Embedded finance is one of the hottest trends in fintech, but despite the buzz about this transaction revolution across the industry, 49% of consumers have never heard of the term ‘embedded payments’ and while a further 23% have, they do not understand what it means. That’s according to new research** commissioned by leading specialised payments platform, Paysafe (NYSE: PSFE), in which 11,000 consumers across Europe, North America and Latin America were surveyed for the company’s latest Lost in Transaction research series.
The findings also show a strong correlation between the benefits embedded payments offer and consumers’ desire for convenience at the checkout. One quarter (24%) of respondents said that their payment habits had changed significantly since the COVID-19 pandemic. 17% of those surveyed reported using mobile wallets more often and 17% say they use digital wallets less frequently. Globally, 33% of respondents reported that they had paid for something using a digital wallet within the past month. The majority of businesses understand the need to adopt frictionless methods at the checkout and recognise the simplicity and convenience wallets provide too – as of October 2021, 61% now accept digital wallets at the checkout and 26% plan to introduce them before the end of 2022.
Consumers who have heard about embedded payments are keen to learn more. 75% of respondents stated they would accept embedded payments. The top three transaction types are online payment (35%), in-store payment (27%), or paying for food (27%). Over a third (36%) of respondents could see themselves using embedded payment to pay for check out-free stores like Amazon Go over the next two year. But, embedded payments must become more accessible and more well-known in order to be able to use them. This means that merchants need to promote the advantages and capabilities of embedded payment.
Megan Oxman, Senior Vice President of New Product Development for Paysafe’s Digital Wallets, comments, “Consumers know when they’ve had a substandard experience. They know when there’s friction. With embedded finance, 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 or organising a transfer. They also don’t have to worry about lost or declined transactions, long wait times or other problems that can arise from authentication processes. To a certain extent the mark of a truly successful embedded payments transaction is for it to be so seamless that it’s entirely unnoteworthy. That said, broadening consumers’ knowledge around embedded payments and their benefits is no bad thing – particularly when it comes to addressing any lingering misconceptions.”
Merchants must address trust and security. 44% of consumers believe security is the most important aspect of online shopping. However, only 27% think embedded payments are safer than traditional payment methods. 3 out 5 (59%) people who have heard about embedded payments fear that they might be overcharged.
Digital wallets, which do not require card details for the payment to go through, address the concerns of consumers who don’t feel comfortable entering financial data online (58%) and those who feel more comfortable using a payment method that doesn’t require them to share financial details with online merchants (70%). When it comes to trust, of those who have heard of embedded payments 46% stated that they would prefer using embedded payments offered by a trusted merchant vs. a traditional bank or an online bank – which rises to 53%for the 25–34-year-old age group.
Oxman, added: “From the findings, it’s clear that it’s important to highlight not only the speed, ease, and convenience benefits of embedded payments, but also showing that security and consumer control are bolstered rather than compromised. Those businesses who place a premium on educating customers about the benefits have a significant opportunity to gain a first mover advantage in today’s increasingly competitive market.”