payment solution.
The Benefits of an Integrated Payment Strategy
Instead of focusing on a single solution, it is much more important to develop an integrated payment strategy. Both integrated and embedded payments fall under the strategic umbrella.
As mentioned above, processing payments is a major pain point for most businesses. Developing and implementing a payment strategy brings a plethora of benefits, including the following.
New Revenue Streams
One of the key ways software companies generate revenue from payment processing is through transaction fees. This is a charge applied to each payment processed through the company’s platform.
Depending on the contract with your payment processor, the revenue you collect from these fees may be a flat rate per transaction, a percentage of the transaction amount, or a combination of both. As your clients process more payments, you earn more revenue.
Increased Efficiency and Time Savings
As mentioned above, manual reconciliation of payments is a time-consuming process. It requires manual data entry, double-checking for accuracy, and can result in errors. Integrating credit card processing into your software eliminates these tasks and allows your clients to focus on other aspects of their business. This also helps to improve customer satisfaction and retention.
Customer Retention and Loyalty
Embedded or integrated payments have proven to be powerful tools for enhancing customer retention and fostering loyalty. These systems provide a seamless and frictionless user experience — a critical factor in ensuring customer satisfaction.
An integrated solution often comes with advanced features such as automated recurring billing, subscription management, and invoice generation. These features not only simplify administrative tasks for your clients but also provide a consistent and predictable billing experience for their customers. As clients get accustomed to the convenience and efficiency of these features, their loyalty to your software deepens.
Choosing the Right Payment Provider
As stated above, your focus should not be on choosing between an integrated or embedded payment solution. The payment provider you choose will have a greater impact on the success of your payment strategy than the type of solution.
Payment service providers are not created equal. They differ in terms of pricing, features, security and reliability. It is important to thoroughly research and compare different providers before making a decision.
Consider the following elements when evaluating payment processors.
Revenue and Profitability
As mentioned above, embedded or integrated payments can bring in additional revenue. However, you should never assume a payment solution will automatically become profitable. It’s vital to consistently assess your payments infrastructure to maximize revenue and avoid settling for suboptimal margins and terms with payment providers.
This requires analyzing fees, rates, and user experience with your payment processor. Settling for less than optimal payment margins and terms can hinder growth and success in today’s competitive market.
Operational Efficiency
To maximize revenue growth, your company’s internal structure must align with your goals. A quality payment processor should act as a consultant, providing clear and prompt communication.
They should help your team identify inefficiencies, streamline workflows, enhance communication, and invest in tools to ensure all departments (sales, marketing, finance) work together towards the common objective: making payments profitable.
Conversion and Lifetime Value
The success of a payment service depends on effective positioning and sales efforts to drive high adoption rates. This requires understanding your clients’ pain points and articulating how your payment service can solve their problems. Your payment provider should help train your team on how to speak to your clients about payments.
Be aware that the financial industry is notorious for poor customer service. Be sure to research your payment provider’s customer support ratings and net promoter score (NPS) to ensure they won’t damage your brand.
Speed to Market and Onboarding
A smooth onboarding process is crucial for customers to quickly and easily start using your integrated payments service. If it’s tedious and clunky, it can slow down revenue and frustrate potential customers.
Look for a processor with a streamlined onboarding process. This will not only help you gain revenue faster, but also foster customer loyalty.
Control and Portability
Owning your merchant portfolio is crucial for SaaS companies’ payment and growth strategy. It offers versatility, scalability, and the ability to adapt to changing market conditions. However, many payment providers refuse to give up contractual control of this asset, limiting your success. This overlooked aspect can be a key differentiator in a competitive market.
Data Transparency
Integrated payments can provide software companies with valuable data and analytics for strategic decision-making. Tracking transactional data in real-time helps understand customer purchasing habits, optimize pricing, and identify growth opportunities.
However, not every processor offers this level of detail and transparency. Be sure to research the data capabilities of your potential payment provider.
Partnership Mindset
The world of payments is complex and ever-evolving. You want to find a payment partner, not just a payment service provider.
A payment partner is invested in your success and works collaboratively with you, offering guidance, industry knowledge, and support for long-term growth. They should be willing to innovate and adapt alongside your company as it grows.
A true payment partnership brings numerous benefits, including optimized revenue streams, valuable market insights, strategic guidance, and accelerated growth. A purely transactional relationship with a payment processor can lead to missed opportunities, misaligned strategies, and business stagnation.
Final Thoughts
Don’t let the choice between an integrated payment solution or an embedded payment solution overshadow the importance of developing an integrated payment strategy. Ultimately, the success of your payment strategy will depend heavily on the individual payment service provider you use.
Take your time and find a payment provider that can match your company’s goals and ambitions. With the right partner, your integrated payment solution can help drive revenue growth, improve customer satisfaction, and support long-term success.
About Nexio
Nexio specializes in helping software companies unleash the true potential of their embedded or integrated payment strategies. We assist our partners in achieving resounding success and maximizing the value derived from their payment strategies.
By partnering with Nexio software companies can:
- Simplify payment complexity
- Optimize payment processes
- Scale with growing ambitions
With Nexio, you’re not just buying the technology to facilitate payments. You’re forging a partnership with a team of professionals who are dedicated to maximizing the value derived from this technology.
Our team of experts will help guide you to make strategic decisions and changes at the time that makes the most sense for your company. We help you create a flexible growth path that minimizes the operational burden and risk you have to take on. Contact us today to unlock the full potential of your payment strategy.