Embedded payments – the integration of payment processes directly into a company’s software – have revolutionised the ecommerce market, challenging the status quo and transforming consumer experience.
But while embedding payments has become common in consumer-facing platforms, the adoption of embedded payments in the business-to-business segment has, until now, lagged.
“There’s an increasing expectation of a consumer-like experience in B2B payments,” says Andrew Griffin, CFO at embedded payments provider Modulr. “Yet most assume there’s no alternative to bank-provided payments which are restricted to business hours, provide little or no software automation, require batch rather than real-time payments, and involve manual processes fraught with errors.”
This demand for 21st-century payments, and the legacy constraints inhibiting banks from providing them, are common across the globe. But, in the UK and Europe, regulatory change has powered fresh competition. “It’s no longer true that the corporate bank is the only source of payments for businesses,” Griffin explains.
The opening up of competition in the EU and UK payments world to regulated but non-bank Electronic Money Institutions (EMIs) has paved the way for businesses to think differently. Griffin points out that this trend has created the opportunity to shift the centre of gravity from corporate banks to business software platforms which are becoming payment control centres.
Expanding payment network access to EMIs has reimagined corporate transaction banking by bringing it into the tech stack itself, with accounts and payments being delivered through API integrations. Now, any business running on a software platform can embed payments into that platform. And the regulatory standards required of an EMI enable this to be delivered in a strong, secure and compliant way.
Myles Stephenson, Modulr’s founder and CEO, believes this shift is only just beginning. “Embedded payments have been a key enabler across financial services, making inroads in areas such as lending, savings, current accounts, insurance and more. Now it’s set to transform business software platforms across many other sectors,” he says.
“The opportunity for productivity and economic growth is huge. Embedding payments allows software platforms to provide more efficient and secure workflows, as well as giving them a competitive edge and the opportunity to create new revenue streams. Any business can now become a payments business by partnering with embedded payment platforms like Modulr.” Stephenson continues.
Griffin offers up the example of a partnership between Modulr and money management app HyperJar which allows the company to make and manage payments 24/7, with 99% of those payments fulfilled within 90 seconds. Similarly, he remarks on lettings platform Goodlord which uses Modulr’s embedded payments capabilities to collect and pay out rent in a much easier way, with over 70% of its core payments now automated.
“From neobanks to lending businesses, to accounting software providers, and non-financial businesses such as travel and car dealership networks, embedded payments eliminate slow processing and friction, which means a smoother customer experience and new revenue opportunities.”
Managing cash flow has become a key priority, while many are seeking the most cost-effective way to scale, improve customer retention, and drive new revenue. “Economic slowdowns have been shown to drive adoption of digital solutions as businesses look to improve productivity and efficiency. Embedded payments will be another prime example of that,” says Stephenson.
“Business technology stacks were built first on the connectivity provided by the internet; then models evolved driven by cloud computing and then mobile. Now a fourth tech stack layer is emerging: embedded payments. They’re set to transform the way businesses receive payments, reconcile and pay out over the next five years,” he continues. “Right now, we’re at the tip of the iceberg of what’s possible, and the future looks very exciting.”
For more information, please visit modulrfinance.com/embedded-payments