Embedded payments used to give software companies a clear competitive edge. Today, they are quickly becoming a baseline expectation.
More than half of software companies in North America already offer embedded payments, according to Boston Consulting Group (BCG), and adoption continues to accelerate. But as payment processing inside software platforms becomes more common, simply adding payments is no longer enough to stand out. The real difference now lies in what sits underneath the payment experience
Can the software company capture meaningful revenue? Can it control the merchant experience? Can the payment model scale as the business grows?
These questions are becoming more important as embedded payments move into a more mature phase. First-generation solutions helped software companies get started quickly, but many are now showing their limits. The next stage of embedded payments will be defined by infrastructure that gives software companies more flexibility, more control and more ways to grow.
The First Wave of Embedded Payments Focused on Speed
The first wave of embedded payments was all about getting to market quickly. Software companies needed a fast, simple way to add payment processing without becoming a full payment facilitator. Two things drove that shift:
First, software companies were losing significant revenue to third-party providers on every payment that flowed through their platform.
Second, merchants were increasingly expecting fast payments to be part of the software they already use to run their business.
As of 2022, 50% of small businesses were getting their payment processing from a software provider, according to McKinsey. By 2025, that number had climbed significantly to 90% of merchants in the United States, showing how quickly software-led payments have become part of everyday business operations.
Simple embedded payment solutions helped software companies respond to this shift. These solutions made it easier to add payment processing and stay competitive. But they often came with trade-offs, including high flat-rate only pricing, limited access to data and little flexibility as the business scaled. It’s those limitations that are now driving demand for a more capable approach.
From “Payments Included” to Payments as a Core Part of the Software Business Model
As more small and medium-sized businesses use software-led payments, payments are no longer just an added feature. They are becoming a core part of the software business model rather than a bolt-on feature.
For SaaS platforms and software companies, embedded payments can create value in several ways. They can increase revenue, improve customer retention and strengthen the overall customer relationship.
BCG found that SaaS companies offering embedded payments saw customer attrition rates 2.5 times lower than competitors that did not offer them. The revenue impact can be significant. In its analysis of fintech enablement for SaaS, a16z cites revenue increases of 2 to 5 times over subscriptions alone.
While fintech is more than payments, it’s a category that also includes embedded lending, insurance and other products. When a software company earns revenue by capturing fees on every transaction processed through its platform, the opportunity can grow quickly across dozens, hundreds or potentially thousands of users.
Embedded payments also create access to valuable transaction data. That data can support better fraud tools, more relevant financial products, smarter pricing and a better user experience.
But to capture that value, software companies need more than a basic payment feature. They need infrastructure that supports monetization, control and scale.
Monetization, Control and Scale: The New Battlegrounds as Embedded Payments Mature
As embedded payments become table stakes the challenge is building a payments model that can grow with the business. The key to success lies in maintaining the ease and simplicity of the first wave while addressing its main weaknesses: monetization, control and scale.
Monetization:
Many first-generation embedded payments solutions limited how much revenue software companies could earn. Flat-fee pricing from large third-party platforms left little room for software companies to mark up processing or build a margin of their own. Referral models were simple to set up, but they typically passed only a small share of payment revenue back to the software company.
As embedded payments mature, software companies need more flexible commercial models. That may mean buying processing at wholesale rates, operating through a revenue-share model or choosing a structure that fits their business stage and growth plans. It also means recognizing that, as the owners of the merchant relationship and the distribution channel, its payments model should reflect that value.
Control:
Many large payment platforms also limit control. Some lock software companies into a single processor. That may work in the early stages, but it can create problems as volume grows. High fees, billing issues, limited data access, low authorization rates, risk reviews and frozen accounts can all affect the merchant experience. If there is no option to use another processor, the software company has little room to respond.
A more mature approach gives software companies greater choice. Processor-agnostic infrastructure allows them to work with multiple processors and route transactions in the way that best supports their business and their merchants.This can help improve resilience, protect continuity and give software companies more control over cost, service quality and performance.
Scale:
Embedded payments can become a major growth driver for software companies, especially when combined with other financial products such as lending. But that only works if the infrastructure can scale.
A company may want to launch quickly with a simple payments feature. Later, it may need more customization, deeper integration, more complex reporting or a more sophisticated merchant experience. That requires flexible deployment options, including:
No-Code: Ready-to-use, out-of-the-box, drop-in payment capabilities for companies looking to get to market fast.
Low-Code: White-label components, pre-built code snippets and embedded components that can be integrated quickly while still offering some customization.They blend seamlessly into your product to create a cohesive user experience.
Fully-Control API: API-led infrastructure for larger or more mature software companies that need to build tailored payment experiences.
This flexibility allows payments to evolve with the business, rather than forcing the business to fit into a payment model it has outgrown.
Embedded Payments are Evolving. The Time to Adapt is Now.
The question for software companies is no longer whether to offer embedded payments, it’s whether the payment infrastructure underneath is modern, mature and ready to support the next stage of growth. Basic payment acceptance may be enough to get started, but it is not enough to compete in a mature market. Software companies need payments infrastructure that helps them earn more, stay in control and scale without adding unnecessary complexity.
NMI helps software companies build embedded payment experiences that balance simplicity, flexibility and long-term growth.
With NMI, software companies can access:
- Flexible monetization models designed to support more profitable payment operations
- Processor-agnostic gateway technology connected to leading processors
- No-code, low-code and API-led development options
- Developer tools, sandbox testing and support for more tailored payment experiences
- Modular capabilities that allow software companies to add, adapt or expand payment services as their needs change
As embedded payments mature, the companies best positioned to grow will be those with infrastructure that can grow with them.
To find out more about how NMI can help you deliver a modern, mature embedded payments experience, reach out to our team today.
