The global embedded payments market is projected to surpass $570 billion by 2033. To embed payments in their products, businesses must choose embedded payment technology. The right solution depends on your user base, payout structure, compliance appetite, and how much engineering you’re prepared to invest.

Below, we’ll outline the main infrastructure models, types of embedded payment providers, and questions worth answering before you choose your provider.

Highlights

• Embedded payment systems give businesses more control over their payment experience. They also introduce compliance, underwriting, and payout complexity.

• Providers fall into a few broad categories, including all-in-one platforms and vertically integrated solutions.

• Choosing the right system means matching provider capabilities to your user onboarding requirements, payout structure, and total cost of ownership.

How do you choose user-friendly embedded payment technology?

An embedded payment system is payments infrastructure built directly into a software platform, so users can transact without being redirected to a third-party checkout. Choosing user-friendly embedded payment technology requires assessing who your users are and what system will enable the smoothest operations for your users and business. Each business has its own unique requirements.

For example, onboarding friction in embedded payments varies enormously. Some checkouts require extensive documentation up-front; others use a risk-tiered approach where users can start processing at lower volumes with minimal information and provide more documentation as volumes increase. If your users are small businesses or sole traders who won’t tolerate a lengthy verification process, that matters. If you’re serving higher-risk verticals, you’ll need to know up-front whether a given provider will work with those categories.

How does an embedded payment system work?

Embedded payments enable the platform to collect payment details through a user interface (UI) it controls. The payment provider handles authorization and settlement, and funds move to the end user’s account, held by the provider or swept to an external bank, on a schedule that the platform can often configure. The platform captures its margin through a revenue share or markup on processing fees.

At the infrastructure level, embedded payments typically run on a payments provider’s technology through a payments facilitation (payfac) model, or, more recently, through embedded finance infrastructure based on application programming interfaces (APIs).

In the traditional payfac model, a platform registers as a payment facilitator with card networks and sponsors sub-merchants under its own merchant account. End users don’t need their own merchant accounts, which means faster onboarding. Platforms take on more compliance and underwriting responsibility.

In a modern API-based model such as Stripe Connect, the platform configures the experience through APIs while the provider helps handle the underlying business relationships, compliance infrastructure, and fund flow. The platform can control how payments look and feel, set its own fee structure, and access a share of payment revenue without becoming a licensed money transmitter itself.

What challenges do businesses face when implementing embedded payments?

Embedded payments introduce complexity that software companies may not have encountered before.

Consider the following:

Compliance obligations

When your platform moves money, you inherit some version of Know Your Customer (KYC) and Anti-Money Laundering (AML) obligations. Even if your payment provider handles the heaviest compliance lifting, you’re still responsible for collecting and transmitting accurate information about the businesses or individuals on your platform. Getting this wrong creates legal exposure.

Underwriting and risk

The businesses or individuals transacting through your platform are, financially speaking, your risk. Disputes, fraud, and sudden spikes in chargebacks can result in funds being withheld or your agreement with your payment provider being terminated.

Payout complexity

Paying out to a single business is straightforward. Paying out to thousands of contractors, sellers, or service providers in different countries, with different tax situations, on different schedules, is an engineering and compliance project in its own right. Tax form generation, currency conversion, and international bank transfers all compound quickly.

Product scope creep

Once you’ve embedded payments, there’s a slippery slope toward adjacent features such as invoicing, payment links, subscription billing, financing, or expense cards. Each one requires another integration, compliance, and support. Deciding how many products to offer is both a strategic and technical consideration.

What types of embedded payment providers are there?

The provider landscape includes all-in-one platforms and vertically integrated solutions.

All-in-one platforms offer the full stack, including payment processing, onboarding infrastructure, compliance tooling, payouts, and often additional financial products such as cards or lending. Stripe Connect is designed specifically for platforms and marketplaces; it handles sub-merchant onboarding, manages fund flows between multiple parties, and gives platforms close API control over the user experience. The advantage is building on an infrastructure purpose-built for embedded payments. The trade-off is dependency on one provider for a lot of critical infrastructure.

Vertically integrated solutions are created when several providers build payments into software designed for specific industries. The payment system is built assuming a specific workflow, such as providers that focus specifically on extending credit within software platforms. These are often layered on top of an existing payment relationship. For example, a trucking software company might embed freight factoring (e.g., a financial service in which trucking companies sell their outstanding invoices to a third party for quick cash) through a specialist provider while still using a separate processor for card payments.

Vertically integrated solutions can be faster to start in the right context, but they’re harder to customize.

What should you consider before choosing an embedded payment system?

Choosing an embedded payment system involves more variables than a standard payments integration.

Consider the following:

• How much control do you want over the payment experience? Some platforms want to own every pixel of the checkout and onboarding experience. Others are happy to use hosted UIs and redirect flows in exchange for faster implementation. Many providers offer both, but the depth of API access for customized implementations varies widely. If brand consistency and user experience (UX) control are central to your product, verify what’s configurable versus what’s fixed.

• What does your payout structure look like? If you’re collecting money on behalf of others and distributing it, the payout side deserves as much attention as the collection side. Can you hold funds before disbursing them? What settlement timelines are available? Can you pay out to international bank accounts, and in which currencies? Does the provider generate tax forms, or is that your responsibility?

• How do you want to handle compliance? Full payfac arrangements give platforms more control and revenue potential, but they also mean more direct responsibility for KYC, underwriting, and disputes. Using a provider that helps maintain the underlying compliance infrastructure shifts some of that burden. Neither is inherently better; it depends on your team’s capacity and your risk tolerance.

• What’s the total cost of ownership? Processing rates are the visible cost. Less visible are engineering time to build and maintain the integration, support costs for users’ payment-related issues, compliance overhead, and the opportunity cost of building payment features instead of core product. A lower-rate provider could end up more expensive once you account for everything else.

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.