As more businesses adopt digital channels and back-office automation, KeyCorp sees an opportunity to place a payment portal at the heart of these developments.
"All trends are pointing to the digital acceleration continuing, so a small business needs to meet customers where they are with automated payments and other services," said Ken Gavrity, head of enterprise payments and analytics at KeyBank.
KeyBank has released a payment facilitator service that enables software companies to support payment processing, allowing them to offer digital payments and other financial services to their own customers. Payment facilitation refers to a provider, in this case Key, that adds a payment rail for other firms. Stripe, Block and PayPal are well-known payment facilitators and the
It's a strategy that has taken off over the past couple of years in consumer financial services, as banks partnered with fintechs to link payments with lending, money management and even digital entertainment. The
Embedded banking is now moving into B2B and B2C payments and banking, according to Enrico Camerinelli, a strategic advisor at Aite-Noverica specializing in commercial banking, cash and trade finance and payment.
"In retail banking embedded payments are pretty basic. It's one customer with their smartphone accessing different services through a payment app," Camerinelli said. "In commercial banking the complexity grows. You have more intermediaries, and the differences between business types becomes more of a challenge."
Key's new service follows the bank's November 2021 acquisition of
Key is also competing with providers of software that is tailored to specific business models.
About half of small businesses were using vertical software, or software tailored to a specific category's product or service, at the end of 2021. That is up from 30% at the end of 2018, according to research from
This trend creates competitive pressure to place payments within the underlying business software, according to Gavrity. "There is a likelihood that you can raise revenue per customer by placing banking capabilities into the software," he said.
A health care provider, for example, could embed payments into its practice management software to combine transaction processing with other functions that can also be offered digitally. In this sample use case, Key's payments technology would be the catalyst to move the practice and its patients away from paper forms to a workflow that includes digital appointment management and other automated communications, along with a payment using a Key card that's already on file, or one of Key's financing products.
Key predicts that other categories like commercial real estate and philanthropy can take advantage of embedded payments. Charities are increasingly moving toward digital options — and even digital assets — for collecting donations.
"It's about ingraining financial instruments into another customer's process," said Christopher May, executive vice president and head of XUP Payments at Key, who was president of XUP before the acquisition. "The fact that you are dealing with Key is almost invisible." When targeted at B2B or B2C use cases, payment facilitation and embedded payments will require technology providers that are in tune with the business' products and payment needs, which aren't as clear-cut as consumer payments, Camerinelli said.
"The way in which payments happen, and when, in different businesses varies," Camerinelli said, adding he considers the concept more about "lifecycle" management than merely embedded payments into business software. "Key is hinting at this with it mention of XUP's expertise," Camerinelli said.
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"It's a leveraged customer acquisition model," Gavrity said. "If a software platform is the primary customer, then there are thousands of dentists, and their patients, that could be underneath."