It’s difficult for many of us to picture modern life without digital payments. Still, as established as digital commerce has become in our lives, it wasn’t that long ago when something as simple as contactless payments was considered trendy. While ecommerce has brought forth tremendous adoption and new business models, it also has created challenges for non-financial institutions trying to streamline payments. To effectively navigate them and optimise the online payments process, many businesses are turning towards Embedded Finance solutions to get closer to their customers and provide the services they need.
By integrating digital payment solutions directly into platforms, businesses can streamline the customer journey and enhance overall payment experiences. Embedded Finance is a destination point for how they can deliver convenient payment experiences, eliminating the need for third-party sites or applications. This simplifies the payment process and increases trust and transparency, which can lead to higher conversion rates and customer retention.
Embracing Embedded Finance is not just about keeping up with the latest trends; it’s about revolutionising the customer journey and staying ahead of the competitive landscape. We see the opportunity for Embedded Finance in cross-border payments. Embedded Finance solutions are unlocking global digital transformation, relieving complexities of multi-country processing and, in turn, increasing productivity and profitability. Embracing multi-country processing, Embedded Finance opens doors to numerous possibilities by fostering an environment where innovation thrives and businesses can scale beyond borders.
Some Embedded Finance solutions are helping financial institutions enhance the customer experience and optimise financial performance through valuable insights into their customers’ needs. By leveraging new technologies and data, merchants can start to include customer-centric financial services that are more interconnected, personalised, and efficient. Moreover, Embedded Finance is a critical enabler of the Internet of Things (IoT) – creating interconnected experiences and fuelling innovative user experiences. To this point, Hogan Lovells predicts that global IoT-enabled devices will grow beyond 75 billion by 2025.
In today’s world, Embedded Finance has further blurred the distinction between the financial services we depend on and the non-financial platforms and apps we interact with daily. However, this shift is not without challenges. The convenience of sharing payment details across multiple sites poses potential risks, such as the increased threat of compromised customer card information. Businesses must prioritise data protection and consider utilising advanced fraud technology to keep payments safe from external threats.
As a first line of protection, many companies are adopting a network tokenization strategy. Network tokenization is the next evolution in card-on-file technology. It replaces sensitive credit card information, or Primary Account Number (PAN) data, with a unique and randomised string of letters and numbers, called a token. In a network tokenization user journey, a customer saves their card on file, and the details are converted to a network token for future transactions on the IoT platform or app. Going forward, the network token, not the card details, is retrieved for future transactions.
By replacing the PAN with anonymised tokens, network tokenization reduces the Payment Card Industry (PCI) compliance burden and lowers fraud risk. Another benefit of tokenization for Embedded Finance is its impact on lifecycle management. With network tokenization, card details are automatically updated when a card is replaced or expired. Additionally, artificial intelligence (AI) and machine learning (ML) fraud detection are essential for creating a secure user experience. Solutions such as Transaction Risk Management powered by Brighterion can provide real-time analysis, enabling businesses to use advanced technology to better help and protect their merchants, reduce fraud, and approve more legitimate transactions.
As Embedded Finance and the use of IoT evolve, these technologies have the power to transform our everyday lives. With this new evolution, we have also reflected on how we serve our customers in this complicated space. As a result, we are moving beyond traditional payment processing limitations and extending our services to better power digital commerce. In this evolution, we can orchestrate a dynamic offering – providing seamless and secure payment experiences for our merchants and their end consumers. Beyond a traditional gateway, Mastercard Gateway serves as a single touch point for commerce needs. When delving further into Embedded Finance, finding a partner that is focused and can tailor their offerings to specific needs is paramount.
Our gateway helps customers focus on growing their business by handling costly and time-consuming payment functions. With our services, companies can become a one-stop shop for merchants with a growing list of services – giving consumers the convenience they want with the simplicity and security they need. Mastercard’s Gateway provides a payment offering with local partner connections worldwide, connectivity to over 200 acquirers globally, and a growing catalogue of products and services to help businesses expand into new markets and become more accessible – with network tokenization and fraud and authentication services. Businesses can tap into ongoing access to innovation with our wider suite of services and partners, to better meet their continuously evolving needs in this dynamic space.
This editorial piece was first published in The Paypers' Fintech for Marketplaces and Platforms Report 2024 which taps into the fast, ever-expanding ecommerce industry, being the ultimate source of information for businesses looking to expand and grow their consumer base.
Maria Parpou, Executive Vice President of Mastercard Gateway, leads the gateway business in over 100 countries. She joined Mastercard in 2022 and brings over 25 years of diverse payment experience, including consulting, investment fund management, commercial payments, and leading ecommerce solutions.
Mastercard Gateway is an acquirer-neutral gateway with connectivity to more than 200 acquirers around the world. We provide an API-powered gateway platform, the knowledge and expertise of Mastercard, and a single connection to a growing catalogue of Mastercard products and services. We offer our partners the Mastercard difference: proven technology, security acumen, and payments expertise.
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