What Are B2B Embedded Payments? Detailed guide for 2025 | Xflow

The term “embedded finance” has been floating around for quite some time now. Put simply, embedded finance refers to the integration of financial services like payments, lending, or insurance into non-financial platforms, products, or services.

Think insurance services within an e-commerce checkout processing platform, or being able to pay for your cab directly on the ride share app. 

Embracing embedded finance and B2B payment processing is the future of business. In fact, research shows that the value of the embedded finance market will be crossing $138 billion by 2026, from a mere $43 billion in 2021 (more than triple the amount!). 

This guide takes a deeper look into what embedded payments entail, how they work, and more. Keep reading to know more!

• Embedded finance refers to integrating different financial services and products into the processes of a non-financial services workflow. This is done using application programming interfaces, or APIs. 

• There are three major types of B2B embedded finance. These include B2B embedded payment, lending (or finance), and insurance. 

• The most common example of embedded finance is found in popular ride-sharing apps. Here, cabs can be paid for from within the app when booking, instead of cash or card payments with a traditional taxi.

Embedded payments refer to the ability to pay for a product or service directly on the platform. The payment capabilities are directly built into the software of the platform. In most cases, they only require one-step verification, making them an excellent way to pay for your B2B payments. 

Their popularity is caused by the fact that they can be applied to just about any business, regardless of whether they’re in the financial sector or not.

Embedded finance works by triggering an action (such as the “buy,” “pay,” or “subscribe” options) on a platform. The platform then alerts the API (or an Application Programming Interface) linked to their payment service provider, and the payment can be processed without having to redirect the user. Some of the most popular API providers include:

• Stripe
• Xflow 
• Ayden
• Plaid 
• Unit
• Moov
• Square
• Finix
• WePay
• PayPal Commerce

Embedded finance typically involves three main components:

1. The financial institution 

The first component is the financial institution, like a bank, which is regulated by the necessary authorities and provides financial products and services. 

2. The company 

This refers to a company or business that provides a non-financial product. For example, an e-commerce platform selling clothes. 

3. The customer 

The customer could be an individual or another business that uses both products on the platform. For example, a person buying clothes on an e-commerce website, paying for them on the same website without needing to open other apps or sites.

Are contactless payments and embedded payments the same?

Contactless payments refer to the physical process of in-store payments. On the other hand, embedded payments are typically done online. However, embedded payments are sometimes viewed as the online equivalent of an in-store contactless payment, due to being both convenient and quick. 

What are frictionless payments?

Frictionless payments typically refer to embedded or contactless payments. They are named this way because they are simple, convenient, and easy to complete. 

Embedded payments can bring countless benefits to your business, including better conversion rates, stronger customer loyalty, improved analytics, and a stronger brand perception and trust. Let’s take a closer look at these benefits.

1. Better user experience

If you have ever logged onto a platform and tried to make a purchase (whether that’s for a software for your company or booking a cab home on a rideshare service), you may have noticed how easy it is to pay for it with the tap of a button. 

This ease and convenience are what strengthen the user experience. Nobody wants lengthy payment times, filling in countless fields, or any other issues along the way. Embedded payments shorten the whole process for your customers, increasing brand loyalty, conversion rates, and retention. 

2. Increased revenue

A smoother payment experience means fewer businesses or people abandoning their purchases, leading to higher revenue. Increased customer retention and conversion also mean higher revenue. 

3. Speed

The most crucial aspect of well-designed embedded payments is speed. Nobody wants to spend or wait for several minutes trying to complete a payment, and embedded payment systems help with this problem exactly. 

Embedded payments have become a staple across many industries, from Software-as-a-Service, marketplaces, fintech, e-commerce, logistics, and even EdTech. Let’s look more closely at a few use cases:

1. SaaS

Software-as-a-Service regularly uses embedded finance and payments, such as software tools tied to finance tools. An example of these could be customized financial tools used for invoicing, billing, or budgeting. 

2. Marketplaces

Many marketplaces also integrate embedded payments into their processes. For example, Shopify allows businesses to provide a “pay in installments” option during checkout. 

