Government technology (govtech) businesses are technology businesses that develop digital solutions to modernize public administration processes and improve delivery of public services. In Italy, they operate within a growing environment that is fueled by the ongoing digitization of the public administration and collaboration across technology businesses and public entities.

For Italian govtech businesses, embedding payments into a management platform means adding a feature that can impact both the experience offered to public entities and the software’s business model. The potential market is vast: According to the Italian National Institute of Statistics (Istat), there will be 7,894 municipalities in 2026 that handle daily revenue related to public services. This is in addition to schools, healthcare businesses, and other administrative bodies.

However, the digitization of public administration payments requires balancing technical requirements, rules governing the workflow of funds, and obligations specific to the public sector.

This article explores why software-embedded payments for public administration can provide a competitive advantage. We also explain the two main models for embedding payments into govtech platforms, onboarding management for multiple public entities, types of payments that can be processed, and steps for developing and monetizing embedded payments.

Key takeaways

• For a govtech business, embedding payments directly into public administration software reduces the need for clients to use separate applications. It also makes the software more central to the day-to-day management of services and payment collection.
  
• Govtech platforms can use various models to manage payments involving multiple public entities. The choice depends on factors such as the recipient of the funds, timing of the transfers, and responsibilities associated with fees, refunds, and disputes.
  
• Embedded payments can also become a source of revenue for the platform, such as through fees or features included in higher-tier software plans.
  
• For payments to the public administration, govtech platforms must integrate payment methods provided for the specific service. This includes pagoPA, Italy’s official electronic payment system, when applicable.
  

Digitization of public administration payments for govtech businesses

The size of the Italian public sector makes payment management a significant use case for software businesses that work with the public administration. The potential market is also very diverse. The Public Administrations Index (IPA) includes around 2,200 central government agencies and over 19,000 local government agencies. These numbers include public entities with highly diverse needs, including schools, local health authorities, and hospitals.

This does not mean that most public entities lack the means to make online payments. The digitization of public administration payments is already underway, and pagoPA is a central component of the national infrastructure. However, there are services that have not yet been digitized or have been only partially digitized. For example, the Three-Year Plan for Information Technology in the Public Administration calls for initiatives in 2026 in areas such as museum admissions, tourist taxes, and health care payments.

Therefore, for govtech platforms, the opportunity does not simply involve adding a checkout feature to municipal digital payment software. Instead, value comes from embedding payment collection within the service that generates it. If the management system already knows the case, amount due, and status of the account, the payment can become a step in the same process, rather than a separate one.

Embedded payments: A competitive advantage for govtech businesses

Embedding payments directly into platforms can increase the software’s value for public entities and create new opportunities for govtech businesses. The main benefits fall into three areas: platform centrality, use of payment data, and monetization.

Platform centrality

When payments and administrative services are managed within the same environment, the public agency does not need to switch between applications. For example, the software can automatically link a payment to the corresponding case and update its status after it is received.

In this way, the platform manages all parts of the process and becomes a tool used to track the payment cycle. This can strengthen the relationship with the customer and make the product harder to replace.

Embedded payment data

Embedding payments into the workflow provides information such as payment statuses, refunds, and disputes. The platform can use this data to update the service associated with the payment without requiring manual verification on separate systems.

For govtech platforms, the benefit lies in linking payment information to the data and processes that the software already manages, not in collecting more personal data.

New monetization opportunities

Embedded payments can also become a part of the commercial offering. For example, the govtech business can include payment features in a premium software plan. In addition, the business can charge service-related fees when the model agreed upon with the public entity provides the option.

Two models for embedding payments into govtech platforms

Stripe Connect is designed for platforms that need to process payments and move funds among multiple parties. Each public entity can be associated with a linked account, while the govtech business maintains a single integration at the platform level.

Among the available models, payments to the recipient and separate payments and transfers are both indirect charges. In both cases, the payment is posted to the platform’s account. The difference lies mostly in how and when the funds are transferred to the linked accounts.

