Revenue models for embedded payments include blended markup on transaction volume, flat-fee or subscription monetization, interchange revenue sharing, payment facilitator (payfac) margins, and value-added services (e.g., instant payouts, business financing). Many platforms layer several of these models, but the right ones depend on your users’ transaction volumes, your risk appetite, and how central payments are to your product.

Embedded finance revenue is expected to grow by 148% and reach $228 billion in 2028. Below, we’ll explain how each model works, risks to consider, and how mature platforms combine models to earn across the full user lifecycle.

Highlights

• Mature platforms often layer multiple revenue models, enabling embedded payments to earn at different stages of the user lifecycle.

• Payfac margins often have strong per-transaction economics but come with direct exposure to fraud losses and chargeback liability.

• Value-added services such as instant payouts and revenue-based financing often produce better margins than core processing.

What are revenue models for embedded payments?

Revenue models for embedded payments are different ways in which businesses can make money by building payment capabilities directly into their software platforms. Users can make purchases without leaving the product, and businesses can accept money without signing up for a third-party payment provider.

What are common revenue models for embedded payments platforms?

Platforms can monetize embedded payments in five distinct ways. Each one reflects where you think your platform sits in the payment flow and how much responsibility you want to take on.

Blended markup on transaction volume

The platform charges its users a per-transaction rate that’s higher than its underlying cost to process and keeps the difference. The spread between what the payment provider charges the platform and what the platform charges its users is the platform’s revenue. As your user base processes more, you earn more without changing your pricing structure. This makes it the default starting point for many platforms.

The downside is that sophisticated users who understand payment economics will notice whether you’re charging materially more than alternatives. That matters most in verticals where users have real buying power and are likely to compare costs. Some platforms address this by disclosing a small platform fee on top of standard processing rates, rather than obscuring it in a blended rate. That approach tends to hold up better as users become more financially literate about what they’re paying.

Flat-fee or subscription monetization

Some platforms charge users a flat monthly fee for access to payment functionality. If you have a restaurant platform, for example, payments might be one piece of a suite that includes reservations, inventory, and staff scheduling. Bundling payments into a subscription simplifies pricing for users and creates predictable revenue for the platform.

The downside is that you’re absorbing processing costs out of subscription revenue. That works at a lower volume, but it can prove costly if usage scales faster than your pricing anticipated. When you run this model, it’s smart to either cap transaction volume per tier or layer a reduced per-transaction fee on top of the base subscription. This way, heavy users still pay more and you won’t need a full pricing overhaul.

Interchange revenue sharing

Every time a card is used to pay, the card network charges an interchange fee that flows through to the issuing bank. Platforms can capture a portion of that interchange by issuing cards to their users through a banking-as-a-service arrangement. Expense management software is a clear use case: if your users route company spend through cards you’ve issued, you’re earning on every transaction they make, not just the ones made to you.

Revenue is passive once the card program is running, but this arrangement requires considerable work. You need a card issuing partner, and your interchange yield depends on card type, spending category, and network agreements. Interchange is generally smaller per transaction than payfac margins, but it compounds substantially if your users’ spending volume is high.

Payfac margins

A payfac aggregates many smaller businesses under a single master merchant account. It underwrites its submerchants, processes their transactions, and earns on the spread between what it charges submerchants and what it pays its acquiring bank.

There are different ways to operate as a payfac with their own trade-offs:

• Registered payfac: You register directly with an acquiring bank, own the full submerchant relationship, and collect the entire margin spread. In exchange, you’re responsible for submerchant chargebacks, fraud losses, and compliance obligations. That requires real investment in underwriting infrastructure and reserve management before you process a single dollar.

• Managed payfac model: Tools like Stripe Connect let platforms operate with payfac-like economics without registering as full payfacs. Stripe handles the acquiring relationship, compliance obligations, and fraud liability; the platform earns a revenue share on processed volume. The unit economics are slightly weaker, but the workload is dramatically lower.