3. Fintech 

In most cases, embedded payments and finance refer to financial services being offered in traditionally non-financial areas. In Fintech, however, this is different. Here, embedded finance could integrate financial solutions directly onto their website, such as allowing users to cancel subscriptions directly from the app. 

4. E-commerce

Embedded finance is commonly seen in e-commerce. For example, customers can complete their purchases using ACH/RTP/UPI directly on the e-commerce site itself. “Buy now, pay later” is a popular embedded payment solution often used today. Popular BNPL providers (like Affirm, Klarna) are used in these cases. 

5. Logistics

When it comes to supply chain management, embedded finance has significant benefits. For example, businesses can manage and access their working capital more easily. Suppliers could also receive early payments using financing solutions embedded into the logistics platforms they use. 

6. EdTech 

EdTech has also benefited from the rise in embedded finance. Learners using EdTech platforms can use “pay-as-you-learn” options and flexible payment plans. This makes accessing education easier and helps reach a larger target audience.

Given the emphasis on speed and efficiency today, conventional systems are too fragmented and slow. This is where embedded payments come in. So what’s the difference between traditional payment gateways and embedded payments?

Several key components are at play in the embedded payments system. These include APIs, white-label wallets, KYC/AML, and FX handling:

APIs

Application Programming Interfaces (APIs for short) are mechanisms that let two different software programs communicate. In embedded finance, businesses can connect and partner with financial institutions to manage transactions, process payments, offer loans or insurance, and more. They offer pre-built financial solutions that are also secure. 

White-label wallets 

White-label wallets refer to pre-built digital wallets. These SaaS products can be purchased and customized to integrate into your business’s existing platform or product. The good thing is that they don’t even require much maintenance. 

KYC/AML

Any company dealing with payments and financial software cannot do without Anti-Money Laundering (AML) and Know Your Customer compliance. Typically, the financial institution is required to conduct these checks to ensure customers and payments are legal and compliant with international regulations. 

FX handling 

If your business deals with international payments, embedded FX handling is a must. Platforms like Xflow offer international payment capabilities and foreign exchange conversion directly on the platform, allowing you to receive payments from abroad with ease.

While embedded payments have countless benefits, they are not without their challenges. From scalability issues, currency conversion, and compliance, here are the challenges faced by embedded systems:

1. Compliance 

Embedded payment systems deal with sensitive customer data and financial information. They need to be secure and compliant with the necessary international regulations to avoid money laundering, fraud, data breaches, or other cybersecurity disasters. 

2. Multi-currency 

As businesses expand, it is crucial to keep up with foreign exchange-related intricacies. Companies face constant currency fluctuation, hidden costs, and more when dealing with cross-border payments. 

3. Settlements 

Managing compliance regulations, fund flows, security, and currency fluctuations can make settlements challenging in embedded payment systems. 

4. Scalability 

Embedded systems also need to be able to scale as your business does. However, designing them to scale with different requirements and applications without needing significant redesigns is often challenging and time-consuming.

While there are challenges associated with embedded payments, there are steps your business can take to extract the most from them using developer-friendly APIs and localization. Let’s take a closer look:

1. Developer-friendly APIs

APIs let businesses integrate payment solutions into their platforms without needing to build from scratch. Developer-friendly APIs are an easy, no-code solution that can help minimize disruptions in your business’s operations.

2. Localization 

When integrating embedded payments, localization is crucial. This could include supporting the local language, domestic and foreign currencies, and local payment methods. For example, UPI in India is integrated onto many e-commerce platforms now, making payment easier for customers.

Xflow provides your business with a well-designed API infrastructure that can be directly integrated into your platforms and products. It allows for transparent, traceable, quick, and compliant cross-border payments. 

Xflow also has deep integrations with RBI-authorized banking partners, as well as some of the best technology partners and fraud monitoring systems. With Xflow, you receive virtual international bank accounts for multiple currencies, which means your international clients can even pay using local transfer methods like ACH (US) or SEPA (Europe).

Using Xflow’s powerful APIs, you can easily manage your customers, collect payments from them, reconcile your invoices, track your payments in real-time, and automate your workflow, all from the convenience of a single intuitive platform.

What does integrating embedded payments with core systems involve? It generally involves integrations with CRM, ERP, onboarding flows, and treasury platforms. Let’s see how. 

