It’s finally time for the NMI Executive Leadership Team to explore their thoughts and predictions for the most important payment trends coming down the pipe in the year ahead. This year, I chose to focus on the embedded payments space — an area where we’ve made significant strides over the last couple of years here at NMI.
While I go into more detail in our upcoming whitepaper, my prediction for 2025 is that, throughout the year, embedded payments will grow at an outsized pace, leading to tighter competition and greater consumer expectations for frictionless payment experiences. This means that software-as-a-service (SaaS) platforms and software providers will need to ensure their payment offerings are clearly differentiated to stand out from the crowd and gain new market share as the payments industry evolves.
Embedded Payments Will Become More Competitive
The embedded payments market has been undergoing explosive growth. Over the next decade, that trend is set to continue, with embedded payments expected to grow at over 30% CAGR by some estimates. That’s great news for merchants because it means more options and more access to all-in-one software solutions. But, for SaaS platforms, growth in the embedded payments market will lead to fiercer competition and the need for unique, differentiated solutions.
In our recent survey of 1,000 consumers, 81% of respondents said that it was important or very important for the merchants they shop from to offer flexible payment services, with 43% saying that it could be a deciding factor in whether they choose to support a business or not — making flexible payments crucial for merchants.
As frictionless digital payments grow in popularity, embedded capabilities will no longer be novel for merchants; they’ll become a baseline expectation. We’re already at the point where a significant number of merchants get their payments from a software vendor, and as more providers stake a claim on payments, the embedded space will only become more competitive.
In the future, more SaaS offerings will start to look similar, and embedded payments alone will no longer be enough to differentiate a platform. That said, failing to offer payments at all will be an enormous competitive disadvantage. Because of that, in 2025, software companies that want to stay competitive will need to:
- Ensure their software platforms and applications offer flexible payment solutions
- Incorporate unique offerings and value-added-services to stand out from an increasingly large crowd of embedded payments providers
Software Companies Will Need To Offer Truly Frictionless Experiences in 2025
As competition heats up, the software providers who differentiate their solutions will be the ones that thrive, not just in selling payments but in attracting users. The key to that differentiation will be offering merchants an even better version of the frictionless processing experience that draws them to embedded payments in the first place.
User experience (UX) is at the heart of all great software. In payments, great UX means things happen invisibly without requiring much from the merchant or consumer. That means:
- Signup has to be friction-free and lightning-fast
- Merchants shouldn’t have to worry about things like fraud prevention or transaction security
- Billing and reporting should be simple and easy to understand
- Flexible payment options like recurring payments, one-click payments, text-to-pay and digital wallets should be easily accessible
- Loyalty incentives like rewards, personalized discounts and cash-back need to be easy to turn on or off
In short, SaaS platforms and other software companies need to find ways to offer merchants more complete payment services while simultaneously making the process feel simpler and more user-friendly. That’s a tall order, but with the right technology and the right partners, it’s very achievable.
2025 will be the year when the gap between software solutions with minimal payment functionality and those offering truly “invisible” payment experiences starts to become clear, and that will make all the difference for SaaS platforms and other software companies looking to stand out.
For more of my thoughts on addressing a tightening embedded payments market and other insights from my colleagues on NMI’s Executive Leadership Team, stay tuned for our upcoming whitepaper, “From Frictionless to Future-Ready: NMI’s Payment Trends & Predictions for 2025.”
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