The tech trends driving a boom in embedded payments

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Embedded and invisible payments are becoming more ubiquitous, with more use cases expected to be rolled out this year.

Juniper Research predicts that the global embedded payments market will grow by 134% between the end of 2024 and 2028, driven by embedded account-to-account and wallet payments. This expected growth is underscored by a KPMG survey of banks, where 58% of banks said embedded finance is a priority in the next year, with 75% naming open banking, or data-sharing technology that supports embedded payments, as a priority. Banks such as U.S. Bank and multiple fintechs, including Green Dot, Marqeta and Brex, have made embedded payments an increased focus.

"It's a very exciting area," Brian Shniderman, senior managing director and head of Accenture's North American payments practice, told American Banker.

Here's what payments professionals expect to see in the embedded finance and invisible payments arena this year:

Growth of AI will fuel embedded payments

As AI becomes autonomous and important in people's day-to-day lives, personal AI agents will need embedded payment capabilities, Nick Maynard, vice president of fintech market research at Juniper, wrote in an email. "Agentic AI will also start to be a consideration — by giving agentic agents payment tokens, they will be empowered to make payments on a user's behalf," he wrote.

Continued investments in infrastructure

Michelle Swiec, managing director at KPMG, expects to see continued investments by payments players in infrastructure to support embedded payments. Businesses want to offer embedded payments, but often feel they are boxed into what they can do based on the solutions the bank is offering, she told American Banker. Fintechs and payment service providers are making it a lot easier for retailers to offer embedded finance because they are simpler to work with, and they offer additional security and compliance solutions. "Right now, banks don't do this as well," she said.

Exploring new verticals for embedded payments

Embedded finance becomes much more valuable if banks can bring together payments systems they provide (like cash management, treasury management) with enterprise resource planning solutions that already exist for specific industries such as health care, oil and gas and insurance, said Accenture's Shniderman. 

U.S. Bank, for example, is investing significantly in the health care revenue cycle, Alberto Casas, head of product for treasury and payment services at U.S. Bank, told American Banker. He said the bank is "investing in deep integrations" with health care practice management systems. 

U.S. Bank is also partnering with fintechs such as Rain, used by employers to provide employees instant wage access. The fintech uses U.S. Bank's embedded payment platform to facilitate customer payments. "It's really a significant evolution of how we do business," Casas said.

One area where embedded payments could become more prevalent is the rental market. Particularly in the U.S., rental payments are very cumbersome, Maynard said. Juniper expects that embedding payments capabilities within niche real estate platforms will increasingly disrupt that market and provide a better user experience, he told American Banker.

Growth of invisible payments

Invisible payments are similar to embedded payments, but often require no active customer authorization. Rather, transactions are triggered automatically using sensors or account credentials. Amazon Go, powered by Amazon's Just Walk Out shopping, is an example. Another example is Sam's Club, which has said adoption of its "Scan & Go" technology has surged by 50% in the past few years, with one in three members regular users of the technology that allows shoppers to bypass the line at exit.

This year, Chris Colson, a payments expert for the Atlanta Fed who focuses on emerging payments, expects use cases for invisible payments to increase in the months ahead in areas like health care, insurance and B2B. This will require banks to work more closely with software-as-a-service providers to ensure their payment mechanisms are accepted in the systems. "With the advancement of APIs that's going to be a lot easier," Colson told American Banker. "There's not a lot of heavy coding anymore."

Car manufacturers are also upping the ante when it comes to embedding payment capability within their operating systems. Colson points to manufacturers like Honda, GM and Mercedes that have been leaders in this space. Mastercard and Visa are also working to allow consumers to pay for gas seamlessly using geolocation. "Initial use cases like paying for fuel and products from the comfort of the driver's seat will soon be the norm in new car models," according to public statements from Ken Moore, chief innovation officer of Mastercard.

Rise of alternative payment rails

Banks have to be careful not to be left behind because, in the future, embedded payments could be done with stablecoins, a form of cryptocurrency backed by reserves of traditional currency such as U.S. dollars. "Disintermediation is a concern," Colson told American Banker. This is especially important as interest in stablecoins grows. Fiserv recently said it would launch a digital asset platform, including a stablecoin, FIUSD, that will be part of Fiserv's banking and payments menu by the end of 2025. Also underscoring the rise in popularity of stablecoins, retail giants including Walmart and Amazon are among those considering issuing their own stablecoins.

The fight to stay relevant

As embedded and invisible payments continue to proliferate, banks will have to keep fighting for their relevance, Colson told American Banker. It's harder to stay relevant when customers aren't actively making a payment with a physical card or bank app, but offering them rewards or incentives to remain top of wallet could help, he said.