The future of payments and commerce gets closer every day.
So close, in fact, that they are becoming intertwined — and embedded.
In an era where technology integrates with daily life, the concept of embedded finance is reshaping payments and financial services while transforming both consumer and business interactions with payments.
“Embedding [payments and financial products] across the value chain and within all of the experiences that a customer is going through in that commerce environment is incredibly important,” Jennifer Marriner, EVP, Global Acceptance Solutions at Mastercard, told PYMNTS during a discussion for the series “What’s Next in Payments.”
Embedded finance is essentially the integration of financial services into a traditionally non-financial platform, creating a more streamlined, user-friendly experience and making payments smooth and accessible.
“The future of commerce,” Marriner said, “is at the intersection of new technology and digitization.”
This shift, from traditional financial transactions to a more digitized and integrated approach, is not only reshaping consumer expectations but also redefining the roles of traditional financial institutions.
For businesses, particularly retailers, the benefits of embedded finance extend beyond payment processing to encompass the entire customer lifetime value chain.
By integrating financial services, Marriner said, businesses can foster closer relationships with their customers, offering personalized experiences through loyalty programs and promotions. This capability not only enhances customer satisfaction but also encourages repeat business, driving growth.
“Banking, payments and the commerce experience is morphed together through embedding capabilities, it gives a chance for the retailer to create stickier relationships and a closer relationship with their customer,” she said.
In the business-to-business (B2B) space, the adoption of embedded finance is transforming traditional payment processes, which have historically been slow, cumbersome, and riddled with inefficiencies. The integration of digital financial services, Marriner noted, can streamline operations, reduce costs and improve risk management.
“B2B transactions have traditionally had a slower approval process, and B2B players have been slower to adopt new technology. But what we’re seeing with a shift to digital is that there is now more data, more controls, stronger authentication coming into that B2B space, all the while bringing down the cost and improving the risk models,” she said. “We’re definitely seeing on the B2B side a realization that there’s a way they can streamline their business through embedded finance.”
Mastercard’s own partnerships with technology providers like Oracle and SAP are pivotal in driving these changes, enabling businesses to digitize their B2B environment and transition from outdated payment methods to more efficient digital systems.
The core advantage of embedded finance is its ability to enhance the end user experience by reducing friction. As Marriner put it, end users rarely wake up thinking about making payments; rather, they think about experiences or products they want. Payments, therefore, need to be an effortless part of this journey.
And with the rise of super apps that offer a range of services including banking, end users are open to exploring new products and services from non-traditional players. Mastercard’s focus on technologies like contactless payments and tokenization exemplifies this integration.
At the same time, Marriner said, small and medium-sized businesses (SMBs) are a significant focus within the embedded finance landscape. SMBs are particularly attracted to embedded finance as it offers a straightforward way to access financial services through the platforms that they already use for other business operations, such as accounting and inventory management.
Mastercard’s collaboration with FinTech companies, both large and small, is crucial in catering to the diverse needs of SMBs, Marriner said. These partnerships enable a deeper understanding of the specific challenges and requirements of the SMB sector, allowing for the development of tailored solutions.
Looking ahead, as businesses continue to adopt embedded finance, the focus will likely shift toward optimizing these systems and enhancing customer engagement. Marriner suggested that the next step involves building on the foundational capabilities of embedded payments by integrating additional services such as loyalty programs and personalized promotions. This approach not only deepens the customer relationship but also provides businesses with valuable insights into customer preferences and behavior.
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