The next step in embedded finance is B2B commerce

Wind up the clock Just a few years ago, online transactions were already a disjointed experience.

After completing a shopping cart on a merchant’s website, the user was redirected to another website at checkout to enter the same payment information. Cart abandonment inevitably ensued.

Enter in-app payments.

As Jim ColassanoSenior Vice President, RTP, Product Development and Strategy at The Clearing HousePYMNTS said embedded options have transformed the very nature of online and B2B commerce. While embedded payments and embedded finance are related concepts in The world of FinTech, they address different aspects of the consumer experience.

Integrated payments, he told PYMNTS during the “What are the next steps for payments?The Business Invoice series—which today takes stock halfway through 2024—focuses on integrating payment processing capabilities directly into non-financial applications or platforms, so that transactions can be completed without having to leave an application.

“It creates a seamless experience,” Colassano said, giving the example of Uber as an illustration of how a payment can be deeply integrated into an application and into daily life.

Without this built-in functionality, friction would be the hallmark of ride-hailing services. But with this seamless interaction, “it’s very customer-centric,” he said.

Expanding capabilities

Embedded finance extends this concept to a broader set of capabilities and goes beyond payments to include a broader range of financial services, spanning loans, savings, bank accounts and insurance. Embedded finance is flexible, take into account that while sometimes a transaction may be a direct payment, “sometimes it may be necessary to finance that payment,” he said.

For merchants and platforms that offer integrated financing options, there are additional benefits beyond just closing a sale, Colassano said. They get data and insights that offers insight into what customers buy, as well as their preferred payment methods.

“This improves trust, speed and reliability in a holistic environment as you deliver more services to customers. that you “We support,” he said.

The growth of real-time payments is giving embedded finance (and TCH’s real-time network) a boost. Traditional payment rails operate on batch systems, meaning it’s difficult to process payments one at a time and get confirmation that the transactions have been completed. In fact It was done, he said.

“It is Really important, especially if you are in a digital environment and You “I want these payments to be made faithfully,” he said.

While traditionally, larger enterprises have had access to these “faster” capabilities, Colassano said smaller vendors, enterprise resource planning (ERP) providers and fintechs are now starting to integrate real-time payments into their platforms, enabling their small businesses to use them online.

This helps small businesses move away from paper payments and checks. B2B use cases will be among the fastest growing segments across the globe. RTP® Network as 2024 gives way to 2025, he said.

Elsewhere, traditional pay cycles are being disrupted, he said. Workers want faster, on-demand access to money, especially in the gig economy.

Real-time payments will be widely adopted in an inflationary environment, and having a clear view of when payments will be finalized will be valuable as B2B interactions incorporate early payment discounts and other incentives to pay. in right timehe said.

Merchant settlements are increasingly moving toward real-time applications because the wait time to receive your money means that money loses value over time, he said. Because real-time rails operate 24/7, users aren’t limited to the opening and availability hours of banks.

Real-time payments and integrated financing, Colassano said, “remove barriers and support individuals and businesses in the way they need and not within the strict confines of a five-day work week… immediacy, settlement, timing, speed, all of these things are important today for businesses of all sizes, but particularly small to businesses and consumers, in terms of managing their expenses.