Payment Pulse – Ep. 37

Embedded payments are becoming a diligence topic. Learn what investors look for when evaluating SaaS payments programs, from adoption and ownership to maturity, retention, and enterprise value.

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Episode Transcript

Shannon:  Welcome back to Payment Pulse, the podcast where we explore the trends, strategies, and decisions shaping embedded payments And vertical SaaS. I’m Shannon.

Michelle: And I’m Michelle. Today, we’re talking about something we’ve been seeing more frequently across the vertical SaaS market.

Shannon: Embedded payments are becoming a diligence topic. A few years ago, most conversations around embedded payments focused on implementation. Could a platform launch payments? How quickly could it get to market? What revenue opportunities existed? Today, that conversation has evolved.

Michelle: We’re seeing operators, investors, and software leaders ask different questions like, “How well is the payments program performing? Are customers adopting it? Is it contributing to retention? Is it creating long-term enterprise value?”

Shannon: Those questions are showing up more often in conversations across the vertical SaaS ecosystem. Whether it’s discussions that are happening within the vertical SaaS community, conversations throughout industry events, or topics that we’re seeing surface throughout other community groups online, there’s a growing interest in how payments contribute to business performance.

Michelle: That’s one of the reasons we recently created our Investor and Operator Guide to Embedded Payments. We’ll share some of the concepts of the guide today, but we’ll also tell you how to download the full guide later in the episode.

Shannon: So let’s start with a simple question. Why are investors paying more attention to embedded payments than they used to?

Michelle: I think a big part of it is maturity. Ten years ago, many software companies were still trying to figure out whether they should offer embedded payments. Today, many platforms do. But now the question isn’t whether payments belong in the platform anymore, it’s whether they’re performing the way they should.

Shannon: Launching payments and optimizing payments are very different challenges. A lot of companies successfully launch payments, but far fewer maximize the opportunity.

Michelle: And investors have started recognizing that. Two software companies can look very similar on paper. They may have similar software revenue, similar growth rates, and even serve similar markets. But once you start evaluating the payments program, you can uncover significant differences.

Shannon: So imagine two SaaS companies with similar software revenue. One has 25% payments adoption, the other has 85%. Those businesses may look similar at first glance, but the underlying opportunity can be very different

Michelle: Exactly. The second company likely has more customers processing payments, more workflow ownership, more payment-related revenue, and potentially stronger customer retention. That’s why investors are increasingly looking beyond whether payments exist. They’re now evaluating how effectively they’re being utilized.

Shannon: And that’s where payments start becoming more than infrastructure. It becomes part of the overall business strategy. So one of the concepts we discuss in the guide is payments maturity because not every payments program is at the same stage.

Michelle: And that’s important. Investors aren’t necessarily expecting every software company to have the same payment strategy. They’re evaluating whether the strategy aligns with where the business is today and where it’s headed.

Shannon: So a company that launched payments six months ago shouldn’t be measured the same way as a company that’s been running a payments program for several years.

Michelle: That’s why we developed a payments maturity framework. It helps operators and investors evaluate where a payments program currently stands and what the next stage of growth might look like.

Shannon: At the earliest stage, payments is simply embedded. The technology’s available, but adoption is still developing.

Michelle: Then comes adoption. More customers are processing payments, and the platform begins learning what’s driving success and what’s creating friction.

Shannon: After that, many organizations move into optimization. So they’re refining onboarding, improving reporting, evaluating economics, and creating a better merchant experience

Michelle: Then comes monetization and strategic value. Payments become a meaningful contributor to growth, retention, and overall business performance.

Shannon: One thing investors often look for isn’t whether a company has reached the final stage. They’re looking for evidence that leadership understands where they are and has a plan for where they’re going.

Michelle: Because maturity isn’t about checking a box, it’s about continuous improvement

Shannon: Mm-hmm. Exactly. So let’s make this practical. If you were evaluating a SaaS company tomorrow, what questions would you ask about the payments program?

Michelle: The first question for me would be adoption. How many customers are actually using it? Not just how many can use it, but how many are actively processing.

Shannon: That’s where the attach rate becomes important because attach rate often reveals whether payments are truly becoming part of the customer workflow

Michelle: I’d also wanna understand merchant activation. How easy is onboarding? How quickly can merchants begin processing? What obstacles exist?

Shannon: Another question we hear more often is around ownership. So who owns payments internally and who is responsible for performance?

Michelle: That’s a huge one. Many organizations launch payments but never establish clear accountability, and when that happens, growth opportunities often get missed.

Shannon: Flexibility matters. As software companies mature, their requirements often change. The payment strategy should be able to evolve alongside the business. So let’s flip the conversation. If you’re a SaaS operator listening today, what questions should you be prepared to answer?

Michelle: A goodstarting point is understanding your own adoption story. Do you know your attach rate? Do you know where adoption stalls? Do you understand why some customers adopt quickly while others don’t?

Shannon: You should also be able to explain how payments support broader business objectives, not just revenue, but customer experience, retention, and operational efficiency.

MIchelle: Another important question is ownership. Who wakes up every day thinking about payments performance? Because if the answer is nobody, that’s often where opportunities start slipping away.

Shannon: And finally, can you clearly articulate where your payments program is headed? That’s something investors increasingly want to understand.

Michelle: Now, one common issue is underutilization. The technology works, payments are available, but adoption remains low.

Shannon: So we’ve seen situations where the integration wasn’t the problem. The challenge was onboarding, education, communication, or simply a lack of focus.

Michelle: Another red flag is stagnant strategy. The company launched payments years ago and never revisited the program.

Shannon: The market evolves and customer expectations evolve as well, so the payment strategy needs to evolve along with it.

Michelle: Third red flag is unclear ownership. When no one is accountable for the program’s success, it’s difficult to maintain momentum and continue improving performance over time.

Shannon: On the flip side, what gets your attention?

Michelle: For me, it would be strong adoption, clear ownership, and a thoughtful strategy. Also, uh, leadership that understands the role payments play within the business.

Shannon: We also see successful programs continually evaluating and improving the customer experience

Michelle: Exactly. The strongest payment programs don’t treat launch as the finish line. Instead, they treat it as a starting point.

Shannon: And that’s what often separates good programs from great ones .

Michelle: So one of the biggest shifts happening right now is how embedded payments are being viewed. For years, they were largely considered infrastructure necessary, but mostly operational.

Shannon: Today, they’re becoming part of broader conversations around growth, monetization, retention, and also enterprise value.

Michelle: That’s why diligence conversations are changing. Payments provide another lens into how the business operates and where future opportunities may exist.

Shannon: For operators, that’s, that’s a real opportunity, and for investors, it’s another way to evaluate the health and maturity of a software business.

Michelle: Well, we’ve only scratched the surface of what’s covered in our Investor and Operator Guide to Embedded Payments. The guide expands on many of the concepts we’ve discussed today. It includes the full payments maturity framework, diligence questions investors are increasingly asking, the metrics operators should be tracking, and practical guidance for evaluating the strategic roles of payments within a software business.

Shannon: So if today’s discussion made you think differently about your own payment strategy or how investors may evaluate it, the guide is a great next step. You can download it for free at try.xplorpay.com/isv-investor-operator-guide

Michelle: Thanks for listening today. We’ll see you next time on Payment Pulse.

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