CRM

A CRM (customer relationship management) payment integration connects a company’s CRM with its payment processing platform. The CRM usually holds customer profiles, purchase history, and preferences. Once it gets integrated, every payment, whether it's successful, failed, or refunded, automatically updates against that customer’s record. 

CRM integration can also automate the process of invoicing, send out payment reminders, and manage recurring billing. And the hassle of manually matching data from one platform to another to understand your customer’s behaviour? That also becomes a thing of the past, allowing you to forecast better. 

ERP

ERP systems connect finance, HR, supply chain, inventory, sales, and more. When you integrate a payment platform with ERP, every transaction flows directly into your core business system. This means invoices, receipts, and reconciliations are automatically updated. 

Your finance team gets real-time insights into where your cash flow stands and what the revenue trends are, while operations benefit from faster order processing and fewer errors.

Onboarding flows

Businesses can also integrate the onboarding process onto their platforms to improve efficiency and convenience. For example, companies can allow customers to upload their payment information directly onto the platform and make payments. This means your customers complete onboarding and payment in one streamlined flow.

Treasury platforms 

When Treasury Management Systems and payment platforms are integrated, every outgoing and incoming payment automatically gets saved into the treasury system. There’s no need to perform manual reconciliations or audits. 

Beyond this, you’ll always have a clear visibility on the updated balance in your bank accounts. Plus, if your business operations involve forecasting models, payments will directly get loaded into them so you can make better investment or borrowing decisions.

Keeping up with regulatory requirements is a must when integrating embedded payments. Some necessary regulations to consider include PCI DSS, PSD2, RBI, MAS, GDPR, and others. Here’s a more detailed look at these:

1. PCI DSS

If your customers are making payments via cards (like Visa/Mastercard), PCI DSS outlines mandatory standards for handling and storing their data. PCI DSS compliance is also an ongoing process and needs to be maintained annually. 

2. Revised Payment Services Directive (PSD2)

PSD2 outlines the regulations for digital payments in Europe. Under PSD2 rules, platforms that offer payment services are required to follow the same regulations as traditional banks. This involves obtaining proper licenses, implementing necessary security measures, and ensuring the safe sharing of data.

3. RBI norms

In India, the RBI regulates financial matters. For embedded payments, RBI regulations revolve around digital lending guidelines, KYC/KYB norms, defining responsibilities between partners, adhering to AML requirements, and more. 

4. MAS

The Monetary Authority of Singapore (MAS) outlines regulations regarding financial matters and transactions. Like the RBI, these revolve around proper licensing, adequate data privacy, KYC/KYB, AML compliance, and more. 

5. KYC

Most countries have stringent KYC and AML laws and requirements. These processes help prevent money laundering and fraud, as well as other financial crimes. KYC and AML typically involve proper customer identification, regular risk assessment and monitoring, and compliance with domestic and international regulations. 

6. General Data Protection Regulation (GDPR)

The GDPR outlines requirements for businesses on how they must handle customer information. For example, businesses must first get express permission from customers before collecting their personal data. They are also required to explain how this data will be used, how long it will be stored, and how it will be kept secure. 

As the world progresses and tech gets more innovative, embedded payments will too. Here are some key trends to look out for: 

1. Banking-as-a-Service

BaaS refers to API-driven platforms that allow third parties to develop financial tools and products. They offer banking and payment capabilities from financial institutions along with regulatory permissions.

2. AI in payment routing

AI has been taking over almost every industry, and embedded payments are no exception. AI-based payment routing could direct you to the best payment path and offer more accurate fraud detection, speed up data analysis, and more. 

3. Payment orchestration 

Payment orchestration refers to the process that allows your business to manage several payment service providers, payment gateways, and banks from a single platform.

If you’re looking for a platform that can help build and scale embedded payment solutions, Xflow is the answer. It provides a speedy and transparent digital payment system that allows you to receive cross-border payments with ease. With Xflow, funds are settled directly in your bank account within 1 business day, with no delays or surprise charges. 

The platform facilitates large-value transactions without limits, offers competitive FX rates to lower your payment costs, and provides comprehensive services, including API-based onboarding. Try Xflow today!