Payments to the recipient

For payments to the recipient, the payment is created on the platform, and the funds intended for the public entity are transferred to the linked account designated as the recipient. The platform can withhold part of the amount as a fee, if the business model provides for it.

This approach is particularly well-suited to payment workflows that involve each payment being associated with a single public entity from the outset. The transfer of funds must occur at the same time as the transaction.

Separate payments and transfers

However, for separate payments and transfers, the payment is created on the platform, and the transfer of funds is handled separately. Therefore, the govtech business can make the transfer at a later time or split the amount among multiple linked accounts.

This setup offers greater flexibility when the recipient has not yet been determined at the time of payment or when a single payment must be distributed among multiple parties. However, it requires more complex workflow management.

These two models must not be confused with direct charges. In this case, the payment is created directly in the public entity’s linked account, rather than in the platform’s account. If the workflow requires that the single public entity directly charge the payer, this configuration can also be considered.

How Stripe Connect can help manage the onboarding of multiple public entities

When a govtech platform adds a new public entity, it must do more than create an account to receive payments. Before the account can be used, the platform must collect and verify certain information about the organization and keep it up to date over time.

With Stripe Connect, platforms can integrate this process into the software and manage it more easily, even as the number of clients grows.

Know Your Business (KYB): Verification of user identity

KYB is the process used to verify an organization’s identity and information before it accesses certain financial features.

In the case of a public entity, the information requested depends on the characteristics of the organization and the features it needs to use. For example, this can include the public entity’s identifying information and the individuals associated with the account.

Connect collects the necessary information during onboarding and verifies which requirements must be met before enabling the relevant account features.

Compliance management when requirements change

The verification process does not necessarily end upon registration. The requirements for accounts can change over time, and it might be necessary to collect new information or update the information already on file.

Connect offers three main ways to manage onboarding:

• Stripe-hosted onboarding: The public entity completes the process through an interface Stripe manages.
  
• Embedded onboarding: The process is inserted directly into the govtech platform’s interface using Stripe components.
  
• Application programming interface (API)-based onboarding: The govtech business builds and manages the workflow independently.
  

Hosted and embedded onboarding offer a significant advantage in terms of compliance. When requirements applicable to linked accounts change, Stripe updates these workflows. This means the govtech business does not have to rebuild the information collection process every time.

Account management on a large scale

This approach becomes especially important when a platform grows from serving a few public entities to serving dozens or hundreds.

Each public entity has its own linked account, but the govtech business can centrally manage certain aspects. These include account status, verification information, and access to payment features. If a public entity needs to provide additional information, the platform can detect that the account has unmet requirements. Then, it directs the customer to the appropriate update process.

In this way, KYB, compliance, and account management become part of a single onboarding process, rather than requiring separate procedures for each new public entity. For a govtech business looking to expand its software for public entity payments to a growing number of customers, this standardization is one of the factors that makes the infrastructure easier to manage on a large scale.

What types of payments can govtech platforms integrate?

With software-embedded payments for public administration, a govtech platform can also manage the collection process associated with public services. This opportunity applies to all processes where an individual or business must make a payment to complete a procedure, access a service, or settle an amount owed. Thus, the software can combine the requested service and payment information into a single workflow.

School and family services

The platforms schools and municipalities use can process payments related to the following:

• School meals
  
• School transport
  
• Fees for daycare centers and other childcare services
  
• Summer camps and other school-based or after-school services that require payment
  

Fines, taxes, and other amounts owed to the municipality

Municipal software for digital payments can also handle payments that citizens are required to make to the administration. These can include fines, local taxes, and other amounts owed to the municipality.

In these cases, the platform can display the outstanding balance and status of the corresponding payment within the management system used by the public entity.

Permits and administrative procedures

Another area involves paying duties, rates, or fees. For example, a govtech platform can integrate payments related to permit applications, authorizations, or other administrative procedures that require the customer to pay.

