Fed Flags Overspending Fears as Invisible Payments Soar

Frictionless commerce has increasingly been the holy grail of online and in-store commerce.

Embedded payments, integrated into platforms, are visible, and require a moment of click-through and interaction. Invisible payments happen in the background, with nary a hint of consumer effort. Uber is the typical archetype, as the transaction happens at the end of the trip, with the charges levied automatically.

A Note of Caution From the Fed

But there are at least a few cautionary notes in the mix: Frictionless commerce may lead to a slippery slope of overspending, some observers say.

As detailed in a June 16 post by the Federal Reserve Bank of Atlanta , in its “Take on Payments” forum, the rise of embedded and invisible payments “bring benefits and trade-offs,” but the “ease can come at the cost of clarity. When payments fade into the background, losing track of spending, overlooking transactions, or feeling less in control of financial decisions becomes much easier.

“Privacy, data security, and budgeting all become more complex,” the post added. “The more seamless the experience, the more important it is to design for transparency, trust, and user awareness.”

Separately, as discussed in research presented in the Journal of Economic Behavior and Organization, and in a paper titled “Paying in the blink of an eye: It hurts less but you spend more,” the authors contend that contactless payments, especially, sidestep what’s known as the “pain of paying” where “electronic payments — both online and offline — hurt less than cash payments … On average, respondents find cash more helpful to prevent overspending and track their expenditures than electronic, and especially contactless, payment methods. When paying with cash, respondents are more aware of the exact amount that they pay.”

The Transformation of Commerce

PYMNTS Intelligence has tracked the growing embrace of embedded options and streamlined payments that have been moving payments into a broader array of everyday interactions. In the “Platform Business Survey: The Rise of Embedded Payments,” we noted that embedded transactions are fast becoming “table stakes” for providers, with 54% of independent software providers and 74% of marketplaces enabling digital payment experiences, a necessary step “to remain competitive.”

As PYMNTS CEO Karen Webster wrote heading into 2025: “Embedded is the prefix for most of the innovations we talk about now in payments. We embed payments into software (something we’ve been doing ever since the dawn of eCommerce), identity into payments, lending into checkout flows, banking into virtual accounts, point solutions inside of tech stacks, GenAI into software, offers into banking apps, and networks into networks … A lot of what was called invisible at the dawn of the 2010s with the introduction of Uber is now described as embedded … But it’s not enough to just “embed” something into something else. Embedding should be almost invisible and frictionless.”

Recent rollouts and announcements underscore the momentum. As PYMNTS reported, U.S. Bank said last month it had expanded its suite of embedded solutions. The move lets businesses integrate payments into their existing systems, and includes a for-benefit-of (FBO) solution for companies to move money on behalf of their customers.

In other coverage, Adam Gray, chief transformation officer at Stax, told PYMNTS: “As an industry, we are always trying to serve new markets — and for embedded payments, there are historically underserved markets that we’re seeing growth.” Small business owners can embed payments and subscription options so that transactions become recurring in nature (and, arguably, by extension, invisible).