What Are Embedded Payments?

Embedded payments are a transformative approach in the financial and e-commerce sectors, integrating payment processing directly into software platforms and applications. Embedded payments solutions allow for a more streamlined and efficient way to accept payments for businesses and their customers.

When e-commerce companies implement embedded payments, they facilitate a seamless checkout experience, enabling customers to complete purchases without leaving the website or app. This not only enhances the customer experience but also simplifies the payment acceptance process for businesses.

The same can be said for software companies and platforms. Embedded financial solutions allow their merchants to handle transactions within the same environment they use for their other business operations, creating a unified and efficient workflow.

The concept of embedded finance, which includes embedded payments, extends beyond mere transaction processing, encompassing a range of financial services like lending, insurance, and banking services, all seamlessly integrated into traditionally non-financial institutions.

Embedded Payments vs Integrated Payments

We can’t talk about embedded payments without mentioning the differences it shares with integrated payment solutions. While they may seem interchangeable at first glance, the underlying architecture and business value they deliver are quite different. Understanding these differences are critical for software providers exploring long-term payment strategies.

Integrated payments refer to a setup where the software platform connects to a third-party payment processor via APIs.

In this model, the payment solution is “bolted on” to the software so it functions alongside the core platform but remains a distinct and separate system. This setup still enables users to enter payment information within the platform interface, but the actual processing, onboarding, support, and reconciliation are managed by the third-party provider.

Embedded payments work by representing a deeper, more seamless integration, where payment functionality is built directly into the software platform.

With embedded payments, everything from onboarding and payment acceptance to transaction management and reporting is handled within the same environment. This creates a cohesive user experience that feels native to the software, with no external redirects or disjointed workflows.

An embedded payments provider plays a crucial role in enabling this experience. With their partnership, software providers can offer a fully integrated financial solution without having to build or manage complex infrastructure themselves.

These payment providers deliver not just the technology, but also the compliance, risk management, settlement, and support services required to make embedded payments work at scale.

The Shift Towards Embedded Payments in Platforms

Embedded payments are becoming a key feature of modern SaaS platforms and marketplaces, transforming how businesses operate and interact with customers. This growing trend is driven by the demand for a frictionless customer experience and all-in-one platform solutions.

For a software company, embedding payments unlocks new monetization opportunities while streamlining workflows for end-users. At the same time, it delivers a faster, more intuitive checkout and payment experience for consumers—making platforms more valuable across the board.

Benefits of Embedded Payments

Let’s dive a little deeper into all the benefits of embedded payment solutions for the solution end-users and the software provider.

Benefits for Platform Users

Streamlined User Experience: One of the most notable advantages is the seamless user experience. Users can pay directly without leaving the platform, which not only simplifies and speeds up the purchase process but also leads to increased user satisfaction.

Time and Resource Efficiency: Embedded payments reduce the time and resources spent on managing separate payment systems. By having payment processing capabilities within the platform, users can avoid the complexities associated with dealing with multiple payment providers or third-party payment gateways.

Enhanced Data Security Trust: When software providers embed payments, they can handle sensitive data within a single, secure environment, which helps build trust among users.

Consolidated Financial Operations: Users benefit from having all their financial transactions and data in one place. This consolidation allows for better financial management and the ability to gain deeper insights into their business’s financial health.

Increase Consumer Satisfaction: Driven by the need for faster omnichannel payment solutions, embedded solutions not only create a better payment experience for the merchant but the consumer as well. 

Revenue Opportunities for Software Providers

New Revenue Streams from Processing Payments: By embedding payment processing, software providers can earn from transaction fees and other related charges each time a payment is processed within their software solution. This model creates a continuous revenue stream that can significantly contribute to the provider’s overall earnings.

Increased Platform User Retention: Platforms that offer comprehensive solutions that include payment processing, are more likely to retain users. This increased stickiness can lead to higher long-term revenue through sustained user engagement and loyalty.

Data Monetization: The data gathered from embedded payment transactions can be invaluable. Platforms can use this data to offer personalized services, targeted marketing, and improved customer experiences, all of which can be monetized.

Partnership and Collaboration Opportunities: Embedding payments opens up opportunities for partnerships with financial institutions and fintech companies, leading to potential revenue-sharing models and expanded service offerings.

In summary, the advantages of embedded payments extend beyond improving the user experience. They represent a strategic opportunity for platforms to diversify and strengthen their revenue streams and their solution in general, positioning themselves as integral partners in their users’ business operations.

Embedded Payments vs. Traditional Models

Historically, many SaaS platforms and digital marketplaces have relied on the traditional referral model for payment processing.

