December 2023 Industry trends update: RTPs, BaaS, and more

In a previous Update we covered the launch of FedNow, the U.S. Federal Reserve Bank's real-time payment (RTP) (or instant payment) service. In a recent Javelin Strategy & Research report,¹ Craig Lancaster, Analyst/Content Specialist, describes FedNow as "certain to be a game-changer in payments." 

According to Javelin, the ability for financial institutions to offer customers access to transactions that are initiated, cleared, and settled in seconds is set to:

• Change consumer expectations
• Spur the development of new payment methods
• Deliver new use cases for older methods like account-to-account (A2A) transfers

If A2A transfers can be processed on FedNow's instant rails, Javelin believes they could find a new role in merchant sales in the U.S.—helping merchants build sales volume and drive down transaction processing costs.

Instant A2A payments have already proved successful in other countries, including India and Brazil, where they have "drawn in unbanked consumers, delivered new clientele to merchants, and become dominant players," says Craig.

Visa Acceptance Solutions enables acceptance of payments made using a number of RTP/instant networks around the world, including UPI in India and Pix in Brazil. Ask us how to implement RTP and the acceptance solutions we offer.

Embedded finance refers to the integration of financial tools and services into non-financial platforms and business models. A report by TSG (The Strawhecker Group²) indicates that embedded finance is becoming more widespread among ISVs who want to meet consumer and merchant demand for seamless, convenient, and direct access to financial tools and services when interacting with non-finance-based apps, websites, and other platforms—and even in the store.

This report addresses four key types of embedded finance: banking, lending/capital, insurance, and payments. Embedded payments typically allow merchants to accept customer payments directly within their own eCommerce website or app, or at other stages of the customer journey, making those payments easier and more seamless.

Embedded payment methods include:

• In-app payments, which enable users to make payments without leaving the merchant's app or opening a web browser
• Click-to-pay, which allows users to click on a button on a website or in an app to make a payment, which is then processed through a third-party payment processor
• Payment links, which merchants can send to customers via email or text message—the customer simply clicks on the link to make their payment

TSG's view is that embedded finance solutions could become a driver of consumer loyalty, given that the payment experience is so smooth it’s almost invisible. Merchant benefits include faster transactions and the ability to offer an enhanced customer experience.

Visa Acceptance Solutions can help ISVs embed payments into their solutions via a single integration with the Visa Acceptance Platform, which offers banking-grade reliability and connects you to a marketplace of payment and technology leaders. Through our modular payment capabilities, we can work to embed nearly any part of the payment journey in a non-finance-based platform. 

Through Cybersource, we already simplify checkout with capabilities like Click to Pay; and by enabling merchants to accept many other payment methods including cards, buy now, pay later (BNPL), digital wallets, direct debits, ACH payments, and online bank transfers. Similar capabilities are available through Authorize.net, our payment acceptance solution for smaller businesses.

Banking-as-a-service (BaaS) has emerged in recent years to support merchants and other companies that want to embed financial services (such as those described in section 2, above) into their offerings.

A wide range of providers—including startups, fintechs, banking software vendors, payment providers and financial institutions—compete in the BaaS market. In a recent market intelligence briefing from 451 Research,³ analyst Jordan McKee describes the sector as "saturated" and subject to increasing regulatory scrutiny. With current market conditions potentially hampering the growth of startups in the BaaS sector, Jordan's view is that many players' prospects "hinge on the backing of a larger company that can provide the distribution and capital needed to scale."

Further, he considers that these factors, combined with the desire of financial institutions and banking software providers to involve themselves more deeply in the fintech space, make the BaaS sector ripe for consolidation.

Visa Acceptance Solutions brings the power of Visa, a global payments leader, to investments, partnerships, and integrations that spur the development of embedded financial services and other innovative payment experiences.

We'd love to talk with you about these and other trends and innovations in the payments industry. Feel free to reach out and discover how Visa Acceptance Solutions and our uniquely open payments platform can help you build the future of payments.

And keep an eye out for our next Update, due early 2024, for more news and commentary.

This content includes references to offerings from Cybersource and Authorize.net, which are part of the Visa Acceptance Solutions family of brands. You can learn more about our comprehensive suite of solutions.