Social, health care, and other public services

Embedded payments can also apply to services that require a user fee, such as certain social or health care services and other fee-based public services.

When is pagoPA used for payments?

For many payments to the public administration, collection must be made through pagoPA or in accordance with the other methods provided for by law. This does not prevent govtech businesses from integrating payments into their software. Platforms can manage the digital experience and information associated with the service, while payments use the infrastructure designated for specific collections.

Therefore, before developing a new workflow, it is necessary to verify which payment method applies to the service offered by the public entity.

How can govtech businesses monetize embedded payments?

Integrating payments can create a new source of revenue for a govtech platform. With Stripe Connect, the monetization model depends on how the platform chooses to manage the rates charged to the linked accounts.

The main options include the following:

• Charge transaction fees: The platform can set its own rates and collect fees on payments processed through Connect.
  
• Receive a share of revenue: In some models, Stripe sets and collects processing fees from linked accounts, and eligible platforms can receive a share of the revenue generated.
  
• Monetize additional products and services: Connect allows platforms to charge fees on products and services related to payments. A software-as-a-service (SaaS) platform can also combine transaction fees with other sources of revenue, such as subscriptions.
  

However, if a govtech business works with public entities, the technical feasibility of charging a fee does not automatically mean that it can be charged to the public entity or individual in every situation. The fee structure must be consistent with the contract entered into with the public administration.

Compliance: What to check before integrating payments into the public administration

A govtech business that adds a payment platform for the public administration must consider compliance as part of its product architecture.

Data protection and cloud requirements

If the platform processes personal data while providing its services, it must comply with the obligations set forth in the General Data Protection Regulation (GDPR). For solutions intended for the public administration, the specific requirements for cloud use in the public sector also apply.

Strategia Cloud Italia classifies public administration data and services as routine, critical, or strategic, based on the potential consequences of their exposure. This classification affects the requirements for cloud infrastructure and required level of security.

Therefore, a govtech solution must assess the overall architecture of the service and ensure that the infrastructure used is appropriate for the type of data and services the public entity manages.

Electronic invoicing

Supplies to the public administration are subject to the electronic invoicing system for the public administration via the Exchange System (SdI). If the platform charges fees or other services to the public entity, it must issue the corresponding electronic invoice to the public administration via the SdI.

This invoicing pertains to the business relationship between the govtech business and the public entity and is separate from the payments that individuals or businesses make to the public entity via the platform.

Value-added tax (VAT)

The tax treatment of the platform’s fees depends on the contractual relationship and type of service. In dealings with many public administrations, the split payment mechanism provided for by Article 17-ter of Italian Presidential Decree No. 633/1972 can also be relevant. Therefore, before defining the monetization model, it is important to consult with a tax advisor about handling VAT.

How to integrate payments into govtech platforms

To integrate payments, a govtech platform must define which services and public entities will be involved. Time frames depend on the complexity of the product, number of workflows to be managed, and desired level of automation.

Outline use cases

Identify which services generate payments, who must receive the funds, and when payment needs to be collected. This analysis helps avoid a universal approach for services that actually have different needs.

Choose the payment model

Define how charges, transfers, and responsibilities between the platform and public entity need to be handled. The choice between payments to the recipient and separate payments and transfers depends on where the govtech business plans to fit in the process and how the funds need to move.

Begin with a pilot project

Before rolling out the solution to all customers, it can be helpful to test it with a limited number of public entities. The pilot project can test onboarding, payments, transfers, refunds, and updates to case statuses in the management system.

Automate management on a large scale

Once the workflow is validated, the platform can automate the creation and management of linked accounts, standardize the onboarding process, and reduce manual tasks required to add new public entities.

Stripe Connect provides APIs and built-in components to create, configure, and manage linked accounts directly from the platform. These tools can reduce the amount of development work required and make it easier to manage a growing number of customers.

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, VAT, and 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.

FAQs on software-embedded payments for the Italian public administration