In this setup, businesses direct users to third-party providers, often via redirect flows, to complete transactions. While this approach might seem straightforward, it presents several challenges that can hinder both platform growth and user satisfaction.

One of the main drawbacks of the referral model is the fragmented user experience it creates. When users are forced to leave the platform to complete a payment, the experience becomes disjointed and less intuitive.

This friction can result in cart abandonment, lower conversion rates, and decreased trust in the platform. Beyond the user experience, platforms that rely on third-party providers often lose visibility and control over critical transaction data.

This data is not only essential for resolving payment disputes and reconciling transactions, but it’s also a valuable resource for understanding customer behavior and optimizing future interactions.

Operationally, the referral model introduces inefficiencies. Manual payment reconciliation, reliance on external support teams, and limited integration with back-office systems can lead to increased overhead and slower time to resolution for payment-related issues.

In addition, managing multiple third-party vendors for payments, compliance, and fraud prevention adds complexity and reduces a platform’s agility.

In contrast, the benefits of embedded payments offer a fully integrated, streamlined alternative. By embedding payment functionality directly into their platform, software providers can create seamless, end-to-end user journeys where payments are just another native part of the workflow. This approach reduces friction, improves the customer experience, and increases brand loyalty.

Embedded payments also unlock access to rich transactional data that would otherwise be owned by a third-party processor. With this data in hand, more companies can make smarter, data-driven decisions, such as offering targeted promotions, identifying high-value customers, or tailoring subscription models based on usage and payment behavior.

From a business perspective, embedded payments create new opportunities. Rather than handing off processing fees to an external provider, platforms can monetize payment flows directly through markup strategies, subscription tiers, or value-added services.

Moreover, by managing sensitive payment data in-house or through tightly integrated partners, platforms can improve compliance with industry standards such as PCI-DSS and reduce the risk of data breaches.

Ultimately, embedded payments don’t just improve payment processing. They enhance the entire platform experience.

They allow software companies to differentiate themselves in competitive markets, create stickier products, and scale more effectively. Compared to the traditional model, embedded payments offer a more holistic, user-centric, and profitable path forward.

The Future of Embedded Payments

As the embedded banking space changes at a rapid pace, software providers are moving beyond the ability to process payments and embracing comprehensive, white-labeled financial solutions.

This includes services like recurring payments, subscription billing, real-time payouts, and merchant financing. These capabilities turn software platforms into financial hubs, meeting users’ needs end-to-end while increasing their revenue.

For example, Clearent is a payments provider with solutions like Xplor Capital, which allows software companies to integrate merchant financing capabilities directly into their software ecosystems.

Another key component of this transformation is the rise of PayFac-as-a-Service.

Traditionally, becoming a payment facilitator required significant time, cost, and regulatory burden. But with PayFac-as-a-Service models, software providers can offer the same benefits, such as onboarding merchants under their own brand, controlling the user experience, and monetizing payments—without the operational complexity. This gives platforms greater flexibility to differentiate and grow, while the PayFac partner handles compliance, risk management, and settlement logistics behind the scenes.

Looking ahead, the most successful software providers will be those that embrace the full spectrum of embedded finance and design payment experiences around the needs of their users. By offering modern payment methods, intuitive recurring payments, and services like PayFac-as-a-Service, software companies can deliver seamless financial experiences that fuel user satisfaction, loyalty, and long-term growth.

Summarizing the Opportunities for Platforms

New Revenue Streams: By offering embedded financial services, software providers can tap into new revenue sources, such as fees from lending services or insurance premiums.

Enhanced User Retention: Providing a one-stop-shop for financial services can significantly enhance user retention, as SMBs value the convenience and efficiency of integrated solutions.

Data-Driven Insights: The financial data gathered through embedded services can give software providers deeper insights into their users’ needs, enabling them to tailor their offerings more effectively.

Building Ecosystems: Software providers have the opportunity to build comprehensive ecosystems around their core offerings and business tools, making them indispensable to SMBs.

Wrap Up

Embedded payments have revolutionized how platforms and their users handle financial transactions, marking a strategic shift beyond a mere technological advancement.

The biggest benefits include:

The future of embedded financial services remains promising, with a trend towards comprehensive financial services and a focus on the SMB market, allowing businesses significant opportunities for innovation and growth.

For many software companies, this involves evaluating current payment methods, partnering with fintech experts, focusing on user needs, and exploring broader financial services. Embedded payments present a unique chance for software providers to elevate their services, engage users more effectively, and tap into new revenue streams.

Learn more about Clearent’s embedded payment solution below! If you’re not ready for embedded payments just yet, connect with us to learn more about our other flexible partnership solutions and other additional services.