Embedded Payments: Meaning, How It Works, Types & Benefits
TL;DR - Summary
- What are embedded payments? - Embedded payments are payment capabilities built directly into a software product, allowing customers to complete transactions within the product instead of using a separate payment page.
- How do embedded payments actually work? - Embedded payments work by connecting a software platform to a payment provider through APIs, with the provider handling payment processing while the platform manages the payment experience within its product.
- What is the main difference between embedded payments and integrated payments? - Embedded payments make payment functionality a native part of the software product, while integrated payments connect the software to an external payment system that may provide a separate payment experience.
- What are the biggest risks of adopting embedded payments? - The biggest risks of embedded payments include integration complexity, fraud and payment risk, compliance responsibilities, and transaction costs that can reduce margins.
What Are Embedded Payments?
Embedded payments are payment capabilities built directly into a software product or digital platform, thereby allowing users to pay without being redirected to a separate checkout page or payment gateway. The payment becomes part of the product experience rather than a standalone step.
For example, when you book a ride on Uber, you do not normally open a separate payment page at the end of the trip. Your saved payment method is charged automatically once the ride is completed. The payment process runs in the background while you continue using the service.
Embedded payments can also handle transactions involving multiple parties. A platform can collect money from its customer and route the appropriate amount to a third-party seller or service provider within the same payment flow. DoorDash and Shopify, for example, use payment infrastructure that supports transactions between platforms, customers, and sellers.
Embedded payments are part of the broader concept of embedded finance, which refers to financial services built into non-financial products. While embedded finance also includes services such as lending, insurance, and banking, payments are one of its most widely used applications.
From the customer's perspective, the key feature is seamlessness. Instead of treating payment as a separate interaction, the transaction happens naturally within the product they are already using.
💡 QUICK INSIGHT
Uber, Swiggy, and Amazon do not typically send users to a separate payment gateway every time they make a purchase or complete a service. The payment is integrated into the product experience, which is the core idea behind embedded payments.
How Do Embedded Payments Work?
Embedded payments work by connecting a platform directly to payment infrastructure through APIs. This allows the payment to be captured, secured, authorised, settled, and recorded within the same app or website, without sending the customer to a separate checkout page.
How embedded payments process a transaction
Hover a step to see it.
API integration. The platform connects a PSP via APIs to reach the payment networks and card infrastructure.
API integration. The platform connects a payment service provider via APIs to reach the payment networks and card infrastructure. Some setups also use open-banking APIs.
Payment capture. The customer pays inside the app: card, saved method or wallet, without leaving the page.
Payment capture. The customer enters card or bank details, or picks a saved method or wallet, all inside the same app or website.
Tokenisation. Card details are swapped for a secure token, so the platform never handles the raw card number.
Tokenisation. The card details are replaced with a secure token, so the platform never needs the original card number for future transactions.
Real-time processing. The request runs through the PSP to the card network and issuing bank for auth and risk checks.
Real-time processing. The request passes through the PSP and processor to the card network and issuing bank, which run authentication and risk checks, then approve or decline.
Approval confirmation. The response returns to the platform and the customer sees it in the same app.
Approval confirmation. The response is sent back to the platform, and if approved the customer sees the confirmation within the same app or website.
Funds transfer. Once settled, funds move through the network to the recipient's account, after fees.
Funds transfer. Once processed and settled, funds move through the payment network from the payer to the recipient's acquiring or settlement account, after any fees.
Data insights. Transaction data flows into reporting and reconciliation tools for tracking and trends.
Data insights. Transaction data flows into the platform's reporting and reconciliation tools, so businesses can track payments, spot trends and understand behaviour.
- Step 1: API Integration: The platform connects a payment service provider (PSP) to its software using APIs. This gives the platform access to the payment networks and card infrastructure needed to process transactions. Some setups also use open-banking APIs for account-to-account payments.
- Step 2: Payment Capture: When the customer makes a payment, they enter their card or bank details within the platform or choose a saved payment method or digital wallet. The payment interface stays within the app or website.
- Step 3: Tokenisation: The payment details can be replaced with a secure token that represents the customer's underlying payment credentials. This means the platform does not need to handle the original card details for future transactions.
- Step 4: Real-time Processing: The payment request is sent through the PSP and payment processor to the relevant card network and issuing bank. The transaction can then go through authentication and risk checks before the bank approves or declines it.
- Step 5: Approval Confirmation: The transaction response is sent back to the platform. If the payment is approved, the customer sees the confirmation within the same app or website.
- Step 6: Funds Transfer: Once the transaction is processed and settled, funds move through the applicable payment network from the payer's side to the recipient's acquiring or settlement account, after any relevant fees.
- Step 7: Data Insights: Transaction information can flow into the platform's reporting and reconciliation tools. Businesses can use this data to track payments, identify trends, and understand customer payment behaviour.
