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The Rise of Embedded Payments and What it Means for Testing Operations

Steve Gilde September 12, 2023
The Rise of Embedded Payments and What it Means for Testing Operations

“The rise of embedded finance marks a new era, not only for banking transactions but also for how consumers and businesses build and manage relationships with financial services more broadly.”

 

That’s according to projections from consulting firm Bain & Company, whose latest report on embedded finance further states that “Financial services (e.g., payments) embedded into e-commerce and other software platforms accounted for $2.6 trillion, or nearly 5 percent, of total US financial transactions in 2021, and by 2026 will exceed $7 trillion.”

But what exactly are embedded payments, and what will they mean for the payments industry?

2023 Trends Guide Payment Testing

Embedded Payments?

At its core, an embedded payment is a transaction that happens within a platform or application, eliminating the need for the consumer to navigate to an external payment gateway. Think purchasing an item within an app, without the traditional redirection to a separate payment page.

One of the driving forces behind the use and rise of embedded payments is the simplified/enhanced user experience. By streamlining the transaction processing flow and minimizing friction, consumers are more likely to complete purchases – reducing traditional shopping cart abandonment rates – and benefiting both themselves and their financial services providers.

The Impact on Payment Testing? 

The convenience offered by embedded payments also brings additional complexity to the transaction processing environment, meaning that testing also becomes more complex. Unlike traditional payment gateways, embedded payments often need to function across various devices, platforms, and operating systems. This introduces a wider range of testing scenarios, making it more difficult to ensure consistency and reliability for each transaction.

Here are a few things to keep in mind when it comes to payments testing for embedded payments:

Regulatory and Risk Management: There is an inherent need to manage and minimize the risk associated with these embedded transactions, which necessarily requires enhanced testing capabilities. In a recent PaymentsJournal essay, a number of key considerations are outlined, including: “…onboarding, scaling the business, compliance and regulation, as well as underwriting and risk staging…”

 Integration Considerations: Many organizations struggle to deliver the true omnichannel banking experience needed to capture and retain consumers who want anytime, anywhere access to financial products and services. Success here requires that the payment testing operations be fully integrated across the enterprise. 

According to PwC, “Success across the embedded finance spectrum - from one-off point-of-sale (POS) technology to solutions for full vertical integration with multiple third parties - requires a major shift in mindset and capabilities.”

Opportunity: The growth trend for embedded payments is nearly limitless for both B2C and B2B commerce. A recent blog from the UK-based Payments Association predicts that embedded payment transactions will exceed US$7 trillion by 2026. As the volume of embedded payments continues to increase, testing operations must ensure that all processing components are capable of supporting the rapid growth.

Interested in learning more about how advanced testing capabilities can help support embedded payments, or simply want to upgrade your current payment testing operations? Reach out to the Paragon Application System team of payment testing experts today.

We’ve developed an innovative range of payment testing products to help businesses like yours implement faster, more efficient and more accurate payment testing processes. 

Request a Consultation

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