How to Build a Business Case for Embedded Payments

Translating the value of payments into a compelling business case can be challenging, as leadership teams demand quantifiable ROI projections, transparent cost structures, realistic risk assessments, and clear implementation timelines when considering payments initiatives.

This guide explains how to address these important questions. Whether you’re researching the impact of embedded payments or are convinced but need help pitching leadership, this framework will give you confidence to build a supportive business case.

1. Start with Customer Expectations

Merchants increasingly want more seamless workflows with fewer tools and logins. When payments sit outside your platform, it creates friction: slower transactions, separate dashboards, and more manual work.

When your customers can manage their operations and process payments in one place, you become the more attractive option.

Additionally, embedded payments could shorten sales cycles due to:

2. Highlight the Opportunity

Next, share how embedded payments can drive new revenue, increase platform stickiness, and help with product differentiation.

Higher ARPU (Average Revenue Per User)

When you process payments on behalf of your customers, you capture a share of every transaction that flows through your platform. For software providers with substantial payment volume across their customer base, this can represent a meaningful new revenue stream that scales with customer success.

This payments revenue also increases ARPU without requiring customers to upgrade to higher-tier plans. Thanks to monetization, integrated payments create a win-win where customers get payment processing convenience and you generate incremental revenue that compounds over time as customer payment volumes grow.

Better Customer Retention

When payments are integrated into daily workflows, switching to a different software provider is highly unlikely. Merchants who do decide to change platforms would end up disrupting their revenue operations, retraining staff on new payment processes, migrating transaction histories, and potentially interrupting cash flow during the transition.

This friction works in your favor, creating a powerful retention moat that makes customers think twice before leaving.

Product Differentiation

Embedded payments also create opportunities for product innovation that competitors without payment capabilities simply can’t match.

As you build or enhance your payments integration, you can include value-added services like automated payment plans, smart invoicing based on service completion, faster funding options, or integrated working capital products.

These innovations become additional differentiators that increase your competitive advantage.

3. Provide the ROI Projection

Strategy and vision matter, but CFOs and finance teams need numbers. Here’s how to model the revenue opportunity from embedded payments with realistic assumptions and clear methodology.

Expected payment volume

Start by analyzing your current customer base to understand their payment activity. If you don’t have direct payment data, you can estimate based on industry benchmarks, customer surveys, or representative samples from customers willing to share their numbers.

For each customer segment, estimate:

Merchant adoption percentages

Not every customer will adopt your embedded payments solution immediately. Adoption rates vary significantly by vertical, customer size, and how entrenched existing payment relationships are.

Model adoption as a curve over time, not a one-time event. A realistic adoption trajectory might show 15-20% of customers adopting in year one, 35-45% by year two, and 50-70% by year three, depending on your go-to-market intensity and product-market fit.

Margins per transaction

Your margin depends on your partner model and pricing structure. Common models include:

Additional monetization streams

4. Compare the Costs: Build vs. Outsource

Building in-house, integrating with a gateway, or partnering with a payment facilitator have different cost structures, risk profiles, and time-to-market implications.

Building in-house

Building payments in-house may seem appealing for software providers seeking full control, but the true cost and complexity are far greater than expected.

Developing a payments platform requires 12–24 months of engineering work, millions in payroll, and significant time away from core product priorities.

On top of that, achieving and maintaining PCI Level 1 compliance adds substantial upfront and ongoing expenses, audits, and security obligations. Software providers must also shoulder fraud prevention, chargeback liability, capital reserves, and the cost of specialized risk staff and tools.

Becoming a registered payment facilitator also adds layers of bank sponsorship, card network fees, regulatory filings, and financial audits.

Altogether, the five-year cost can reach millions, not including the opportunity cost of delayed time-to-market or diverting resources from the core business.

Integrating with a third-party payment gateway

This option gives companies a faster route to market, but it comes with major strategic trade-offs.  

Because merchants contract directly with the payment provider, software providers earn little to no revenue share and miss out on meaningful recurring payment income.

