Integrated Payments vs Embedded Payments: What’s the Difference?

TL;DR

If you’re a software platform offering payments or considering adding them to your platform, you’ve likely encountered the terms “integrated payments” and “embedded payments”. While they’re sometimes used interchangeably, the differences can affect your product, customer experience, and payments strategy.

Understanding the differences can help you determine how payments should fit into your platform, how much control and responsibility you want to take on, and which approach best supports your business today and as it grows.

How Are Integrated and Embedded Payments Similar?

Integrated and embedded payments both connect payment capabilities with software to reduce manual processes, simplify payment acceptance, and create a more convenient customer experience. Both can also create new revenue opportunities for software companies.

What Is the Difference Between Integrated and Embedded Payments?

The biggest difference between integrated and embedded payments is how deeply payments are incorporated into the software platform and the role the software company plays in delivering the payments experience.

With integrated payments, payment processing is connected to the software so transactions and payment data can flow through existing workflows. The payments provider typically maintains a larger role in areas such as merchant onboarding, processing, and support.

With embedded payments, payments become a more native part of the platform and customer experience. Depending on the partnership model, the software company may have greater control over areas such as branding, merchant onboarding, pricing, support, and monetization.

Area	Integrated Payments	Embedded Payments
Product Experience	Payments connect with existing software workflows	Payments are designed as a native part of the platform experience
Merchant Relationship	Payments provider typically plays a larger role	Software platform can take greater ownership
Branding	May include more provider visibility	Can offer greater control over the branded experience
Pricing	Typically less pricing control	Greater pricing flexibility
Revenue Opportunity	Can generate payments revenue	Greater revenue potential
Operational Responsibility	More responsibility remains with the payments provider	Can increase depending on the partnership model
Risk & Compliance	More responsibility typically remains with the provider	Responsibility varies based on the model
Speed to Market	Often faster and less resource-intensive	Varies based on the level of payments ownership

→ Related: Listen to our Payment Pulse podcast episode to learn the key differences and benefits of integrated and embedded payments.

What are Integrated Payments?

Integrated payments connect payment processing directly with a software platform, allowing payments and payment data to flow through the workflows customers already use. Instead of managing payments through a separate system, users can accept payments and access related information within the software.

These connections are typically enabled through APIs (Application Programming Interfaces) and SDKs (Software Development Kits), which allow the software and payments systems to communicate.

For example, a field service platform might integrate payments so a contractor can create an invoice, accept a card payment and automatically update the customer’s account without entering the same information in multiple systems.

What Are the Advantages and Tradeoffs of Embedded Payments?

For many software companies, integrated payments offer a relatively straightforward way to add payment capabilities without taking on significant payments complexity.

Advantages of Integrated Payments

Simplified operations: Connecting payments with existing software workflows can reduce manual data entry, improve accuracy and make it easier for customers to manage payments alongside other business activities.

Faster path to market: Because the payments provider typically handles more of the payments infrastructure and operational responsibilities, software companies can often bring integrated payments to market with fewer internal resources.

Revenue opportunity: Integrated payments can create an additional revenue stream without requiring software companies to take on greater payments responsibility.

Tradeoffs of Integrated Payments

Less control: Software companies may have less control over areas such as merchant onboarding, pricing, branding and support, depending on the payments partnership.

Greater provider involvement: The payments provider typically maintains a larger role in the merchant relationship and overall payments experience.

What Are Embedded Payments?

Embedded payments make payment capabilities a native part of the software platform and customer experience. Rather than payments feeling like a separate service connected to the software, they become part of the workflows customers already use to run their businesses.

Depending on the payments model, software companies can gain greater control over merchant onboarding, branding, pricing, support, and the overall payment experience.

For example, a field service platform with embedded payments could provide a branded experience that allows contractors to sign up for payments, accept transactions, manage payment activity and access reporting without payments feeling like a separate third-party service.

What Are the Advantages and Tradeoffs of Embedded Payments?

Embedded payments can give software companies greater influence over how payments fit into their product, customer experience and business model. That additional control can create significant advantages, but it also requires companies to think carefully about how much payments responsibility they want to assume.

Advantages of Embedded Payments

More seamless customer experience: Payments can be designed around the platform’s existing workflows and brand, making the experience feel like a natural extension of the software.

Greater control: Software companies can have more influence over how payments are delivered, priced, and supported.

