Embedded Payments and How ISOs Can Win With Them

The way businesses accept and move money is being fundamentally reinvented. Embedded payments (the integration of payment capabilities directly into non-financial software platforms) have moved from a niche fintech concept to one of the most consequential shifts in modern payment processing. According to Juniper Research, global transaction value from embedded payments stood at $1.1 trillion in 2024 and is projected to surpass $2.5 trillion by 2028 — a 134% increase in just four years.

For ISOs and payment processors operating in merchant services, this isn't background noise. It's a strategic inflection point that is reshaping the ecosystem you operate in, changing who controls the merchant relationship, and opening up genuine new revenue streams if you know how to position for them.

This guide breaks down what embedded payments actually are, how they differ from integrated payments, who's winning with them, and what they mean for your business model.

What Are Embedded Payments?

Embedded payments are payment capabilities built natively into a digital platform or application — not bolted on through a redirect to a third-party payment page, but woven into the core experience so that end users complete transactions without ever leaving the software they're already using.

The contrast with the old model is sharp. Traditional payment flows routinely sent customers through redirects — clicking away from a retailer's site to a PayPal page, or from a SaaS app dashboard to a separate billing portal. Every redirect is a moment of friction, a moment of doubt, and statistically, a moment of attrition. The Baymard Institute estimates that roughly 70% of online shopping carts are abandoned before purchase, and a complicated or redirected checkout is one of the leading causes.

Embedded payments eliminate that break in the experience. The customer pays (by credit card, debit card, ACH, or through digital wallets) inside the environment they already trust, in real-time, without interruption.

At the infrastructure layer, this is made possible through APIs provided by payment providers, fintech infrastructure companies, or enabling platforms. These APIs expose functionality ranging from card tokenization and authorization to payouts, dispute management, and KYC verification — all consumable by software providers who want to add payment services to their product without becoming a licensed payment processor themselves.

Embedded Payments vs. Integrated Payments: An Important Distinction

These two terms are often used interchangeably but refer to meaningfully different things.

Integrated payments connect back-office systems such as accounting software, ERP platforms, and POS systems to a payment processor, synchronizing data across workflows. If a restaurant's POS automatically syncs sales data with its accounting software, that's integrated payments. The user still sees a familiar payment terminal or gateway; the integration is largely invisible to the customer and primarily serves operational efficiency internally.

Embedded payments, by contrast, are user-facing. They change the checkout experience for the end user and allow a non-financial company to deliver financial services as part of its core product. A SaaS platform that handles billing, subscriptions, and payouts entirely within its own interface without routing users to an external payment page — that's embedded payments. The distinction matters because they address different problems and create different value for different stakeholders in the payments platform ecosystem.

The Broader Ecosystem: Where Embedded Payments Fit in Embedded Finance

Embedded payments are the most mature and widely adopted subset of the larger embedded finance movement. Embedded finance refers broadly to the integration of any financial products or financial services — payments, lending, insurance, banking — into non-financial platforms.

According to Bain & Company, embedded finance accounted for approximately $2.6 trillion, or nearly 5% of total U.S. financial transactions, as far back as 2021. The firm projects that figure to exceed $7 trillion (more than 10% of total U.S. transaction value) by 2026.

Within that broader universe, embedded payments represent the entry point for most businesses. The logic is simple: you build the payment experience first, establish the infrastructure, develop the merchant relationship, and then layer in additional financial solutions such as buy now, pay later (BNPL), embedded lending, expense management, and insurance once the foundation is stable.

The BNPL segment deserves specific mention because it's rapidly becoming an expected feature rather than a differentiator. Major BNPL providers like Affirm, Klarna, Afterpay, and PayPal's pay later product are embedding directly into e-commerce checkout flows through partnership arrangements with payment providers and marketplaces. Merchants offering BNPL have seen conversion rate increases of 20–30% and average order value increases of 30–50%, according to data cited by industry analysts.

The Benefits of Embedded Payments: Why the Numbers Are Compelling

1. Higher Conversion Rates and Less Cart Abandonment

The most immediate and measurable benefit of embedded payment solutions is their impact on conversion rates. When customers are not sent through redirects to a separate checkout environment, they complete purchases at higher rates. Stripe research has found that one-click checkout can cut checkout time by 50% and improve conversions by up to 30% for returning customers.

For ISOs and service providers managing merchant portfolios, this matters directly: merchants with better-converting payment systems process more volume, generate more interchange revenue, and churn less frequently.

2. Superior Customer Experience and Retention

Sixty-five percent of shoppers say customer experience is more influential than advertising in their purchase decisions, according to PwC research. A seamless, embedded payment experience contributes directly to that experience. Customers who can pay easily within an environment they trust are more likely to return — and less likely to defect to competitors.

For SaaS platforms specifically, embedded payments create a powerful flywheel: better user experience improves retention, and higher retention increases the lifetime value of every merchant or subscriber on the platform.

3. New Revenue Streams for Platforms

For software platforms and SaaS providers, embedding payments transforms the business model. Instead of being purely a software subscription business, a platform becomes a payments platform — earning a margin on every transaction its merchants process. Shopify and Toast are frequently cited as examples of companies whose growth trajectory was directly tied to the new revenue streams unlocked by embedded payment solutions.

These revenue opportunities can include transaction fees, subscription-based access to premium payment capabilities, payouts management, and eventually access to embedded BNPL, embedded lending, and other financial products.

