What are integrated payments? A business deep dive

Integrated payments connect payment processing directly with merchant Point of Sale (POS) systems to complete transactions. This connection creates a streamlined process for users, who remain on the merchant website for the whole payment process.

Creating the ideal shopping environment is important, with 63% of consumers surveyed globally in 2022 stating that optimized checkout experiences are important when researching or buying a product.¹

Integrated payments are one way merchants can optimize the checkout process, creating a smooth shopping experience and good operational efficiency.

An integrated payment system supports unified commerce experiences by linking payment processing directly with other merchant systems and allowing merchants to efficiently manage retail data. Systems such as inventory management and bookkeeping can automatically update, saving time on manual data entry and reducing errors.

This article explores how merchants can implement integrated payments to meet customer expectations, improve business workflows, and potentially increase revenue.

Table of contents

• How do integrated payment solutions work?
• Benefits of integrated payments
• Considerations of integrated payments
• How to implement integrated payments in a company
• PayPal for integrated payments
• FAQ

How do integrated payment solutions work?

Integrated payment solutions streamline and centralize payment acceptance and processing, whether merchants accept payments in person or online. These systems can allow merchants to access real-time sales and inventory data and updates, which provide a reliable source of information.

Additionally, customers can use various payment methods, such as credit or debit cards, digital wallets, and ACH transfers. This can eliminate the need for some manual transaction data entries, providing a smooth experience for both customers and merchants.

Here’s how an integrated payment solution works:

For online transactions:

To accept payments, the business can use APIs to embed a payment gateway on its checkout page so that customers can pay directly on the site.

Whatever payment acceptance service the business uses connects directly to its payment processor, which processes the payment. Throughout this process, the merchant's business management systems (inventory management, accounting software, etc.) track the transaction and update the business's financial management system with real-time sales data.

Ideally, the business would use a payment service provider (PSP) that offers an integrated payment solution where most of these services are centralized on one platform. However, integrated payments can also involve connecting multiple payment service providers, which can be less efficient and more costly in some cases.

For in-person transactions:

For in-person transactions, businesses use a merchant POS to accept digital payments. In an integrated payment system, the POS directly connects with a payment processor, which verifies the funds with the customer’s bank and supports a smooth transaction.

The POS system combines hardware devices that customers use to pay with software that tracks inventory and sales and can integrate with various business management systems.

Benefits of integrated payments

Integrated payment systems can create a low friction checkout experience for customers while automatically updating key systems for merchants. They can ultimately create efficiencies in business processes, reducing manual data entry.

Look for these benefits in an integrated payment system:

• Improved security: Integrated payment solutions help secure sensitive data, such as customer information and credit card details. They transfer data directly from the gateway or POS to the payment processor, providing few opportunities for data interception. Integrated payments also help merchants to comply with regulatory standards such as PCI DSS.
• Optimized efficiency: Integrated payments can streamline the payment process through automated communication and updates, reducing the need for manual entries. Automatic recording of transactions reduces merchant workflow.
• Increased revenue: Integrated payments can create a smooth checkout flow for customers, increasing trust and reducing abandoned transactions. POS tipping for in-person transactions is also easy to set up with an integrated payment system, helping to drive tip revenue.
• Enhanced data management: An integrated payment system can automatically capture transaction data, reconciling within one system. Merchants can easily access key business data for reporting and valuable sales and customer insights.
• Real-time inventory updates: Integrated payments can connect the payment gateway with inventory management systems to update inventory in real time. Keeping up with inventory changes (like when an item is out of stock) used to require a lot of work, which could impact customer experience.
• Upgraded customer experience: Non-integrated payments can feel disjointed and create frustration with longer checkout flows. Integrated payment systems can enhance the customer experience with the convenience of checkout in one place, flexible payment options, and easy access to detailed receipts and purchase history.
• Lower processing costs: Interchange fees are charges that acquiring banks pay to issuing banks to help cover the expenses of processing card transactions. Interchange fees are typically the largest part of the processing fees, but businesses may be able to lower them by sending rich data about each transaction. An integrated payment system can make it easy to access this information.
• Consolidate sales data across sales channels: Integrated payment systems allow merchants to easily consolidate payment data from all sales channels. This helps support a multi-channel selling strategy and may help to drive more sales.
• Automate workflows: Integrated payment solutions, like PayPal, can eliminate the need to string together multiple third-party systems to process a transaction. Transactions automatically appear on the correct ledger, simplifying accounting and eliminating manual data entry.

Considerations of integrated payments

An integrated payment system can bring significant efficiencies to a business, but not all are the same. Some merchants may find that a payment system doesn’t suit their needs very well.

Here are some considerations for merchants before choosing an integrated payment system:

• Investigate pricing models: Payment processing pricing models can factor significantly into monthly business expenses and may not make sense for all businesses. For example, merchants with few monthly transactions or who have manual bookkeeping systems might not need the advanced features of an integrated system. Additionally, any merchant in a restricted industry (such as cannabis sales) may find that those restrictions preclude them from using an integrated system.
• Look for accepted payment methods: An integrated payment processor should offer a variety of payment methods — including credit cards, digital payments, ACH, pay later options, and more — in keeping with consumer preferences. Offering customers options can help to drive more sales and increase the average order value of those sales. For example, offering PayPal Later has driven a 49% increase in average order value.²
• Understand PCI DSS compliance: PCI DSS compliance is mandatory for all merchants that accept credit card payments, but it is not always automatically taken care of by the payment processor. While all payment processors must help merchants maintain compliance, the merchant is ultimately responsible. Some payment processors will have solutions that make PCI DSS compliance easy for merchants.

How to implement integrated payments in a company

While the details of how to implement integrated payments will vary slightly depending on the merchant’s chosen payment gateway, the basic steps are common across providers.

1. Choose a payment gateway: Find the provider with the features that best fit the business, such as fee structure and payment options. Part of this consideration should include whether the payment gateway will integrate well with any current systems or whether the merchant is willing to overhaul their legacy systems.
2. Establish a merchant account: A merchant account receives any incoming payments and can transfer funds directly to the merchant’s bank account.
3. Integrate the payment gateway via API key: The merchant will need the API keys of their chosen payment gateway to integrate it with their website or app. They should follow the provider's instructions for installing and testing the gateway.
4. Set up POS terminals: Where merchants make sales face-to-face, they’ll need to set up any POS terminals or tills with their payment system. PayPal's POS terminal is a simple, lightweight option that helps merchants accept various popular payment types.
5. Enable live payments: After testing and verifying the payment system, merchants are ready to go live.