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Embedded vs Integrated Payments: What’s the Difference?

If you’re among the many SaaS companies that are already processing payments for your customers, then you know how instrumental payments are to revenue growth and the customer experience. You’re also likely aware of the abundance of confusing payments lingo thrown about on the internet.

In this blog, we’re going to demystify these two terms: embedded payments and integrated payments.

How are integrated payments different from embedded payments?

While these payment terms are often used interchangeably, there is one technical, but important distinction between them—merchant management. The thing is, this one difference could be stagnating your earning potential, as well as your ability to create better experiences for your customers and their customers.

As the saying goes, the devil is in the details.

Embedded payments improve the customer experience

With integrated payment systems, you’re basically connecting two products together so that they can speak to one another machine style (via API). This connection allows your business to accept and monetize payments but doesn’t let it control the merchant onboarding experience—which is where the distinction comes in. Instead, this aspect of your payments is controlled by a third-party payment processor—just like with the ISO/ISV model.

By contrast, embedded payments involve making payments an integral part of your business. Along with a payment gateway integration, you’re also building a merchant onboarding flow and management system into your product. This means you own more of the payments experience.

Here’s an analogy:

Think of the embedded payments option as a room addition to your home. While it wasn’t part of the original design, it’s made to function and feel as if it were. Integrated payments, on the other hand, are more akin to say a screened-in porch. It adds additional functionality to your home, but is only attached to it and not truly a part of it. Both add value, but because a room addition is built as a seamless addition, it has more capabilities and brings more return on investment.

How are these payment models the same?

Aside from merchant management, these models are pretty much identical. Both allow your platform to process payments via a payment facilitator (PayFac) and empower your business (and your customers) to offer payments directly in your platform rather than having to send customers to a third-party site to pay.

The PayFac, in both instances, provides the necessary APIs and infrastructure and handles much of the payments-related heavy lifting. Or you can go with the technology-only approach and become a PayFac yourself with tech from an enablement partner. Finix provides both models.

How integrated and embedded payments can help SaaS platforms

Whether you have integrated or embedded payments into your platform, the following are the top advantages of using these models:

Improved customer experience

Embedding or integrating payments into your platform will have a noticeable and positive impact on your customer's payment experience. That’s because the process will be more seamless.

However, as mentioned earlier, an embedded solution takes it one step further and enhances the customer experience even more by also including merchant management features. This is important as great customer experiences reduce churn rates and improve retention.

The ability to monetize payments

New revenue opportunities were likely what prompted you to accept payments in the first place. Considering that over 37% of businesses have already switched to cloud-based solutions and 73% of companies plan to rely solely on SaaS-based systems—it’s clear that there is a large market for SaaS products.

The products that provide more value to their customers through features like embedded payments will provide more value and win against the competition, further increasing their revenue growth.

To get an idea of just how lucrative payments can be for platforms, just look at companies like Shopify and Toast. Shopify saw a 42% increase in its gross payments volume (GPV) in 2020, which brought its payments revenue to $53.9 billion. Toast experienced similar results, with its GPV jumping 124% in 2021.

Save time and money

Both integrated and embedded payments also save you time and money as they significantly cut down your development time vs building your own payments infrastructure. This is because you're using your provider’s technology and don’t have to build everything from scratch. How much you save depends on what your provider offers and how much of the experience you want to control.

At Finix, we provide an embedded payment solution that offers a single integration for in-person and online payments. This means you’ll save even more time and money and can allocate developer resources to your core product.

Fraud detection

When partnering with a provider like Finix, your transactions are monitored for fraud in real time. This protects you and your customers’ brand reputation and helps to prevent disputes and chargebacks.

Which payments model is best for SaaS platforms/ISVs?

While both options are beneficial, an embedded payments solution that provides merchant management is the best fit for SaaS companies—especially when payments are a core part of your revenue strategy. This is because you’ll have more control over how merchants are onboarded as well as the overall experience of your customers and their customers.

Choosing the right partner is crucial to your long-term success in payments. Finix offers a full payments suite specially designed to make accepting payments and managing merchants easy and frictionless. Your brand is always front and center—with customization options for our dashboard, onboarding, and subdomains—and is backed by our world-class support and sophisticated, reliable payments APIs.

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