The changing nature of everyday transactions — from buying groceries to ordering a book online — means many financial institutions are having to rethink payment products. Traditional retailing banking propositions such as cards with low interest rates, cash-back rewards, mileage programs, and prepaid debit cards for high risk cardholders are giving way to digitized personalization enabled by API technology.
Thus the battleground for customer satisfaction (and ultimately loyalty) is the point of sale. A bank or fintech that understands the importance of giving account holders real-time digital payment options and rewards when they shop today can lead the field tomorrow. But this isn’t just about e-commerce. In many use cases, even brick-and-mortar merchants are incorporating embedded payments into their overall customer experience.
Meanwhile, many large corporations with expansive multinational teams are feeling the weight of countless business transactions. As a result, an increasing number of companies are using digital automation to disburse large expense volumes and salaries to employees at the point of need via virtual cards, which can be instantly issued to their digital wallets.
It’s all part of a huge shift by companies to customize all payment disciplines — authorizing, approving, or declining transactions in real time in the most frictionless way possible.
How the API architecture of an embedded world creates personalized experiences
A key component in the architecture of customized and personalized payments is modern card issuing (MCI) built on open API platforms. With MCI technology, each transaction can be authorized based on exact spend controls such as merchant ID, transaction amount, geolocation, and even the digital identity of the cardholder by using facial recognition techniques or biometrics. For consumers, this has led to popular propositions such as Buy Now, Pay Later financing, and customer loyalty rewards beyond the traditional miles and points.
In the corporate world, accounts payable automation applications are embedding finance in their workflow to seamlessly pay invoices and bills by using virtual cards. In practice, it means accounting teams can spend less time directly managing the card programs, which offer a robust payment method that gives employees instant access to funds. These kinds of customized embedded payments can also be set to only make disbursements after certain criteria are met, such as invoice date, amount, or predetermined payment terms.
Thanks to modern card issuing platforms, it’s possible to open up the payment flow and allow applications to authorize transactions in real time and based on criteria and data unique to each use case.
Modern card issuing’s myriad cases across society
Modern card issuing goes way beyond virtual cards and digital wallets. While younger generations, including Generation Z, might prefer to use Google Pay or Apple Pay for fast transactions, other members of society who have yet to adopt digital payments can still benefit. That’s because physical cards, whether in the form of debit, credit, or loyalty, can deliver the same level of functionality as their digital counterparts.
The common component is the background MCI architecture that enables card program owners to set rules and personalize the experience. This means innovators can tailor a range of propositions to different target audiences, taking a portfolio approach to building a diverse customer base.
Additionally, the data derived from an MCI card program can be used to inform behavioral insights that can shape relationships with merchants to create a unique embedded finance experience. For example, spending patterns might show a tendency among a group of cardholders to use a particular group of retailers or make purchases of certain product lines. This information can be used to develop rewards programs with those merchants, such as cash back or discounts, all managed by the platform’s spend controls.
Modern consumers demand convenience, speed, and personalization when spending, and card issuers delivering modern, flexible card options can come out on top. With modern card issuing, fintechs and banks can keep their cards — both physical and virtual — top of wallet for their customers at the point of sale. This, in a nutshell, is embedded finance at its most effective.
