Payments used to be handled externally. A software company built the product, and a bank or payment provider handled the money movement. Now, many software platforms embed payments directly into their products and earn revenue from every transaction their users process. The revenue model that best suits your platform depends on your payment volume, the size of those transactions, and your risk tolerance.
The global market for embedded payments was valued at almost $24 billion in 2024 and is forecast to grow to nearly $193 billion by 2032. Below, we’ll discuss the main revenue models for embedded payments, how they differ, and how to pick the one that best fits your business.
Highlights
Common revenue models for embedded payments range from flat per-transaction fees to value-added financial products.
The right revenue model depends on your platform’s transaction volumes, user base, and capacity to handle compliance and underwriting.
Platforms often start with one model and add more revenue streams as they scale.
What are the revenue models for embedded payments?
Embedded payments are built directly into a software platform so the payment experience lives inside the product with the same interface, login, and workflow. Platforms that embed payments can monetize that capability in several distinct ways. Mature platforms tend to use more than one revenue model.
These are the main types of revenue models for embedded payments.
Payment markup
The platform charges its users a per-transaction rate that’s higher than its own processing cost and keeps the difference. If the processor charges the platform 2.5% per transaction and the platform bills its users 3.2%, the spread (0.7%) is the platform’s margin on every payment processed. At scale, even a modest spread compounds into considerable revenue. But potential users who shop around will notice if your rate is uncompetitive, so the model works best when the platform delivers enough value to justify that payment pricing.
Subscriptions with payments
Some platforms bundle payment access into their subscription tiers rather than charge per transaction. A higher plan could enable lower processing rates, and the platform bets on subscription revenue to cover the per-transaction costs. This model suits platforms where payment volume per user is predictable and relatively modest.
Flat per-transaction fee
The platform charges a fixed amount per transaction instead of a percentage, regardless of transaction size. This structure works well for platforms that serve businesses with large average order values, where a percentage-based fee would be too large. A platform that handles B2B invoice payments might find its users far more willing to pay $5 per transaction than 1.5% on a $10,000 invoice.
Revenue sharing
In partner or referral arrangements, the platform refers users to a payment provider and earns a share of the revenue that provider generates from those users. The platform off-loads risk but earns less per transaction than it would with a markup model. This often appeals to early-stage platforms, where the compliance burden of full implementation isn’t yet financially viable.
Value-added financial products
Once a platform controls the payment flow, it has access to transaction data and cash flow patterns that make additional financial products viable. Platforms can offer working capital advances, instant payout access, or card issuing. These products tend to offer higher margins than straight payment processing.
How do the revenue models for embedded payments differ?
The primary difference among the revenue models for embedded payments comes down to margin versus complexity. Payment markup and value-added products generate the most revenue per dollar processed, but they require more infrastructure, compliance work, and underwriting discipline. Revenue sharing generates less income but demands less effort. Where your platform fits on that spectrum depends on your capabilities.
Consider the following comparison of embedded payment revenue models.
|
Revenue model
|
How the platform earns
|
Good for
|
|---|---|---|
| Payment markup | Spread between payment processing cost and billed rate | High-volume platforms |
| Subscription with payments | Fixed monthly or annual fees for using the platform | Platforms with predictable, modest user volume |
| Flat per-transaction fee | Fixed fee per processed payment | B2B platforms with large average transaction sizes |
| Revenue sharing | Commission from referrals to the payment provider | Early-stage platforms or referred models |
| Value-added financial products | Fees on capital, payouts, and cards | Mature platforms with rich transaction data |
What risks affect revenue models for embedded payments?
Each revenue model for embedded payments comes with constraints. If you ignore them, you might end up absorbing losses you didn’t price for.
Consider these issues when you select your revenue model:
Compliance exposure: Platforms that move funds take on money transmission obligations in some jurisdictions. Solutions such as Stripe Connect handle most of the Know Your Customer (KYC) requirements, but the platform might still have monitoring and fraud obligations.
Chargeback and fraud liability: In a markup model, the platform often shares in fraud losses. A submerchant with a high dispute rate can erode a meaningful portion of the margin the platform earns from processing.
User pricing sensitivity: Platforms that charge above-market rates need to justify that cost through product value. When users grow large enough to negotiate directly with acquirers, some might try.
Revenue concentration risk: Platforms that rely on payment revenue from a few high-volume users carry considerable risk. If one leaves or renegotiates, the impact on payment revenue can be severe.
Cash flow timing: Depending on how funds flow, platforms might hold them on behalf of submerchants during settlement periods. That’s a liquidity consideration and, in some jurisdictions, a regulatory one as well.
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.
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