BNPL and Digital Wallets High Priority for PayFacs and Marketplaces

Embedded payments can open the door to monetizing new revenue streams, deepening customer engagement and growing new lines of business. However, retail marketplaces, payment facilitators (PayFacs), and independent software vendors (ISVs) must navigate heightened economic uncertainty and complex regulatory and compliance requirements in their quest for innovation.44%: Share of retail PayFacs putting operational enhancement at the top of their innovation agendas

PYMNTS Intelligence’s latest study explores why economic conditions are a top challenge for PayFacs, marketplaces and ISVs. Despite common worries, the various embedded payments players serving this sector have differing priorities regarding their innovation agendas.

These are just a few insights in “Embedded Payments and the Retail Innovation Agenda,” a PYMNTS Intelligence and Carat from Fiserv collaboration. This study examines PayFacs, marketplaces and ISVs in the retail sector, taking a deep dive into the innovation strategies and challenges they face. It draws on a survey of 282 executives conducted from May 10 to Aug. 25.

Other findings from the study include:

25%: Portion of retail marketplaces that cite system integration as their biggest innovation challenge

Nearly half of retail PayFacs prioritize operational enhancements above all else.

PayFacs in this sector increasingly focus on streamlining operations and enhancing transaction processing speed, showcasing a distinct trend toward operational efficiency. Forty-four percent of these PayFacs prioritize operational enhancements above all else on their innovation agendas — twice the rate observed among PayFacs operating across all industries in our study. While PayFacs lead, ISVs and marketplaces in this sector follow closely behind, at 40% and 37%, respectively.

Marketplaces and ISVs alike widely find compliance to be an obstacle to innovation.

Marketplaces and ISVs in this sector face regulatory and compliance requirements that complicate innovation efforts. Forty-seven percent of retail marketplaces consider regulatory compliance challenging, while 59% of ISVs say the same.37%: Share of retail ISVs that say compliance is their top innovation obstacle

Retail marketplaces and PayFacs widely prioritize digital wallets and BNPL capabilities.

Marketplaces and PayFacs in this sector increasingly focus on digital wallets and BNPL services. Nearly 6 in 10 retail PayFacs and retail marketplaces either already offer or are highly interested in offering BNPL services. This share is considerably higher than the 31% of retail ISVs that say the same. In addition, 19% of PayFacs not currently offering digital wallet options express strong interest in exploring this avenue, suggesting that PayFacs may be aiming to adopt a more holistic payment strategy.

As embedded finance continues to reshape the online retail sector, payment innovation is crucial for competitiveness. Download the report to learn how these marketplaces, ISVs and PayFacs approach their digital innovation agendas and the challenges they face.