There’s a lot happening behind the scenes whenever a customer uses a credit or debit card to complete a transaction. Beyond the payment itself, businesses are tasked with the challenge of tracking customer data, reconciling deposits for accounting purposes, and dealing with payments coming from multiple channels or locations.
Even smaller businesses can have multiple ecommerce systems, mobile POS devices, and self-service terminals. At scale, these types of systems can be even more complex when you’re dealing with multiple locations and attempting to unify the customer journey across every channel.
Integrated payment systems solve these problems for businesses, which is why more and more merchants are leveraging these solutions.
I’ve noticed a sharp rise in integrated payment deployments for our clients over the last five years, and all signs point to this continuing to trend upward for the foreseeable future.
So whether you’re thinking about implementing an integrated payments system or you’re not exactly sure how your existing integrated payment system works, this guide will answer all of your questions.
What Are Integrated Payments?
An integrated payments solution unifies payment acceptance functionality in your POS system with other core business systems.
Businesses can use integrated payment systems to accept credit cards while automatically syncing data related to customers, inventory, accounting, reporting, and more.
Regardless of the payment method or transaction environment, all of the payment data is automatically synced into a single source of truth—so online transactions and in-person transactions can update sales figures and backend inventory in real time.
Integrated payment systems also allow businesses to accept payments directly embedded into a third-party software, like a website or mobile app. Since the payment system is natively embedded, customers can complete the purchase without having to leave the page or navigate to a third-party gateway.
These systems also make it possible for niche-specific use cases, like doctors and dentists, to have payment functionality built directly into their practice management software.
Simply put, integrated payment solutions let companies collect payments from any sales channel—all while automatically syncing business-critical data across different systems.
How Integrated Payments Work
Without getting too technical, integrated payments work by using APIs to connect payment gateways and software. One action (like a payment) triggers a response on the backend based on how the business operates and what custom capabilities they want.
Several simultaneous processes happen once the transaction data is captured.
First, the payment data travels through the processor to the issuer for authorization and settlement (just like traditional processing).
Next, other transaction data flows through connected business systems for things like:
- Updating stock levels for inventory management
- Recording customer-specific purchase info in your CRM
- Logging sales data in your accounting software
- Refreshing real-time reporting dashboards
All of this stuff, and more, happens automatically without the need for manual entries or reconciliation. These processes are established during the initial integrated setup so that your payment acceptance is integrated with other business systems (hence the name).
This is very different from a non-integrated payment system, where the payment process is completely siloed and independent from other functions.
For example, if you have an online store that doesn’t have integrated payment capabilities, your customers may be routed to a PayPal checkout page or third-party screen to complete the transaction. And this data wouldn’t be connected to the customer’s purchase history when they visit your physical retail locations.
Benefits of Integrated Payments
The cool part about having an integrated payment system is that it benefits both businesses and customers alike. Let’s walk through some of those perks for each below.
For Merchants
- Fewer Errors — By eliminating manual data entry, integrated payment systems allow transaction details to automatically sync across different software solutions without human intervention (which is often error-prone).
- Higher Conversion Rates — Each extra step you force customers to take when completing a purchase gives them an opportunity to abandon the decision. By keeping the payment on a single page or screen without re-routing them elsewhere, conversion rates will stay high.
- Better Operational Visibility — You’ll know exactly where you stand in real-time for key metrics related to sales, accounts receivables, inventory, and more.
- Saved Time on Administrative Tasks — Since your API connections trigger communications automatically between your systems, you won’t have to spend hours trying to get multiple independent tools working together.
- Single Provider For All Payments — Historically, some businesses needed to work with multiple processors or have different types of payment systems set up to handle varying environments where the business operates. This is no longer necessary, as just one payment processor can set up an integrated system for all of your sales channels.
For Customers
- Faster Checkouts — Customers can pay for goods or services quickly without being routed to another page or screen.
- Flexible Payment Options — Credit cards, debit cards, ACH routing, Apple Pay, digital wallets, BNPL services, and more can all be available through a modern integrated payment system.
- Enhanced Personalization — Purchase history, receipts, order tracking, and other personalized payment info can all be connected and accessible for customers in one place.
- Improved Security — While different tools talk to each other within an integrated payments system, the cardholder data remains safe and relies on advanced security measures to ensure info is safeguarded when it’s in transit and in storage.