4. Operational Efficiency and Workflow Automation

Beyond revenue, embedded payments drive operational efficiency by collapsing fragmented payment systems into a single layer. When payment data, customer data, and operational data live in the same place, automation becomes possible across workflows that previously required manual reconciliation, separate logins, or data exports. ACH processing, payouts to sellers or contractors, and recurring billing can all be automated through the same payments platform that handles card transactions — eliminating the manual overhead that plagues ISO back offices built on spreadsheets or disconnected tools.

5. Richer Data and Personalization

Embedded payments give platforms something traditional payment providers and financial institutions rarely share with their merchants: transactional data at the platform level. Understanding what customers buy, when they buy, at what price points, and through which payment methods allows platforms to optimize their checkout experience, surface the right payment options at the right time, and even underwrite embedded lending products based on real revenue data rather than credit scores alone.

Who Uses Embedded Payments? Key Use Cases

E-Commerce and Marketplaces

E-commerce was the earliest and largest adopter of embedded payment solutions, commanding the largest revenue share among use cases in 2024. Platforms like Shopify and Amazon embed the entire checkout process — including card payments, digital wallets, buy now pay later, and seller payouts — within their own interface. Multi-sided marketplaces use embedded payments to handle the split between buyer charges and seller payouts in a single, seamless flow without routing either party through a third-party payment environment.

SaaS Platforms

SaaS companies across verticals (project management, legal tech, HR software, field services) are increasingly embedding billing, subscription management, and payment collection directly into their platforms. For vertical SaaS providers, this is especially powerful because they already have deep knowledge of their customers' businesses and can build payment capabilities that reflect the specific workflows of their industry. This is where all-in-one positioning becomes a genuine competitive advantage rather than marketing language.

Healthcare

Healthcare is identified as the fastest-growing sector for embedded payments, driven by the digitization of medical billing, the expansion of telehealth, and patient expectations shaped by consumer e-commerce. Embedding payment methods directly into appointment scheduling or patient portal software platforms streamlines billing, reduces administrative overhead, and dramatically improves the patient payment experience.

Ride-Sharing, Food Delivery, and Gig Platforms

These platforms pioneered the embedded payments model at scale — Uber, DoorDash, and Instacart complete millions of transactions daily without a visible checkout step. The payment is entirely invisible to the customer; it happens automatically, in the background. This frictionless model is now the standard that other industries are racing to replicate.

Social Media and Creator Platforms

Social media platforms are embedding commerce directly into content — allowing users to complete purchases without leaving the feed. Instagram, TikTok Shop, and Pinterest have all embedded checkout into their discovery experiences, turning social media from a traffic referral channel into a direct e-commerce channel with native payment options.

Financial Institutions and Fintech

Financial institutions (banks, credit unions, and specialty lenders) are embedding payment functionality into business banking portals and treasury management tools, enabling corporate clients to initiate ACH transfers, manage payouts, and handle vendor payments within their banking dashboard rather than navigating separate payment systems.

The Role of APIs and the Infrastructure Layer

None of this happens without the right infrastructure. APIs are the connective tissue of the embedded payments ecosystem. Payment providers — from established processors to fintech infrastructure companies — expose APIs that allow software providers to consume payment capabilities without building card network connections, bank sponsorships, or compliance frameworks from scratch.

The payment processor or infrastructure provider in this model is often invisible to the end user. The SaaS platform presents its own brand at the checkout; the payment processor operates in the background, handling authorization, clearing, settlement, and KYC verification. This creates a layered ecosystem where enabling providers, payment processors, payment facilitators (payfacs), and SaaS providers each play distinct but interdependent roles.

For ISOs looking to move up the value chain, this infrastructure layer represents a significant opportunity. The payfac model — where a platform aggregates sub-merchants under a master merchant account and controls the full onboarding and payment experience — is the natural endpoint for SaaS providers who want to fully own their financial services offering. Payfac-as-a-Service providers now make this model accessible without the full capital requirements and regulatory burden of traditional payment processor registration.

What This Means for ISOs and Merchant Services Professionals

If you're an ISO managing a portfolio of merchants, embedded payments affects your business in several interconnected ways:

The software platform is becoming the new ISO. As vertical SaaS providers embed payments, they take on the merchant acquisition relationship that ISOs have traditionally owned. A restaurant management platform that handles onboarding, billing, and payouts natively has less need for an ISO to sit between it and the payment processor. This compression is already happening in verticals with mature SaaS ecosystems.

Partnership is the strategic response. ISOs that build distribution partnerships with software providers, becoming the embedded payment processor behind a SaaS platform's payment offering, can maintain revenue and merchant relationships even as the acquisition channel shifts. The ISO may not own the merchant-facing brand, but it owns the processing relationship and the residuals.

Your CRM is your foundation. Managing a portfolio in an ecosystem where merchants are increasingly onboarded through software platforms, where payouts flow through all-in-one systems, and where financial solutions are layered on top of payment capabilities requires infrastructure that can track complexity at scale. Automated workflows, real-time portfolio visibility, and onboarding tools built for this new environment are what separate ISOs that scale from ISOs that stagnate.

The merchant services industry is not going away. But the channels through which merchants discover, adopt, and stay with payment processing solutions are shifting toward software platforms and embedded fintech. ISOs who understand this shift — and build the partnerships, tools, and payment capabilities to serve it — will find that the embedded payments era creates as much opportunity as it displaces.

Speaking of the right tools, If you’re looking for a better way to manage your ISO PSP business, try Pulse CRM today!