Embedded software monetization earns ongoing revenue from software that runs inside hardware devices, creating a new opportunity for companies to generate value from connected devices. The global embedded software market was estimated at more than $17.9 billion in 2024, and it’s projected to surpass $30 billion by 2030. This growth has been driven by advances in connectivity, over-the-air (OTA) updates, and edge computing, which allow manufacturers to continuously enhance functionality after a device is deployed.

Mastering embedded software monetization enables businesses to stay relevant in a market where customers expect ongoing innovation and flexibility. Below, we’ll cover what embedded software monetization is, which revenue models apply, and what to look for when choosing a payments provider.

Highlights:

• Embedded software monetization creates the opportunity to earn additional income from the software running inside a physical product.

• Monetizing embedded software can lead to increased revenue, richer data, and a competitive edge.

• Choosing the right payments provider can shape your economics and compliance exposure for years.

What is embedded software monetization?

Embedded software monetization generates revenue from software that’s built directly into hardware devices (often called “embedded systems”). Instead of making money only from selling the physical product, companies also earn ongoing or additional income from the software running inside it.

What are the benefits of embedded software monetization?

Embedded software monetization fundamentally changes how companies make money from physical products, benefitting revenue, product strategy, and customer relationships.

With embedded software monetization, your business can:

• Bring in revenue that scales with your users: When you move beyond one-time sales to recurring income through subscriptions or renewals, it tends to lead to higher lifetime value per customer as you keep earning after the sale. A company such as Tesla, for example, can continue generating revenue long after a car is sold by offering software upgrades.

• Offer more flexible pricing: Instead of one fixed product, you can offer tiered pricing (e.g., a range from basic to premium). Customers can pay only for what they need, and you can offer easier entry points for price-sensitive buyers. This expands your market without redesigning your product.

• Access richer data: Connected devices generate usage data that allows businesses to understand how their customers use features, identify what’s worth monetizing, and improve future products based on real behavior. This turns hardware into a feedback loop instead of a static product.

• Set themselves apart from competitors: Businesses that adopt this model well can differentiate through features, build platform ecosystems, and lock in customers over time.

What are the revenue models for embedded software monetization?

There are several ways to structure revenue once you’ve embedded payments, and mature platforms often use more than one.

Common revenue models:

• Feature-based licensing: Users pay to unlock specific capabilities (e.g., heated seats or advanced driver assistance in cars).

• Subscription fees: Users make ongoing payments for continued access (e.g., a monthly fee is charged for cloud-connected security features in a smart camera).

• Pay-per-use: Users pay charges based on usage (e.g., industrial equipment is billed per hour of operation).

• Freemium model: Basic functionality is free, but users pay for advanced features. This is common in Internet of Things (IoT) devices and consumer gadgets.

• OTA upgrades: New features are sold and delivered after purchase. This extends product lifespan and revenue potential.

• Embedded payment monetization: Users make payments within your software; revenue comes from a payment markup or flat per-transaction fees.

What are the steps for implementing embedded software monetization?

Implementing embedded software monetization involves a series of consequential decisions. Getting the order right can save you substantial rework later on.

Here’s how you’ll want to proceed:

Define your monetization goal: Before you evaluate any technology, be specific about what you’re trying to achieve. Are you adding a new revenue stream, improving retention, or both? What transaction volumes do you expect in year one versus year three? What’s your tolerance for compliance complexity? Your answers shape every subsequent choice.

Choose a revenue model: Your revenue model determines your technical architecture. Simple feature-based licensing has different integration requirements than a full embedded payments setup.

Select a payments solution: Evaluate providers against your specific requirements. The questions that matter are whether the provider supports your user base’s payment methods, how their onboarding and Know Your Customer (KYC) processes work, what your revenue share looks like at different volume tiers, and how much of the compliance burden they absorb.

Integrate billing and commerce systems: Connect usage to revenue. Your billing system needs to recognize different pricing tiers, subscription management, and pay-per-use charges. Payments providers such as Stripe make it easy to bill and manage customers however you want.

Launch with a subset of users: Start with a cohort of users who are representative of your audience but small enough that problems are manageable. Closely monitor transaction success rates, onboarding completion rates, and support volume. The data from this phase will tell you what needs fixing before you scale.

Improve on monetization: Embedded software monetization is a starting point, not an endpoint. Once you have transaction data and user feedback, you can refine your fee structure, add payment methods, or evaluate adjacent products. Platforms that treat the initial launch as a finished product can miss some revenue.

What should you look for in a payments solution for embedded software monetization?

The provider you choose can shape your economics, compliance exposure, and users’ experience for years.

Here’s what you should look for when evaluating potential payments providers:

• Pricing structure: Some providers might offer better rates up-front, while others might improve economics as volume grows. Get the numbers in writing and model them against realistic projections.

• Onboarding and KYC capabilities: Your users might judge your payment integration by how easy it is to get started. Providers vary enormously in how they handle identity verification, business verification, and risk assessment. Look for a provider whose onboarding flow can be embedded directly in your product rather than redirecting users to a separate interface.

• Compliance and risk management: A good provider handles Payment Card Industry Data Security Standard PCI DSS compliance, fraud monitoring, and dispute management and gives you clear documentation of exactly what it covers versus what you’re responsible for.

• API quality and documentation: Poorly documented application programming interfaces (APIs), inconsistent sandbox environments, and slow developer support can be expensive in engineering time.

• Support for your specific use case: Marketplace payouts, subscription billing, and point-of-sale (POS) payments all have different requirements. Make sure the provider has production deployments for your specific model, not just theoretical support for it.

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.