The consumer takes on embedded payments

By James Titman, Vice President of Embedded Finance.

It might be a hot topic for merchants, payments providers, banks, and a plethora of other financial services players, but what do consumers think – and know – about embedded payments?

A trend that’s rarely been out of the spotlight and continues to drive billions in investments yet seems to be more mystery concept than transaction revolution for the average consumer: in Paysafe’s 2022 Lost in Transaction survey of 11,000 respondents in Europe, North America, and Latin America, we asked consumers about their perception of embedded finance. Before we share more detailed thoughts about embedded finance from a business perspective, we explore some of the perceptions among consumer audiences and see what the results mean for merchants.

“Embedded what?”

Nearly half of those who took part in the survey – 49% – have never heard of the term embedded payments. And of the 51% who have heard of the term, 23% don’t understand what it means. This shows us that while there may be much fanfare across the industry, consumer awareness of embedded payments is generally low.

There’s a noteworthy difference between responses to this question in Latin America compared to EMEA and North America, with only 39% in Latin America having never heard of the term versus 53% in EMEA and North America combined. Latin American consumers’ keen adoption of alternative payment methods in the last couple of years might explain this more extensive understanding of the digital payments options available, as well as knowledge of how they work.

Back to the worldwide picture, and of those who have heard of the term embedded payments, 58%of respondents agree with the statement that they don’t know enough about embedded payments. Here, in contrast, we see minimal variation between EMEA, North American, and Latin America –54%, 58% and 63%respectively.

So one of the strong messages coming out of Paysafe’s research is that there is a clear opportunity for more education around embedded payments. This means there’s huge scope for the role of merchants in not only highlighting their embedded payments capabilities, but also helping the consumer base understand the benefits and thereby encouraging greater uptake.

Already the ultimate frictionless experience?

While the survey results expose a big knowledge gap and demonstrates a need for more education around embedded payments, there’s also a clear willingness to get to grips with the concept. This suggests people would be more open to using the option when paying for services online and on their smartphones.

Another key point is that a fair number of consumers who responded that they don’t know (or don’t know enough) have probably used embedded payments, but not necessarily realised they had. Or perhaps they’ve just not known this is what we call it in the fintech world. How easy is it to book a cab on an app, order a takeaway? And how many of us when we do this, think – “that was a seamless embedded payments transaction”?

The thing is, consumers know when they’ve had a substandard experience. They know when there’s friction. And the whole idea around embedded payments is that the payment aspect becomes so seamless that the consumer doesn’t need to expend any of the usual effort of locating their wallet or purse, entering card details, organising a transfer. Nor do they encounter any of the potential problems, such as dropped or declined transactions or long wait times as authentication processes take place. So these figures might, in part, reflect the fact that the embedded payments transactions consumers are having are so seamless as to be entirely unnoteworthy – they just work.

Embedding the experience and building trust

That being said, broadening consumers’ knowledge around embedded payments and its benefits is no bad thing. Especially addressing the security concerns that some respondents have expressed.

Like with many emerging tech trends, consumers may be taking time to get used to the concept. Currently, only 38% of those who have heard of embedded payments globally agree that they’re more secure than traditional methods of payment. When broken down into region, the responses highlight another interesting geographic difference, with 47%of Latin American consumers reckoning embedded payments are more secure than traditional payments, compared to 31% in EMEA and 37%in North America.

Another significant callout on security is that of those that have heard of embedded payments, 59% worry that they might be charged the wrong amount when using embedded payments. This is a fundamental concern that needs to be addressed before we can expect more widespread adoption of embedded payments.

So for merchants and payments providers, getting the word out there is a top priority. Highlighting not only the speed, ease, and convenience benefits, but also showing that security – and consumer control – are bolstered rather than compromised with embedded payments. Build trust, and they will come.

Maybe, also, we need a better moniker. One that sticks more comprehensively in the consumer mind and says more about their experience – which is what matters – than how we think of it as merchants and payments providers. Answers on a postcard, please.

In a series of articles, we’ll be looking at the embedded finance ecosystem, strategies and questions for merchants, and what three critical elements successful use cases have in common.