Enhancing your brand with embedded payments

Think about the last time you had an unpleasant experience paying for something. Afterward, were you focused on the value you received from your purchase, or was that overshadowed by the aggravation you felt when paying?

Let’s say you flew into a new city and booked a ride from the airport. The car was clean; the driver was pleasant, took you on a scenic route and pointed out landmarks along the way; and you were promptly transported to your hotel. At the end of the ride, however, the driver wouldn’t accept your credit card, or couldn’t successfully process your card transaction, and you spent extra time trying to find cash to pay the fare.

What impression did that leave on you? On your next trip, might you choose a different company for your ride?

One of the ways Uber and other ride-sharing apps have disrupted the traditional taxi industry — and created a more brand-centric experience — is by making it easier to schedule and pay for a ride. They make the transaction aspect of that experience fast and invisible through “embedded payments.”

What is embedded finance?

“Embedded finance” refers to the practice of integrating financial services into non-financial applications or platforms, essentially allowing customers to access financial tools within the services they already use.

Embedded payments are a form of embedded finance, and they occur in the normal process flow of doing business. They create seamless, simple experiences, rather than separate, disconnected events. As such, they make paying easier for customers and simplify collection and reconciliation for employees of the service provider.

For Uber, embedded payments ensure riders leave the car thinking about their pleasant journey rather than any friction created by the payment experience. “Their entire perception of Uber is driven by the ride itself and the app,” notes Anu Somani, head of Global Payables & Embedded Payments at U.S. Bank.

Embedded payments improve the customer experience

Many businesses are leveraging the power of embedded payments to streamline and improve the customer experience.

Video streaming services, for instance, typically offer the ability for a viewer to register on their TV screen or through a mobile device and sign up to pay for the service automatically each month.

Amazon Go stores illustrate embedded payments trends in retail. Embedded payments are the foundation for Amazon’s Just Walk Out shopping experience. Amazon Go stores let shoppers skip a traditional checkout when they pay with an Amazon app or through a payment method tied to their account. When they’re done shopping, store visitors leave and the technology automatically charges them for the items they take with them.

The added power of ‘instant’

Embedding payments can be even more powerful — and brand-enhancing — now that instant payment options like RTP^® and FedNow^® Service have emerged and enable embedded experiences featuring more speed and less friction.

For instance, auto insurers are supporting the emerging 24/7 economy and improving the claim payment process by offering embedded instant payments. Nowadays, with some insurers, if you are in a car accident, you can pull up an app on your phone, submit photos of the damage along with your claim, and receive a same-day claim payment via one of the new instant payment rails.

Embedded payments also support more traditional payment methods, such as ACH and checks, when the speed of payment is less of a priority. “The value proposition of keeping the brand front and center remains, irrespective of the payment rail,” Somani says.

Another benefit: greater employee efficiency

For companies making regular business-to-business payments, another important benefit of embedded payments is the efficiency gained by their employees who are originating those payments. Embedded B2B payments reduce their manual workload and cut down on errors.

Increasingly, companies are embedding payment origination capabilities in their treasury management system (TMS) or enterprise resource planning (ERP) system. That way, instead of originating a payment in a separate event using commercial online banking — and rekeying all the payment details — an employee can make payments directly from the TMS or ERP.

“Embedded payments allow them to remain in their normal process flow versus going to a bank-centric process flow,” Somani explains. “Whatever invoice-to-pay tool application they are in, they can hit a button to approve the invoice and purchase order.”

Embedded payments are enabled by technology such as bank application programming interfaces (APIs), which allow companies to send payment instructions directly to their bank from the platform they are working in, and then receive information back about balances and payment status.

“The employee never has to leave the application they spend their entire day in,” Somani notes.

Multiple paths to embedded payments

Lithia Motors is an example of a company leveraging embedded payments and connecting directly with its bank. This major U.S. auto retailer has a used car e-commerce unit, Driveway. By embedding U.S. Bank payment capability in Driveway’s customer app, the company is enabling consumers to receive payment for used cars they sell to Driveway in real time, offering Driveway a significant competitive advantage and brand enhancement.

Companies can also leverage embedded payment capabilities by using third-party applications that allow them to link indirectly to bank payment rails. To support this path, U.S. Bank has introduced the Connected Partnership Network. The network includes an online directory that features a growing list of fintechs with popular applications already integrated with U.S. Bank embedded payment capabilities. The network directory helps business users find and implement specialized payment and treasury solutions that natively integrate with their preferred bank.

Control your own destiny

Leveraging embedded payments requires a deliberate, strategic decision and some study. You must think about what embedded payments will mean for your customers, how you will use this flexible capability to grow with your business, and whether you will build a direct connection with your bank or create an indirect connection through a third-party application.

“It is a very conscious effort, and one that seems to be resonating with a lot of companies because it enables them to create these seamless, brand-centric experiences,” Somani says. “Embedded payments allow companies to control their own destiny rather than letting poor payment experiences negatively impact their success.”

To learn more about how embedded payments can help you enhance your brand and increase efficiency, contact your banker or treasury management representative.