Technology continues to transform the retail experience at a rapid rate, providing a seamless shopping experience that is reshaping our expectations as consumers.
Embedded finance is starting to become commonplace in the retail industry, improving the way payments are processed. The US embedded finance market is projected to exceed $7 trillion in transaction volume over the next two years, up from $2.6 trillion since 2021.
By creating new ways to enhance convenience and overcome traditional hurdles, retailers are able to cater to diverse customer needs.
In this article, we delve into seven ways in which embedded finance is revolutionizing retail.
International Payment Solutions
Closing the gap between retailers and customers from across the globe not only improves the customer experience but allows businesses to expand into new overseas markets.
Multi-currency payment options allow customers to make transactions in their preferred currency directly from the retail platform.
By embedding payment solutions that have the capability to convert currencies and manage transactions from abroad, a retailer is able to provide greater flexibility to their customers.
For example, hospitality point of sale systems allow hotels and restaurants to process payments from international customers easily. By allowing guests to pay in their preferred currency, the barriers of traditional banking methods are avoided.
The Rise Of Mobile Payments
The ability to pay by smartphone has transformed retail transactions as shoppers are able to make a purchase at the tap of a button.
Nearly 4 in 10 people in the US will make payments through their mobile this year, an ever-growing number that highlights the sheer speed at which the industry is evolving.
This has created new opportunities for retailers to offer a more convenient checkout experience, eradicating the need for people to carry their money or cards when they go shopping. Since the majority of people carry their phones as standard, this opens up the door for spontaneous purchases, allowing people to buy without needing their wallet.
(Image source: Business of Apps)
Buy Now Pay Later
As of 2022, there were an estimated 360 million people worldwide using buy now pay later services, and this number is expected to reach 900 million by 2027.
These schemes allow shoppers to make a purchase and pay off the debt at a later date, without involving a third party. By a retailer embedding financing solutions directly at the point of sale, traditional credit checks are not needed and convenience is maximized.
For the retailers themselves, the size of transactions that customers are now more willing to make benefits their sales figures. When a shopper has the flexibility to take control of their finances and make payments over time, they can spend more at any one time.
Lower Transaction Fees
The processing of traditional payments incurs hefty costs that can eat into the profit margins of retailers.
By embedding financial services into their own platform, a retailer is able to avoid third parties either altogether or agree on better rates with the payment processor.
As ongoing costs are cut down for retailers, the money saved can be invested back into the business to improve their offering. It can also lead to reducing item prices, resulting in a more competitive business plan that is likely to drive further sales.
Advanced Security Features
As consumers become more aware of potential security issues when they navigate online, it is essential that payment methods are secure in the retail sector.
The number of digital payments being made is forever rising, yet hackers and fraudsters are becoming smarter as scams and viruses appear harder to detect.
Embedded finance solutions often utilize advanced security features, such as algorithms that detect fraudulent transactions in real time and biometric authentication. By integrating these security features into their payment processes, retailers can prevent security issues and provide customers with peace of mind that their payment details are safe.
Targeted Loyalty Programs
In the modern day, loyalty programs have become a staple within the retail industry. With 52% of US consumers participating in at least one customer loyalty program, retailers should be jumping on the bandwagon.
Loyalty reward programs can be integrated with payment systems, meaning customers can rack up loyalty points whenever they make a purchase through the embedded payment platform.
This year, more retailers are expected to utilize loyalty programs, not only to encourage customer loyalty but also to provide them with transaction data that can be used to inform future customer retention schemes.
(Image source: Forbes)
Simplified Ways To Remain Compliant
Retailers are able to partner with established fintech providers to integrate financial services. This means they can share their existing infrastructure and regulatory framework, allowing the retailer to process payments and lending services.
Without the embedded finance approach, a retailer would have to align with financial regulations themselves–requiring a lot of training, time, and knowledge.
By partnering with established financial providers, a retailer can be sure they are aligning with complex regulations while being able to focus on their core business. This avoids the risk of oversight that could have the potential to lead to serious legal trouble and loss of consumer trust.
What’s Next For The Retail Industry?
The last few years have been revolutionary for retailers, seeing the introduction of advanced technological capabilities that have reshaped the industry.
The year 2024 saw significant advancement across many retailers, and that isn’t looking to stop any time soon. From international payment solutions to lower transaction costs, businesses are not only improving the way they work, but are providing a better experience for their customer base.
As we look into the future, the opportunity to offer secure and flexible payment options is looking to switch from an impressive advancement to a nationwide necessity, driven by customers’ demand for convenience and payment security.