Value-added services and product upsells

Payment data is one of the richest datasets a platform can hold. You know your users’ revenue, transaction patterns, customer bases, and seasonality. That creates a foundation for products that go beyond processing.

Common extensions include:

• Instant or accelerated payouts: Platforms can offer faster payouts than standard direct debit settlement for a fee. Users who care about cash flow are often willing to pay for this.

• Business financing: Platforms with sufficient transaction histories can offer revenue-based advances or working capital products to their users. Repayment is structured as a percentage of future sales, which makes underwriting more manageable because you already see the revenue stream.

• Fraud and risk tools: Some platforms charge users for access to enhanced fraud detection, chargeback dispute management, or identity verification. These are real costs you’d otherwise absorb, repackaged as optional or tiered services.

• Financial accounts and card issuing: Offering users a debit card, business account, or both generates revenue through interchange and monthly account fees. It deepens the platform relationship and keeps more financial activity within your product.

How do embedded payment revenue models work in practice?

Mature platforms don’t necessarily run a single model in isolation. They often layer different models, which earn at different moments in the user lifecycle.

A typical architecture looks like this:

• Blended markup as the baseline: Each user pays a per-transaction rate from day one. It’s a low-friction starting point and generates revenue before you’ve built anything else.

• Instant payouts as an early upsell: As users start caring about cash flow, they’ll be more willing to pay for accelerated payouts. This is a natural second layer that doesn’t require underwriting or credit infrastructure.

• Working capital for established users: Once a user has built a sufficient transaction history, you can qualify them for revenue-based advances. Some tools let you do so automatically.

• Subscription pricing for heavy users: Enterprise-tier users might prefer a flat monthly fee with reduced per-transaction rates. It can be cheaper for them at scale and still profitable for the platform because the volume justifies the margin compression.

What do embedded payments platforms get wrong?

Platforms can implement revenue models incorrectly if they don’t fully think through their strategies.

Here are some predictable errors to avoid:

Picking a model based on upside without analyzing the cost side

Blended markup might seem attractive until you account for processing costs, fraud losses, and chargeback exposure. Payfac margins tend to look even better until you price in the compliance infrastructure required to run them. Every model has a cost structure, so it’s important to calculate the full unit economics before you commit.

Building value-added products before establishing core volume

Financing and instant payouts offer high margins, but they require transaction histories to underwrite and a large enough user base to justify the build. Platforms that prioritize these before they’ve stabilized their core processing revenue can end up with products that serve too few users to make a difference.

Underestimating fraud exposure

This is especially common in the payfac model. Fraud losses and chargebacks sit on your books, not your users’. Often, platforms that don’t build fraud tooling and reserves into their cost models early find that a single bad month erases months of margin.

Treating payments as a feature rather than a business

Platforms that embed payments without a clear monetization strategy tend to underprice (or not price at all), then find it difficult to reprice later without user backlash. The time to set pricing strategy is before you’ve onboarded thousands of users who expect the current rate to hold.

How Stripe Connect can help

Stripe Connect orchestrates money movement across multiple parties for software platforms and marketplaces. It offers quick onboarding, embedded components, global payouts, and more.

Connect can help you:

• Launch in weeks: Use Stripe-hosted or embedded functionality to go live faster, and avoid the up-front costs and development time usually required for payment facilitation.

• Manage payments at scale: Use tooling and services from Stripe so you don’t have to dedicate extra resources to margin reporting, tax forms, risk, global payment methods, or onboarding compliance.

• Grow globally: Help your users reach more customers worldwide with local payment methods and the ability to easily calculate sales tax, value-added tax (VAT), and goods and services tax (GST).

• Build new lines of revenue: Optimize payment revenue by collecting fees on each transaction. Monetize Stripe’s capabilities by enabling in-person payments, instant payouts, sales tax collection, financing, expense cards, and more on your platform.

Learn more about Stripe Connect, or get started today.