Embedded Payments: The Hidden Costs of Convenience

TL;DR

Embedded Payments Are Everywhere – Once a convenience feature, embedded payments are now built into business software across industries, from invoicing tools to eCommerce platforms.
Convenience Comes at a Cost – While embedded payments streamline transactions, they also introduce higher processing fees, hidden markups, and restrictive agreements that limit your ability to shop for better rates.
A $185 Billion Industry Built on Your Transactions – According to BCG Research and Adyen, SaaS platforms integrating payments can triple or quadruple their revenues, taking a cut of every transaction.
Layered Costs Add Up – Payments already pass through multiple middlemen (ISOs, acquiring banks, card networks), but embedded payments add another layer, increasing costs for businesses.
Lack of Transparency – Embedded payment fees are often bundled and lack clear cost breakdowns, making it harder to negotiate better terms or optimize for lower processing fees.
Restricted Choice & Vendor Lock-In – Many SaaS providers require exclusive agreements with payment processors, limiting competition and your ability to switch without costly disruptions.
Regulators May Need to Step In – Stronger oversight could help ensure fair pricing, prevent anti-competitive practices and promote payment cost transparency.
Take Action to Protect Your Business – Businesses should demand transparency, choose software with payment flexibility, and push back against unfair fees.

Business and operational software providers promote embedded payments as a game-changer, framing it as a seamless, secure, and convenient way for customers to pay invoices and for businesses to reduce collection hassles. At first glance, it seems like a win-win.

But while the convenience is real, so is the cost—one that’s escalating beyond control.

Offering easy payment options to customers has undeniable benefits, but if your software provider embeds payments into its platform, you need to take a closer look. The trade-offs might not be as favorable as they seem. Here’s what you need to know to make informed decisions about which costs are worth accepting—and which ones aren’t.

What Are Embedded Payments?

Embedded payments are when payment capabilities are built directly into your business or operational software. They’re everywhere—powering apps that send appointment reminders, manage health records, track inventory, and, of course, run e-commerce transactions. These built-in payment features allow customers to seamlessly send money without ever leaving the application, making transactions faster, more secure, and easier to collect.

This kind of integration has transformed the way businesses handle payments. Think back to how things used to work—you’d send an invoice, wait for a customer to swipe their card at a terminal, or take their payment details over the phone. Today, it’s as simple as clicking a link in a text message, interacting with an automated system, or even using biometric authentication. One day, making a payment might be as easy as just thinking about it. And for businesses, the appeal is obvious: money gets collected faster with little to no follow-up from your team.

The concept is straightforward—put payment capabilities where your customers already are. So, what’s the catch? Payment companies are leveraging embedded payments to generate billions in profits—at your expense. Hidden fees, limited flexibility, and inflated processing costs are just a few of the ways they’re maximizing revenue while keeping you locked in.

The Evolution of the Software Business

Not long ago, buying software was a one-time transaction. Programs like QuickBooks came on CDs—you’d install them on your computer, and that was it. No recurring fees, no hidden costs. If the software company wanted more revenue, they’d release upgraded versions. Sometimes, you could skip the upgrade to save money; other times, they’d force your hand by discontinuing support for older versions.

Then came the rise of subscription-based software, or Software as a Service (SaaS). This model shifted most applications from computer-hosted to web-based, charging users a recurring fee for access. SaaS promised continuous updates and added features, but it also introduced new ways to extract more revenue. Freemium models lured users in with limited functionality, nudging them toward costly upgrades. Seemingly minor add-ons could quietly inflate your bill over time.

Since the early 2000s, software companies have been searching for even more ways to monetize their platforms. Enter embedded payments—the latest (and often sneakiest) revenue stream. These built-in payment systems may already be eating into your operating budget, and if you’re not paying attention, they’ll continue finding new ways to charge you.

The Rise of Embedded Payments

The rise of embedded payments can be traced back to digital-first businesses like Amazon and Uber, which pioneered integrated payment experiences that eliminated checkout friction. Recognizing the opportunity, major retail brands—including Starbucks, Walmart, and Walgreens—followed suit, embedding payment functionality into their apps and eCommerce platforms. This shift wasn’t just about convenience; it was a strategic move to capture more consumer spending and streamline transactions.

Now, embedded finance is on a trajectory for explosive growth. According to Research and Markets, the global value of embedded finance is projected to grow at a compound annual growth rate (CAGR) of 36.41% between 2025 and 2030. To put that in perspective, artificial intelligence (AI), a dominant force in today’s economy, has a lower projected CAGR of 27.67%, according to Statista. The rapid expansion of embedded payments is being fueled by evolving consumer preferences and the continued digitization of businesses.

The sheer size of this market opportunity has software providers rushing to capitalize on it. Many are restructuring their business models to integrate embedded payments and other financial services. But transparency is often lacking. The potential downsides? Reduced competition, stifled innovation, and rising costs—all at the expense of the businesses using these platforms.

Small and mid-sized businesses depend on software providers to help deliver seamless customer experiences. In response, these providers are eager to roll out new revenue-generating features—particularly embedded payments. And make no mistake: the revenue potential is substantial and recurring. By adding a percentage plus fees to every transaction, software providers have turned themselves into silent partners in your business.

For every dollar your business collects, your uninvited silent partner takes a cut—without the risks, overhead, or effort that you put into running your operation. As embedded payments become the norm, the question isn’t whether they’re convenient—it’s whether the cost is worth it.

