Payment Pulse – Ep. 28

Embedded vs. integrated payments explained: learn key differences, benefits, and how SaaS platforms use payments to drive revenue, retention, and growth.

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Episode Transcript

 

Shannon: Welcome back to Payment Pulse, a podcast by Xplor Pay, where we talk about what’s happening in the payments world and how it impacts software platforms and the businesses they serve. I’m Shannon.

Michelle: And I’m Michelle.

Shannon: And today we’re diving into a topic that comes up a lot when we talk to SaaS companies: embedded payments versus integrated payments. You hear these terms everywhere in FinTech and SaaS conversations, but honestly, people don’t always mean the same thing when they use the two terms.

Michelle: Yeah, that’s very true. Sometimes people use the terms interchangeably, even though they’re actually describing pretty different approaches.

Shannon: Exactly, and this conversation is becoming more important because a lot of software platforms are starting to realize payments aren’t just something they need to enable transactions. They can actually become a very important growth driver for their business.

Michelle: Right, when payments are part of the platform, it can improve the customer experience and create new revenue opportunities for SaaS providers.

Shannon: So today we’re going to talk through what integrated payments are, what people mean when they say embedded payments, and when each approach makes sense, which is actually one of the biggest misconceptions we hear from SaaS companies exploring this space.

Before we get into the definitions, it’s worth stepping back and talking about why this conversation is happening so much right now. If you look at the SaaS world over the last decade, there’s been a huge rise in vertical SaaS platforms.

Michelle: Right, software designed for very specific industries: restaurants, dental offices, fitness studios, field service companies, you name it.

Shannon: Exactly, and those platforms are increasingly becoming the central system businesses rely on to run their operations. They manage scheduling, invoicing, reporting, customer data, pretty much everything.

Michelle: So once the software becomes that central hub, it’s a pretty natural step to start handling payments there too. Instead of sending customers somewhere else to pay, the transaction just happens inside the platform.

Shannon: And from a business perspective, that’s where things get really interesting because once payments start flowing through the platform, software companies can begin participating in that transaction revenue.

Michelle: And in some cases, that becomes a very meaningful revenue stream, sometimes second only to subscription revenue. So payments stop being just a feature and start becoming part of the platform’s growth strategy.

Shannon: All right. Let’s talk about the two terms we hear the most: integrated payments and embedded payments. So Michelle, when people talk about integrated payments, what are they usually referring to?

Michelle: At a high level, integrated payments usually mean that the software platform connects to a payment processor, so users can accept payments within their workflow, but parts of the payment process still happen through a third party system.

Shannon: Right. So for example, maybe the merchant application happens somewhere else, or the payment page is hosted externally, or reporting can live in a separate portal.

Michelle: Exactly. It works well and it’s often a great way for platforms to start offering payments, but it’s not fully native to the product experience.

Shannon: So now when people talk about embedded payments, they’re usually describing a deeper level of integration. Payments are built directly into the workflow, so it feels like a natural part of the software.

Michelle: One example people immediately understand is Uber. When you take an Uber ride, you’re not thinking about making a payment. You just request the ride, get to your destination, and the payment happens automatically.

Shannon: Exactly, so the payment is essentially invisible because it becomes completely embedded into the experience.

Michelle: Right. And while most SaaS platforms aren’t trying to replicate Uber exactly, the idea is the same. Make payments feel like a natural part of the workflow, not a separate process.

Shannon: Now, one thing we should probably point out here is that one model isn’t automatically better than the other. A lot of it depends on where the software company is in its growth journey.

Michelle: So different payment models make sense for different stages of a SaaS company’s growth. So for example, early stage platforms are usually focused on launching features quickly and keeping development complexity manageable.

Shannon: So integrated payments can be a great starting point. You can enable payment acceptance fairly quickly without building a huge payments infrastructure.

Michelle: As platforms grow, though, the conversation often shifts. They start asking questions like, how do we increase payment adoption? How do we make payments easier for our customers? How do we get more revenue flowing through our platform?

Shannon: That’s when many companies begin exploring more embedded payment models. Sometimes that includes options like PayFac as a service, where payments can create a seamless experience without relying on a payments partner to manage the infrastructure behind the scenes.

Michelle: Beyond the user experience, embedded payments can also have a big business impact for the software provider. One obvious benefit is revenue. When payments happen inside the platform, the software company can share in the economics of those transactions.

Shannon: But there are other benefits too. So for example, when payments are tied directly to workflows like invoicing, reporting, and reconciliation, it becomes much harder for customers to switch platforms.

Michelle: Right, payments can actually increase customer stickiness. Once everything is connected, moving to another system becomes such a bigger lift.

Shannon: Another advantage is data visibility. So when payments happen inside the platform, the SaaS provider gains insight into how customers are actually running their business.

Michelle: That data can unlock additional opportunities. Things like financial reporting tools, automation forecasting, and even financing products down the road.

Shannon: So a good example of how workflow impacts payments comes from a partner of ours, a dental software platform that we’ve worked with. So originally the platform allowed offices to send payment links or direct patients to an online portal after their appointment.

Michelle: Now, all of this sounds convenient, but what often happened was that the patients would leave the office and simply go on with their day and then forget to pay.

Shannon: Exactly. So that’s why the platform introduced payment terminals at the front desk of the office, integrated directly into their workflow. So now when patients check out, the staff can collect payments immediately.

Michelle: The results were dramatic, processing volume increased by 1500% per account, the payment attach rate increased by 27%, and we reduced nonactivated accounts by 11%.

Shannon: Yeah, so the interesting thing here is that the technology itself wasn’t the big breakthrough. It was simply aligning payments with the moment that people expect to pay.

Michelle: One misconception we hear a lot is that if a SaaS company wants to embed payments, they immediately have to become a full payment facilitator, or a payfac.

Shannon: And that can sound intimidating because running a payfac program involves compliance, underwriting, and risk monitoring, and there’s a lot that goes into it, as you can imagine.

Michelle: So the good news is that there are more flexible models available today. For example, with PayFac as a Service, platforms can embed payments into their user experience while a payments partner helps manage the infrastructure and operational complexity.

Shannon: So the big point here is that it’s not necessarily an all or nothing decision. Platforms can gradually move toward a more embedded model without taking on everything themselves.

Michelle: Now, for SaaS leaders thinking about payment strategy, one of the best starting points is simply understanding your customer’s workflows. Where do payments naturally happen?

Shannon: And how can your platform make that process easier or faster? Sometimes that means starting with integrated payments and evolving over time.

Michelle: Other times it means building a more embedded experience right away. Either way, the goal is the same. Remove friction for users and create more value inside your platform.

Shannon: So embedded and integrated payments aren’t competing ideas. They’re just different approaches for supporting different stages of growth.

Michelle: And as SaaS platforms continue to evolve, payments will likely play an even bigger role in how they deliver value to their customers.

Shannon: Thanks for joining us for this episode of Payment Pulse, brought to you by Xplor Pay.

Michelle: If you enjoyed listening to this episode, we have more resources like this on our blog at xplorpay.com. That’s X-P-L-O-R pay dot com.

Shannon: Thanks for listening and we’ll see you next time on Payment Pulse.