A Software Company's Guide to Embedding Payments (Integrated Payments / ISV)

If you build software that touches money, payments are no longer something you can leave to a third-party checkout page and forget about. Customers expect to charge a card, send an invoice, or run a subscription without ever leaving your product. Getting that experience right is a meaningful engineering and business decision. This guide walks through what “embedded” payments actually mean, the models available to software companies, the core concepts your team will need to understand, and how to evaluate a payments partner.

What “Integrated” or “Embedded” Payments Means

Integrated payments describe any setup where the act of taking a payment happens inside your application rather than on a separate, disconnected system. Instead of telling a customer to “go pay over there,” your software initiates the charge, tracks the result, and reconciles it against the relevant record—an invoice, an order, a subscription.

“Embedded” payments take this a step further. The payment experience feels native to your product: your own UI, your own workflows, your own reporting. The processing happens behind the scenes through APIs, but to the merchant using your software, payments are simply a feature you offer. The deeper the integration, the more value you can capture and the more control you have over the experience.

Two Models: Referral/ISO Partnership vs. PayFac

There is a spectrum of how deeply a software company can get into payments. At a high level, two models anchor the ends of it.

Referral / ISO partnership

In a referral or ISO (Independent Sales Organization) relationship, you partner with a processor and refer your customers to get set up with merchant accounts. Each merchant is underwritten individually and has a direct relationship with the processor. You integrate against the processor’s gateway and APIs, but you are not in the flow of funds or the compliance burden of approving merchants. This is the fastest path to a credible, integrated payments offering, and it typically still lets you share in the economics.

Becoming a payment facilitator (PayFac)

A payment facilitator operates under a master merchant account and onboards its own customers as sub-merchants. PayFacs control onboarding, underwriting, risk, and often the flow of funds. The upside is greater economic share and a more seamless onboarding experience. The cost is substantial: regulatory and compliance obligations, risk and fraud exposure, reserves, and ongoing operational overhead.

Many software companies start with a referral or managed model and consider PayFac status only once payment volume justifies the investment. There are also “PayFac-as-a-service” and hybrid arrangements that sit in between. The right choice depends on your volume, risk appetite, and how much of the operational burden you want to own. This is a conversation worth having with an integrations team before committing.

Core Concepts to Understand

A few concepts come up in nearly every payments integration:

• Gateway / API. The gateway is the service your software talks to in order to authorize and capture transactions. Modern processors expose this through documented APIs and, often, client-side SDKs.
• Tokenization and card-on-file. Rather than storing raw card numbers (which carries heavy compliance scope), you exchange card data for a token. That token can be charged later, which is what enables “card-on-file” experiences and reduces your PCI burden.
• Card-not-present (CNP). When the cardholder isn’t physically present—online checkout, recurring billing, phone orders—the transaction is card-not-present. CNP carries different risk and pricing than in-person transactions.
• Recurring billing. Subscriptions and installment plans rely on stored tokens charged on a schedule. Handling retries, failed payments, and dunning gracefully is part of doing this well.
• Settlement and funding. Authorization is not the same as money in the bank. Settlement is the process by which captured transactions are batched and funds are deposited, usually on a delay. Understanding funding timing matters for your merchants’ cash flow.
• Onboarding and underwriting of sub-merchants. Before a business can accept cards, it must be vetted. In a PayFac model you own this; in a referral model the processor handles it. Either way, the friction of onboarding directly affects your activation rates.

Why Teams Embed Payments

Software companies invest in embedded payments for three reasons that reinforce each other:

• Better UX. Keeping payments inside your product removes friction, reduces drop-off, and makes your software feel complete.
• Retention. Once a customer runs their money through your platform, switching costs rise sharply. Payments make your product stickier.
• New revenue. Payments can become a meaningful revenue line, turning a cost center into a margin contributor as volume grows.

What to Evaluate in a Payments Partner

Not every processor is built to support software companies. When evaluating a partner, weigh:

• Support. Look for a dedicated integrations team and responsive technical support. When a payment fails in production, you need answers quickly.
• Compliance handling. Understand how much PCI and regulatory scope the partner absorbs versus what lands on you. Tokenization, hosted fields, and clear guidance reduce your burden.
• Integration effort. Review the documentation, available SDKs, sandbox quality, and how the onboarding flow works. A clean developer experience saves months.
• Economics. Understand the pricing model, your revenue share, settlement timing, and any reserves or fees. The headline rate is rarely the whole story.

The right partner should make the simple cases easy and the complex cases possible—and should be willing to walk through the trade-offs with you rather than hand you a contract.

Talk to an Integrations Expert

Embedding payments is a decision with long-term consequences for your product, your economics, and your customers. The best next step is a conversation with people who do this every day. If you’re a software company weighing your options, talk to our team about ISV and developer integrations or get a quote to map the right model to your product.