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Embedded payments have moved decisively beyond their early role as a bolt-on feature for software platforms and are now foundational to how merchants operate, according to panelists who spoke Thursday at the Northeast Acquirers Association conference in Boston.
Once viewed as optional, embedded payments are increasingly expected to function as invisible infrastructure—fully integrated into software workflows and encompassing far more than traditional card processing.
“Embedded payments are no longer additive,” said Ed Searcy, senior vice president for partner management at Elavon, the acquiring unit of U.S. Bank. “They’re base-level infrastructure that every serious partner has to be prepared to deliver.”
That reflects a broader transformation in how merchants adopt technology. Roughly 90% of merchants now rely on some form of independent software vendor applications to run their businesses, up from about 50% five years ago, Searcy said. As software adoption has accelerated, so have merchant expectations around payments.
“Payments used to mean credit card processing,” said Kyle Taylor, chief operating officer at linked2pay, a payment-processing and gateway-services company. “Now it includes ACH, digital wallets, subscriptions, invoicing, lending, buy now, pay later, and alternative funding. Merchants expect all of it to work seamlessly inside the software they already trust.” ACH refers to transactions processed through the automated clearing house network.
These rising expectations are increasingly elevating embedded payments to a requirement rather than a differentiator. Panelists estimate that about half of new partners entering the market today bring their own proprietary software, typically built for a specific vertical. The remainder are aligning with independent software vendors (ISVs) to deliver integrated commerce experiences.
Traditional standalone POS and MSP sales models still exist, but their share of the market continues to shrink, according to panelists. Where those models persist, success tends to be highly localized and relationship-driven.
“Software wins because vertical specialists ask better questions,” said John Badovinac, senior vice president of embedded commerce at Las Vegas-based Aurora Payments. “Payments are a small part of the business. The real value is understanding the operational realities of that merchant.”
Examples include factors from inventory-intensive retail operations to complex dealer-management systems in automotive, as well as event-registration platforms. Searcy said one of his favorite origin stories is that of RunSignup, a platform for running events. “They came out of a space where they were all runners themselves,” he said. Because registrations and their fee payments could be months ahead of the actual event, they encountered issues because banks didn’t want the liability.
“They took it all in house and developed the software themselves and did all the event registration, management, and ticketing” Searcy said. “And because they were runners themselves, they knew the industry inside and out, so they could know the risk and, you know, portray the risk appropriately in all of those relationships and were able to build that out really successfully.”
While competition is intense in highly penetrated verticals such as retail, restaurants, and health care, panelists pointed to opportunity in less saturated sectors, including professional services, nonprofits, education, manufacturing, and real estate. These verticals may often lag in electronic-payments adoption but offer significant upside for providers willing to navigate added complexity. But the lack of electronic payment penetration could be the result of the difficulty in converting these merchant types.
Scaling embedded payments, however, introduces challenges. Pricing compression, unrealistic expectations around becoming a payment facilitator, and misalignment between sales, compliance, and sponsoring banks all frequently derail growth efforts. Payfacs can enroll merchants to accept credit and debit payments as a sub-merchant, often to the independent software developer working with a payments provider. “Everyone likes to talk about being a payment facilitator,” Searcy said, “but the reality is there’s a whole lot of responsibilities and compliance functions that you have to take on as you do that.”
Integration failures are another recurring issue. Successful partnerships require clear contractual agreements, defined ownership across onboarding and underwriting, and disciplined requirements gathering before development begins. “A fast, informal integration almost always fails,” Taylor said. “If you don’t do the work up front—reading the documentation, defining requirements—you’ll end up rebuilding it later.”
While connecting payments has become relatively commoditized, building and scaling a durable embedded-payments business remains difficult. “Anyone can connect payments,” said Badovinac. “It’s very few partners that can really help you orchestrate and build a payments business.”
