If you’re a software founder or product leader, you’ve almost certainly run into the embedded payments conversation. Maybe an investor brought it up. Maybe your customers have been asking why they can’t just pay inside your platform.
The concept sounds straightforward. The execution often isn’t. This guide breaks down what embedded payments actually are, how they work for software platforms, what business models are available, and what to watch out for. Without the jargon.
What Are Embedded Payments?
Embedded payments refers to integrating payment processing capabilities directly into your software platform so your customers can accept, send, or manage payments without ever leaving your product.
Instead of your merchant customers relying on a separate payment processor (think Square, PayPal, or a bank terminal), transactions happen natively inside your software. To them, it looks and feels like your product. That’s the point.
“The key consideration for SaaS platforms is the ability to extend their products to include payments WITHOUT their customer leaving their brand.” — Forward
This is made possible through a combination of APIs, SDKs, payment gateways, merchant accounts, and boarding tools all plumbed together so that the complexity stays invisible to the end user.
Embedded Payments vs. Traditional Payment Processing
In traditional payment processing, the merchant goes out and finds their own payment processor: Stripe, Square, a local bank. They manage their own account, their own terminal, their own reporting. Your software might integrate loosely with these providers, but payments is someone else’s problem.
With embedded payments, your platform owns that relationship. You become the payments layer. Your merchants sign up for payments through you, get funded through you, and manage everything inside your dashboard. You control the experience, and you earn revenue from every transaction.
The difference in economics is significant. According to UBS research, integrated SMB payments is on track to account for $3.4 trillion in U.S. payments by 2030. Platforms that own payments typically generate 3-5x more revenue per customer than those that don’t.
Why Software Platforms Are Moving to Embedded Payments
There are three reasons this shift is happening fast:
- Revenue: Payment processing fees are real money. When your customers pay through a third-party processor, that revenue goes somewhere else. When they pay through your embedded solution, you earn a share of every transaction. Typically 20-100+ basis points on processing volume. At scale, this dwarfs SaaS subscription revenue. Most software platforms that partner with Forward join with fewer than 20% of their customers actively using payments. Our goal is to get that above 70%. The math on that jump is transformative.
- Retention: Merchants who process payments through your platform are far stickier than those who don’t. Payments create data dependencies, reconciliation workflows, and operational habits that make switching costly. Platforms with embedded payments consistently see lower churn.
- Customer experience: Your customers shouldn’t have to leave your product to manage a critical part of their business. Embedded payments means reconciliation, reporting, settlements, and support all live in one place: your platform. That’s a better product.
- AI Moat: We are in the midst of immense technological change resulting in the public markets sell off of well known software names (SaaSpocolypse). While the gyrations of the market are likely a short term over-reaction, there is no doubt that further embedding a software company’s value prop into how their customers collect revenue – creates a strong moat for vertical specific workflow and business operating software.
How Embedded Payments Work (The Technical Short Version)
When a merchant on your platform wants to accept payments, they need a merchant account, essentially their own account with the payment networks (Visa, Mastercard, etc.). In an embedded model, you provision that account for them, either as a Payment Facilitator (PayFac) or through a managed PayFac arrangement.
Here’s the basic flow:
- Your customer signs up for payments inside your software (a button, a modal, a short onboarding form)
- After going through an underwriting process (KYC/KYB, credit underwriting), they’re onboarded to the payment network,and assigned a merchant account
- You embed a payment widget. Card fields, ACH forms, and hosted checkout directly in your product using a Payment Elements SDK
- Transactions flow through your platform. Merchants get paid. You earn revenue on the spread.
- Reporting, reconciliation, refunds, disputes, and support all happen inside your software or via white-labeled tools
The integration itself, if done with the right partner, typically takes less than two weeks.
Understanding the Business Models: PayFac, Managed PayFac, and Everything In Between
This is where most SaaS founders get overwhelmed, and where the wrong choice costs years of growth. Here’s a plain-English breakdown:
Managed PayFac (the starting point for most platforms)
You partner with a PayFac enabler (like Forward) who handles compliance, underwriting, risk monitoring, and settlement infrastructure. You integrate, you sell payments to your customers, and you earn revenue. The complexity lives with your partner, not your team.
This is the right move for platforms that are earlier in their payments journey, don’t have a dedicated payments team, or want to move fast. Forward’s managed models include, Maximize, and Rails. Each calibrated to meet you where you are in your payments journey.