The Ever-Increasing Business Expense

Driven by the massive revenue potential, software providers are embedding payment functionality into nearly every type of application. What started with accounting and invoicing platforms like QuickBooks and FreshBooks has rapidly expanded. Today, embedded payments are found in eCommerce platforms like Shopify and WooCommerce, enterprise resource planning (ERP) systems such as NetSuite and Epicor, scheduling tools like Calendly, and even electronic health records (EHR) software such as Nextech and ModMed, widely used by medical offices.

No software category is off-limits. While embedded payments offer convenience, the cost often outweighs the value. According to BCG Research and Adyen, a leading financial technology platform that enables embedded payments for software companies, embedded payments represent a $185 billion opportunity for SaaS platforms—a number that continues to grow. By integrating payments and financial services, SaaS providers have the potential to triple or even quadruple their revenues.

To be clear, it’s not wrong for service providers to charge fees in exchange for value-added solutions. A feature that streamlines collections, accelerates cash flow, and reduces administrative burdens can be beneficial for businesses and their customers alike.

However, the added software/payment processor layer introduces significant costs and oversight challenges. Many businesses find themselves navigating complex fee structures that disguise inflated rates, hidden markups, and excessive processor kickbacks. Worse, some software providers require restrictive, exclusive agreements with payment processors, effectively eliminating free-market competition. The result? Higher costs, fewer options, and limited negotiating power for businesses.

As embedded payments become the norm, businesses must carefully evaluate the trade-offs—because convenience shouldn’t come at the cost of financial control.

A Layered Cost Structure

Every card payment you accept passes through multiple entities, each taking a portion of the processing fees before the money reaches your business. Even before software providers insert themselves into the transaction, several players are already claiming a cut:

Independent Sales Organizations (ISOs) / Payment Facilitators (PayFacs): ISOs resell acquiring bank technology and provide customer support for merchants. PayFacs process payments on behalf of merchants, handling authorization and settlement.
Acquirers: These are the financial institutions that facilitate payment processing and ensure transactions are completed between merchants and customers.
Issuing Banks: The bank that issued your customer’s credit card.
Credit Card Networks: Visa, Mastercard, and other networks oversee data transfers between acquirers and issuers while collecting network fees.

Now, embedded payments add yet another layer—the Independent Software Vendor (ISV), or your software provider. ISVs either develop their own payment technology or partner with a third-party processor, integrating payment functionality into their software. This additional layer means another party is slicing into each transaction, increasing your total processing costs.

How much does this cost your business? Business News Daily recently reported that average processing fees range from 2.87% to 4.35% for businesses processing between $10,000 and $250,000 in annual card transactions. However, businesses using embedded payments within niche software applications often face even higher, non-negotiable rates—further eating into profits.

Each of these layers compounds the cost of accepting payments, turning what should be a simple transaction into a revenue-sharing model that benefits everyone—except the business actually making the sale.

The Erosion of Free Market Choice

Embedded payment solutions often eliminate your ability to choose a payment provider. There is a business case for this. Payment provider integrations are expensive to develop and maintain. Providers, therefore, may require an exclusive relationship with the software company.

This exclusivity restricts your right as a business owner to shop around for the best rates. It may also expose you to above-market payment costs over time. This happens when SaaS providers and their payment partners implement cost increases, knowing customers are highly dependent on the software.

The unfortunate reality is that some business applications become essential to daily operations, to the point that switching to a cheaper competitor is prohibitively expensive. Switching costs arise from staff retraining, customer confusion and the potential for data loss.

Data loss can occur at various points during a software migration due to compatibility issues, backup failure, human error or restrictions within the application. Some apps won’t or can’t release your customer data. A software change that invites data loss would be extremely disruptive, especially if you accept recurring payments or charge invoices to securely stored card numbers.

Under these conditions, you may accept higher-than-market payment costs as the lesser of two evils.

The Impact on Transparency and Trust

Embedded payments also obscure cost transparency. Traditional credit card processing statements usually break down interchange fees and processor margins. They provide valuable analytics that can reveal cost reduction opportunities, such as fee breakdowns for debit vs. credit transactions.

Embedded payment cost statements are more likely to be simplified. They may not detail interchange fees, processing fees, and settlement fees by transaction type. You may end up paying high rates without knowing who’s getting what or why some payments cost more than others.

Not-So-Fun Fact: In 2024, VeriFee found more than 60% of the statements it analyzed, rates and fees were higher than what was originally contracted.

Without visibility into your actual payment costs, it’s nearly impossible to audit charges, negotiate better terms, or apply advanced cost reduction techniques like debit routing or interchange optimization.

The Call for Change

As embedded finance continues to expand, hidden costs and restrictive practices demand greater scrutiny. Businesses must take a stand by demanding transparency and flexibility from software providers—or choosing platforms that allow them to integrate payments on their own terms. Collectively, we can send a clear message: adapt or risk losing not just the payments business, but the software business too. By pushing back, businesses foster a more competitive environment—one that encourages cost efficiency, innovation, and freedom of choice.

Regulators also have a role to play. Stronger oversight could help ensure embedded payment agreements uphold antitrust principles, prevent the exploitation of businesses’ operational dependencies, and mandate full transparency in payment data.

The future of payments should not be dictated by hidden fees and restricted choices. It’s time to expose the unethical, unveil the invisible, and reclaim financial control for businesses everywhere.

If you’re looking for software vendors that support multiple payment processors, VeriFee can help—at no cost and with no hidden agenda. Unlike resellers or profit-driven intermediaries, our AI-enabled, people-powered service uncovers hidden cost savings and protects small and mid-sized businesses from excessive and unregulated processing fees.

Learn more at VeriFee.com.