Embedded payments will change commerce as much as cards

We accept change as it comes, and it’s only when we look back that we see how quickly things have shifted. Early adopters of the first debit and credit cards had no idea that we would be using contactless technology to pay for goods a few decades later.

The card has been transformed from a physical way to pay for goods into a digital token that spans multiple consumer wallets.

Yet in a few short years, the transaction will be dramatically different once again—this time thanks to embedded payments. The direct relationship between the customer and the transaction will cease to exist, as payments will be embedded and invisible to the point that customers won’t think about it at all. The payment will simply happen.

You needn’t look far to see how similar ideas have quickly flourished in other industries. It was not long ago we had a small directory of phone numbers in our head, and a larger one at home. But today, people can dial numbers by simply saying their contact’s name to an AI assistant. The process of phoning someone has been embedded in other applications.

This decade will see payments become embedded in much the same way—into connected applications (Facebook, WeChat, Grab) and devices (think the internet of things). Inevitably, this means our very relationship with payments is going to change. Services like Uber and Deliveroo are already making this possible, with the payment being frictionless and taking place behind the scenes.

Biometric technology (such as face and voice identification) is going to further drive this trend until it becomes truly commonplace in all transactions. Just as cash is ever rarer, the non-embedded payment will become increasingly unusual.

Embedded payments offer several benefits.

Convenience. Consumers will always look for the easiest route to purchase. Entering a long card number on a mobile phone gets old quickly. It is way more convenient to create a one-click checkout experience by embedding payments into a merchant’s platform or store.

Revenues. Up to 70% of all shopping carts online are abandoned. While all abandonments can’t be attributed to payment friction, friction undoubtedly contributes to the problem. Removing it will therefore increase revenues. And it should be stated that one-time sales are less lucrative—75% of businesses selling direct to consumers are set to offer subscriptions by 2023. This model, in vogue thanks to the likes of Netflix, Headspace and Spotify, sees a recurring payment embedded into the application and in turn, delivering consistent and predictable revenues. There’s no need to attract a customer back to a store when they have already bought in.

Innovation. Embedded payments generate more data, which helps businesses better understand their customers and potentially boost revenue. Uber has used insights from its payments data to create a support programm for drivers who didn’t have the cash to buy fuel and complete trips—even if funds weren’t immediately available, Uber was able to help new or struggling drivers stay on the road and keep earning.

In a few short years, payments will evolve into a frictionless and invisible experience for consumers and a data-rich experience for retailers. Consumers will enjoy greater convenience, and businesses will have opportunities for greater revenue and new ways to innovate. It’s this innovation that will define the next decade of finance, with payments increasingly invisible and embedded into a wide array of applications and brands.