Registered PayFac (the eventual destination for larger platforms)
As your payments volume and team grow, it sometimes makes sense to register directly with Visa and Mastercard as a Payment Facilitator. This gives you more control over economics and merchant experience, but comes with compliance obligations and operational overhead.
Forward’s platform is built so you can start in a managed model and graduate to a registered PayFac at any time, without re-contracting or re-onboarding your customers. True legal and technical portability.
The trap to avoid
Some payment providers lock you in with restrictive contracts, charge hidden junk fees that come off the top before your revenue share, or assess 25–40 basis points on every dollar settled to merchants. These practices can double or triple your effective cost of payments, and the contracts make it painful to leave once you figure it out. A lot of legacy processors will implement ‘exclusivity or non-solicits’ which can oftentimes lock your merchants into contracts for years, heavily discounting the value of your payments offering if ever looking to transact or raise funds.
Always read the full economics before signing. Always ask what happens if you want to switch.
What to Look for in an Embedded Payments Partner
Not all PayFac enablers are built the same. Here’s what actually matters:
- Transparent pricing: no hidden fees, no junk fees that eat your revenue share before it reaches you.
- No exclusivity or non-solicits: the ability to grow, adapt, or move on without disruption. Know that minimums = exclusivity, just called something else.
- True portability: not just token portability, but full merchant agreement portability so you’re not re-onboarding thousands of customers if you change providers.
- Fast integration: sub-two-week go-live is achievable with the right tools and support.
- White glove support: technology alone doesn’t get your customers to use payments. You need strategy, sales support, and hands-on help driving attach rates.
- Geographic coverage: If 90%+ of your customers are located between the US and Canada, ensure that your provider can cover both markets.
- Ownership: Does your payments provider own their stack – from bank to network to interchange to payouts. If they put a modern UI on a legacy processor backend, you will struggle to keep pace with an ever-changing payments landscape.
- A path to PFAC: if you eventually want to become a registered PayFac, your current provider shouldn’t be a dead end.
At Forward, we built our platform specifically because we couldn’t find a partner that met all of these criteria when we were on the SaaS side of the table. We’ve been in your shoes as software founders who learned payments the hard way, and then inside a Fortune 100 company, and we built what we wished existed. We’re here to pay it Forward.
Common Misconceptions About Embedded Payments
“Integrating payments will automatically drive adoption.”
It won’t. The technology is the easy part. Getting your existing customers to switch from whatever they’re doing today to your embedded solution requires a deliberate sales and onboarding strategy and ongoing optimization. Most platforms join Forward with less than 20% adoption. Getting above 70% requires active effort, and that’s where most DIY approaches stall.
“We already have payments, we don’t have to worry about this now.”
Most software companies should expect to make 50% of their revenue from payments income. If you are generating $15 million in software license revenue, your payments and embedded finance net-revenues should be roughly the same number. If you “have payments” but the revenue is less than 30% of your total revenue, you don’t really have what the market is referring to.
“We’ll just use Stripe and figure out the rest later.”
Stripe is a great tool for getting your first transactions running. But Stripe’s economics aren’t designed for software platforms that want to monetize payments long-term. You’re giving away the revenue that could be yours. Many of the software companies Forward adds each week are converting from Stripe or other legacy setups specifically because the business side of payments didn’t meet expectations.
“Our customers won’t switch.”
The same customers who resisted switching to your software are now processing through it. Payments is the same story. When the experience is better, simpler, and fully inside the platform they already use every day, adoption happens, with the right support and communication. The unified experience becomes so sticky that they often become customers for life.
Getting Started
If you’re evaluating embedded payments for your platform, the most important first step isn’t picking a provider. It’s understanding your current situation and what model fits your team.
Ask yourself:
- What percentage of my customers are currently using a payment solution outside my platform?
- What’s my monthly processing volume (or projected volume)?
- Do I have a payments-focused person on my team, or would I need to build that capability?
- Am I looking to move fast and iterate, or invest in full PayFac registration from the start?
The answers point you toward the right model. And if you want a second opinion from people who’ve done this many times across many industries, that’s exactly what Forward is here for.
Ready to explore embedded payments for your platform? Speak with a Forward payments expert. No strings attached.