Merchant onboarding also happens outside the platform, creating friction, slower approvals, inconsistent experiences, and limited visibility into issues. This disconnect often leads to a disjointed customer experience, with merchants juggling multiple portals, siloed data, and support interactions with the gateway instead of the software provider.

While gateway integrations can make sense for quick launches, niche customer requests, or low-priority payment needs, they are ultimately tactical rather than strategic.

Partnering with a PayFac as a Service provider

Partnering with a PayFac as a Service (PFaaS) provider offers software providers the ideal balance between ownership and scalability, allowing them to deliver a fully integrated payment experience without taking on the heavy regulatory and operational burden of becoming a payment facilitator themselves.

Software providers still capture meaningful payment revenue through shared-margin models, earning basis points or a percentage of gross payment revenue while avoiding the massive capital requirements and ongoing overhead of operating in-house.

Since the PFaaS partner manages PCI compliance, fraud mitigation, underwriting, chargebacks, and regulatory obligations, software providers dramatically lower their risk.

This model also accelerates time-to-market, helping platforms launch embedded payments in months, not years.

5. Address Risks

While revenue projections and cost comparisons often grab a leadership team’s attention, risk assessment is frequently the deciding factor in whether a payments initiative moves forward.

A strong business case must acknowledge these risks clearly and demonstrate how each payment approach can mitigate or amplify them.

In-house build

When evaluating an in-house build, the risk burden sits entirely on your software. You would be responsible for maintaining PCI compliance, managing fraud and chargeback liabilities, and underwriting merchants.

Additionally, your platform becomes the first and last line of defense when customers experience payment disruptions, placing pressure on support teams that may lack specialized payment expertise.

While full control may sound appealing, leadership needs to understand the scale and cost of managing this risk internally.

Gateway integration

A payment gateway integration reduces some operational risk but comes with limited control. Because merchants contract directly with the payment provider, you have little visibility into fraud issues, underwriting decisions, or compliance incidents affecting your customers.

When payment outages, frozen accounts, or settlement delays occur, you often cannot diagnose or resolve the problem but customers may still hold your platform responsible. This creates reputational risk without corresponding revenue upside, since gateways offer minimal monetization opportunities.

For leadership teams, this approach may seem “safe” on paper but often creates support burdens and customer experience gaps that weaken long-term retention.

Payfac as a Service partnership

A PFaaS partner absorbs the majority of regulatory obligations: PCI Level 1 compliance, merchant underwriting, AML/KYC requirements, fraud mitigation, and chargeback management, and reserve handling, significantly reducing operational and financial exposure.

Instead of tying up working capital in reserves or building fraud teams from scratch, you operate under your partner’s established infrastructure and compliance programs. This allows your team to focus on product experience and customer value, not the complexities of financial risk.

For leadership, this model provides a clear path to capturing payment revenue without introducing instability or regulatory strain to the business.

6. Outline the Implementation Plan

Leadership buy-in increases dramatically when you show that a payments integration is not only high-ROI but also operationally achievable.

Start with a high-level timeline, breaking it into phases such as:

Payments implementations vary depending on complexity, so present these milestones with confidence and realistic buffers.

Identify the cross-functional roles required (product, engineering, finance, support, and go-to-market partners). Articulate their responsibilities so leadership can anticipate workload and resource needs.

Next, map out the merchant onboarding strategy, including how customers will be migrated or introduced to the new payment offering, how pricing will be communicated, and what support resources will be available at launch.

Finally, outline the go-to-market plan, including positioning, messaging, internal enablement for sales and customer support teams, and any promotional tactics (e.g., offering early adopters discounted rates or faster funding).

Make Payments Happen

Embedded payments have become one of the most powerful ways for software providers to increase revenue, improve retention, and differentiate their platforms.

By presenting clear customer demand, strong financial upside, transparent cost comparisons, and an appropriate path to market, you give leadership everything they need to confidently move forward.

If you’re ready to see what embedded payments could look like for your platform, or want help modeling the revenue impact, our team at Xplor Pay is ready to assist.