How Embedded Finance is Revolutionizing PayFacs and Software Platforms

Embedded finance is rapidly transforming the landscape for Payment Facilitators (PayFacs), Independent Software Vendors (ISVs), and online marketplaces. These businesses, while offering products and services, often require additional help to process payments efficiently. Enter PayFacs — they provide the necessary support to enable seamless payment processing, driving innovation and expanding revenue opportunities for all parties involved.

The integration of embedded finance solutions into retail platforms allows businesses to offer banking and credit products directly within their platforms. This shift creates new revenue streams and enhances customer experience. According to PYMNTS Intelligence data, ISVs and marketplaces that combine payment acceptance with embedded finance features are seeing a higher share of revenue from payment processing fees.

PayFacs, ISVs, and marketplaces alike are increasingly recognizing the strategic advantage of offering both payment processing and embedded finance solutions. Key features driving this innovation include buy now, pay later (BNPL) and loyalty and rewards programs — both of which are top priorities in their development roadmaps.

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Key Insights from the "Business Platform Survey"

The PYMNTS Intelligence report, developed in collaboration with Carat from Fiserv, highlights several important trends from a survey of 280 executives across PayFacs, ISVs, and marketplaces. These findings shed light on how embedded finance is reshaping the payments landscape:

• Revenue Growth: Offering payment acceptance combined with embedded finance solutions leads to increased revenue and greater market expansion for PayFacs, ISVs, and marketplaces.
• Innovation Focus: PayFacs are supporting ISVs and marketplaces by helping them meet regulatory requirements, reducing security risks, and streamlining operations.
• Top Features to Watch: Innovations like BNPL and loyalty programs are expected to be game changers in the near future, driving customer engagement and retention.
• Challenges Ahead: While embedded finance offers immense potential, it’s critical for businesses to navigate regulatory complexities and operational constraints carefully.

The report also provides actionable insights for businesses looking to expand their embedded finance offerings, including detailed data and charts that showcase the growing opportunities for PayFacs, ISVs, and marketplaces.

By integrating embedded finance solutions, these platforms can enhance their capabilities, increase revenue streams, and better serve their customers.

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