by Ben Dwyer If you spend any time online, you’ve probably heard the term “embedded payments” a lot more recently. But what is it, and does it affect your business?
The short answer is that embedded payments refers to payment options that are integrated directly into apps or websites. Instead of requiring an external credit card machine or redirecting you to a payment processing page online, the payment capability is “embedded” in the app or website.
In this article, I’ll go into more detail on how embedded payments work and what businesses need to pay attention to.
What are embedded payments?
As I mentioned above, embedded payment means that you’ll accept payment through an app or your website rather than through a traditional credit card machine or a separate payment page. Think about any in-app purchases you may have made as a consumer, such as through DoorDash or Uber. When you order food through DoorDash or set up a ride through Uber, you don’t swipe a card – you pay in the app. That’s an example of an embedded payment.
The website version is a little murkier – roughly speaking, it’s an embedded payment if the user is not directed away to another page to finish their purchase. However, not all ecommerce websites do that. Some instead redirect you to a payment page, often hosted by your credit card processor, to complete the transaction. In most cases, the redirect is relatively seamless, but it often doesn’t have the same look or feel of the full ecommerce site. In other cases, the redirects can be a little clunkier. A common example many people are familiar with is PayPal. In some implementations, customers begin the checkout process on an ecommerce website, but if they opt to pay using PayPal, they are redirected to Paypal’s site and then redirected back.
How do embedded payments work?
Embedded payments really don’t work much differently than other online payments. There is a payment processor on the backend, who handles the transaction for a fee. The embedded payment is enabled through a processor’s API, a programming interface designed to allow for customization and integration of various systems. Once the payment is authorized, funds are removed from the customer’s back account and transferred to the business’s bank account.
Are embedded payments safe?
Yes, they are just as safe as other types of payments. That is to say, they’re as safe as the technology used and your implementation of it.
Like other payments, embedded payment platforms are concerned about security. These days, tokenization is a popular security protocol that replaces card details with secure “tokens” that are meaningless to hackers. Embedded payments frequently make use of tokenization to ensure secure transactions. With embedded payments, you’ll still be responsible for PCI compliance and ensuring your systems are secure.
What kind of businesses should consider embedded payments?
Since embedded payments are primarily used in apps and websites, it makes the most sense for businesses that heavily rely on an app or ecommerce site. They might still make sense for brick-and-mortar businesses like restaurants, retailers, or coffee shops, but it depends on the specifics. I’ll get into that in the next section.
But for ecommerce or app-based businesses, it can include things like service businesses that utilize online booking systems. If you have a business that offers services, whether it’s a salon, pet-sitting, accountant, or handyman services, an app with embedded payments can cut down on the need to accept checks or carry a card reader with you to job sites.
When does it make sense to use embedded payments for in-person businesses?
While many brick-and-mortar businesses are fine with simply using traditional credit card machines or POS systems, there could be times that embedded payments make sense. That primarily comes into play with curbside orders or mobile purchases. For example, if your restaurant offers takeout with an online portal to view the menu and place an order, an embedded payment option would be a seamless option for your customers. Same for a store that offers online purchasing for in-store pickup. In both of those cases, you’ll collect the money at the time of the purchase, speeding up the experience when the customer comes to get their food or items.
Benefits of Embedded Payments
The main reason people like embedded payments is that they make the checkout process smoother and more convenient, keeping the customer right in your app or website. This can lead to fewer abandoned carts or lost sales that can come from redirected payment pages, especially if the direct is slow to load. Additionally, embedded payment systems typically match your branding / website / app much more seamlessly than a hosted or redirected payment page. While most hosted pages let you choose specific colors or add your logo, it often has a distinctly different feel from the rest of a website, usually more stark and plain. Embedded payments make your business seem modern and up on technology.
Drawbacks of Embedded Payments
Like most things, embedded payments aren’t without some drawbacks. In this case, though, they’re mostly the same possible drawbacks as other things ecommerce business owners have to think about. That includes being “locked in” to a specific payment platform or processor. You may want to consider an ecommerce platform that allows a choice of payment processors to give you flexibility in the future. Additionally, the fees to accept embedded payments (while they should be the same as other “card-not-present” fees) can be high if you don’t know what to look for.
Read more: Card-Present vs. Card-Not-Present Payments
Another possible hassle is more complicated customer service. With embedded payments, when you have an issue with accepting cards, you may have to do a little more investigating to find out where the issue is.
How do I implement embedded payments?
If you’ve considered your business use-case and determined that you want the smoothest checkout experience, you’re probably interested in embedded payments. For many small businesses, especially those with online or hybrid purchasing, embedded payments can significantly improve customer experience.
In most cases, accepting embedded payments isn’t a big undertaking. For business owners already taking payments online and looking for a more seamless experience by embedding the payment capabilities, you can check in with your current processor on what options you have.
If you’re not taking payments yet, you’ll want to look for the right platform for your business and the right processor to support that. If specific features matter more, you’ll want to start by looking into ecommerce website options. On the other hand, if price matters more, you should start off by finding a competitive credit card processing company and seeing what solutions they can support.
If you’re interested in features and looking for your platform first, Check out some of these articles:
Service businesses may want to check out booking systems that allow for booking appointments or classes and paying right through that app or booking system. You can check out our profile on Mindbody, where real customers can leave reviews.
If you’re more interested in pricing, consider signing up for a free CardFellow account to compare pricing from multiple processors in one location. There’s no obligation and no sales calls – just easy comparison shopping.
Costs for Embedded Payments
Since embedded payments isn’t really a separate feature, the costs are simply the ecommerce pricing a processor charges. That also makes it tough to say what any specific business can expect to pay. Credit card processing companies will set your rates and fees. Broadly speaking, “card not present” payments (which is what embedded payments are) incur higher fees than “card present” payments. But that doesn’t mean you shouldn’t shop around.
Be sure to arm yourself with knowledge of credit card processing pricing models before you get started, and don’t fall into the trap of asking a processor for their “rates.”
Still have questions or need help finding a processor that can implement embedded payments for your business? Create a free CardFellow account and give us a call!