Increased revenue potential: Greater control over the payments program can create more opportunities to optimize pricing, increase payment adoption, and build payments into the platform’s broader revenue strategy.

Tradeoffs of Embedded Payments

Greater resource requirements: Creating and managing a more embedded payments experience may require additional product, development, and operational resources.

More operational responsibility: As software companies take greater ownership of payments, they may also take on more responsibility for areas such as merchant support, onboarding, and payment operations.

Additional risk and compliance considerations: Greater payments ownership can bring additional responsibilities, although how much the software company assumes depends on the partnership model.

Do You Have to Become a Payment Facilitator to Offer Embedded Payments?

No. Software companies don’t have to become full payment facilitators to offer an embedded payments experience.

Different partnership models allow software companies to choose how much of the payments experience they want to control and how much operational and compliance responsibility they want to assume. For example, a software company may want greater control over the merchant experience and payments monetization while relying on its payments provider for areas such as underwriting, risk and compliance.

How Do Payments Partnership Models Differ?

Software companies have several options for structuring their payments partnerships. These models vary in how much control the software company has, the responsibilities it assumes and the revenue opportunity it can capture.

Referral: The payments provider typically manages merchant sales, onboarding, activation, support and payment processing. The software company refers customers to the provider and may receive a share of payments revenue. This model offers a relatively simple way to provide integrated payments with limited operational responsibility.

Hybrid: The software company takes a more active role in the payments experience while continuing to rely on its payments provider for much of the operational infrastructure. This provides greater control over the merchant relationship without requiring the platform to manage the entire payments program.

PayFac as a Service (PFaaS): The software company can create a more embedded, branded payments experience while relying on its payments partner for much of the infrastructure, risk and compliance. This model can provide greater control and revenue potential without requiring the software company to become a full payment facilitator.

Payment Facilitator: The software company assumes the greatest level of payments ownership and responsibility. This can provide greater control over the merchant experience, pricing and economics, but also requires significantly more operational, risk and compliance resources.

Which Payments Model Is Right for Your SaaS Platform?

The right payments model depends on your business goals, resources and the role you want payments to play within your platform. For some software companies, an integrated approach provides the right balance of simplicity and revenue opportunity. For others, a more embedded approach can provide greater control over the customer experience, pricing, and revenue.

As you evaluate your options, consider questions such as:

Your payments needs may also change as your platform grows. The Xplor Pay Flex Framework is designed around that reality, giving software companies different paths for launching and growing payments based on the level of control, responsibility and revenue potential, and the ability to evolve as their needs change.

Wrapping Up

The right payments strategy depends on the role you want payments to play in your product and business. Integrated payments can provide simplicity and speed, while a more embedded approach can offer greater control over the merchant experience, pricing and monetization.

What matters is choosing a model and payments partner that support your needs today without limiting where you can go next.

Frequently Asked Questions

Q. What is the difference between integrated payments and embedded payments?

A. Integrated payments connect payment processing to a software platform so payments and payment data can flow through existing workflows. With embedded payments, the payment experience becomes a more native part of the platform, giving software companies greater control over areas such as branding, pricing and monetization.

Q. Which is better for software providers: integrated payments or embedded payments?

A. Neither approach is inherently better. The right choice depends on the role payments play in your business, how much control you want over the payments experience, your available resources and how much operational responsibility you want to assume. Integrated payments may be a good fit for platforms prioritizing simplicity and speed to market, while embedded payments may be better suited to platforms seeking greater control and revenue potential.

Q. Why can embedded payments offer more revenue potential?

A. Embedded payments can give software companies greater control over areas such as pricing, merchant adoption and the overall payments experience. That additional control can create more opportunities to optimize payments revenue as the program grows.

Q. Do you have to become a PayFac to offer embedded payments?

A. No. Software companies can offer embedded payments without becoming full payment facilitators. Models such as PayFac as a Service can provide greater control over the payments experience while allowing a payments provider to continue supporting areas such as infrastructure, risk and compliance.

Q. Can a software company make payments more embedded over time?

A. Yes. As payments become more important to a software company’s product and growth strategy, the company may choose to take greater control over areas such as the merchant experience, pricing, branding and monetization.

That evolution doesn’t necessarily require becoming a full payment facilitator or replacing the entire payments program. With the right partnership model, software companies can increase their level of payments ownership as their needs evolve.