- Better Experiences — Customers can buy from all of your channels while having a streamlined experience that doesn’t feel siloed or disconnected.
Drawbacks of Integrated Payments Systems
While having an integrated payments system is generally a good thing, there are definitely some downsides that you should be aware of.
First and foremost, most processors offering integrated solutions are likely going to charge higher rates. This can sometimes be justified, especially if they’re doing something fully customized for your business. But it’s unlikely that you’re going to get rock-bottom processing rates if you’re leveraging the latest and greatest payment technology.
Embedding payments into your other business operations makes it extremely difficult and costly to switch processors down the road. We rarely recommend that businesses switch processors anyway, but the integrated route really limits your options later on—which is why it’s so important that you’re using the right provider before you set everything up.
You’re also dealing with some added technical complexities and potential integration challenges. So you’ll need to make sure that your provider is able to support you if things ever go wrong or aren’t working as intended.
If you’re currently using an integrated processor and feel like you’re paying too much, let our team here at MCC audit your statements to see if you’re getting a fair price. It’s possible that your processor is unfairly inflating your rates and using the integration to justify it.
Alternative Options to Integrated Payment Processing
There are three main alternatives to integrated payments:
- Non-Integrated Payments — This is a traditional payment system where the POS system and terminal aren’t connected.
- Hosted Gateways — For online transactions, a hosted gateway brings customers to a third-party checkout screen instead of letting them complete the process directly on the merchant’s website or mobile app.
- Standalone Payment Processors — Businesses are forced to switch between more than one processing system depending on how the payment is being made (like in-person vs. online).
For smaller businesses that don’t have complex systems, an integrated system may not be necessary. But generally speaking, the technology behind these three alternatives is nowhere near what’s possible with a fully integrated system—and that’s why so many modern businesses are leaning towards the integrated route.
Examples of Integrated Payments
By now, I’m sure you have a firm grasp of how integrated payments work. But let’s walk through some common real-world examples showing how different types of businesses can leverage integrated solutions to improve the customer experience while streamlining internal processes.
Hotels and Hospitality
Guests staying at a resort can reserve their rooms online by inputting payment details directly on the hotel’s website. Upon arrival, they can put a deposit for incidentals using the same card (or a different card) at the front desk.
Throughout their stay, guests can charge meals from the restaurant to their room, take drinks from the minibar, and even charge excursions, spa treatments, or jet ski rentals to their room before paying for everything in a single bill upon checkout.
Restaurant and Food Service
Restaurants can centralize orders to backend kitchen operations whether they come from the server’s mobile POS, a self-service kiosk, curbside pickup order, or delivery from a third-party service.
Customers have the choice to pay using their preferred payment method or even a gift card, and all of the data is synced through a unified system regardless of the channel or payment type.
Healthcare
Doctors, orthodontists, physical therapists, and other healthcare providers can accept patient payments directly within their practice management software.
They can also set up payment plans and send automated text or email reminders for customers to pay while centralizing data across different facilities.
Retail and Ecommerce
Businesses selling physical goods to customers can have a single payment provider that facilitates all in-person transactions, online transactions, and purchases made through a mobile app.
Not only does this sync the payment data from each channel to one location, but it can also update inventory and stock levels in real time while simultaneously giving customers access to digital receipts and rewards points.
Final Thoughts: Integrated Payments Are the Future of Payment Processing
Lots of our clients are leveraging integrated payments. The more I see this, the more I like the technology behind it.
Some providers are definitely better than others, especially when it comes to providing customized solutions. However, we’ve also seen lots of industry-specific providers offering integrated systems, especially in the healthcare space.
It’s also worth noting that providers that haven’t historically offered fully integrated payment solutions are now starting to get on board, and I expect to see more businesses deploying integrated systems as a result.
That said, processors are definitely leveraging integrations to charge more money to merchants—not only during the initial setup but with rate hikes down the road.
Those providers know that it’s extremely difficult for merchants to switch once they’ve been set up with a deep integration. So they’re hoping the business just won’t push back against higher rates.
To help protect yourself from these types of situations, you can work with a merchant consultant to determine if you’re actually getting a good price. Our team here at MCC can audit your statements and identify cost-saving opportunities—helping you lower your rates without switching providers or disrupting any of your current operations. So you can keep your integrated system in place but pay less for it.