Two Ways to Implement Embedded Payments
Platforms generally have two implementation options:
- Payment Facilitator (PayFac): The platform takes on more responsibility for payment infrastructure and merchant onboarding. This provides greater control over the payment experience but also brings additional compliance and operational responsibilities.
- Managed Embedded Payments Provider: The platform uses a third-party provider for the underlying payment infrastructure. The provider handles much of the payments, compliance, and operational complexity, making this approach easier to deploy.
How the Approach Varies by SaaS Platform
The right setup also depends on the type of software platform:
- Vertical SaaS: Platforms built for a specific industry, such as legal, dental, or field services, often need payment features that can be tailored to industry-specific workflows.
- Horizontal SaaS: Platforms serving businesses across multiple industries generally benefit from broad payment-method coverage and a setup that can be deployed quickly across different use cases.
Related: How to receive international payments in India
What Are the Different Types of Embedded Payments?
The different types of embedded payments can be understood in two ways, i.e., by what the payment is designed to do and by how the payment infrastructure is integrated into the platform. This distinction helps explain both the customer-facing use case and the technology behind it.
Functional Types
- Split Payments: A single transaction can be divided between multiple parties, such as a marketplace, seller, service provider, or other recipient. The platform determines how the funds are allocated and routes each party's share through the payment infrastructure. This is common in marketplace models such as those used by Shopify and DoorDash.
- Recurring and Subscription Payments: The platform automatically charges customers according to a defined billing schedule. Once a customer authorises the payment method, the system can handle future charges, subscription renewals, and failed-payment retries without requiring the customer to enter their details each time.
- One-Click / In-App Checkout: Customers can complete purchases within the app or website using a saved payment method, wallet, or tokenised payment credential. This removes unnecessary steps from repeat purchases and keeps the checkout experience within the product.
- Escrow and Held-Fund Payments: A platform can hold funds until predefined conditions are met before releasing them to the intended recipient. This model is useful where payment release depends on an event such as delivery, completion of a service, or fulfilment of contractual conditions.
Integration Architecture Types
- Integrated Payment Gateways: The platform connects an existing payment gateway or processor to its software through APIs or embedded components. This approach can provide a relatively quick way to add card, wallet, and other payment methods without building the entire payment infrastructure internally.
- Custom Payment APIs: Developers use payment APIs to build a payment experience tailored to the platform's specific workflow and branding. This offers greater control over the interface and payment logic, but requires more engineering work and greater responsibility for integration, security, and compliance.
- Out-of-the-Box Solutions: Pre-built payment components or modules can be added to a platform with relatively little development effort. These solutions are useful when a business wants to launch payment functionality quickly rather than build a highly customised system from the ground up. Providers such as Adyen offer pre-built UI components alongside more custom API-based integrations.
Who Needs to use Embedded Payments?
Embedded payments are useful for businesses that collect or move money as part of a digital product, particularly software platforms, marketplaces, and online services. They allow customers to pay within the platform's existing workflow instead of being sent to a separate payment page.
- Vertical SaaS Providers: Industry-specific software for clinics, salons, gyms, legal firms, and similar businesses can add payment collection alongside their core workflows. For example, veterinary practice software can let a clinic collect a consultation fee directly from the appointment or scheduling screen.
- Online Marketplaces: Marketplaces that connect buyers with independent sellers can use embedded payments to collect customer funds, calculate platform fees, split the payment between parties, and facilitate seller payouts within the same system.
- B2B Service Platforms: Accounting, invoicing, subscription-management, and other business software can incorporate payment collection into existing workflows. This can support recurring billing for B2B payments strategy while also keeping payment records connected to invoices and reconciliation processes.
- E-Commerce and Retail Apps: Retail apps can integrate payment directly into product and cart experiences, making repeat purchases faster through saved payment methods or one-click checkout. Reducing extra checkout steps can also help limit abandoned purchases.
- SaaS and Tech Platforms: Beyond making payments easier, platforms can use embedded payments to increase the value of their software, strengthen customer retention, and create additional revenue through transaction-based fees or other payment-related charges.
- Financial Service Providers: Banks, fintechs, and other financial service providers can embed payment capabilities into third-party software and marketplaces. This lets them reach customers through the digital products they already use rather than requiring customers to interact with a separate financial platform.
What Are the Key Benefits of Embedded Payments?
The key benefits of embedded payments include higher conversion rates, new revenue opportunities, greater control over the payment experience, better access to transaction data, faster issue resolution, and stronger customer retention.
For Businesses and Platforms
- Increased Conversion Rates: Fewer redirects, payment windows, and repeated card entries make checkout faster and easier. The Baymard Institute reports that around 70% of online shopping carts are abandoned, with checkout friction being a major contributor.
- New Revenue Streams: Platforms can earn through transaction fees, payment subscriptions, and premium features such as recurring billing or multi-currency payments. Embedded finance can also create substantial revenue opportunities, with some industry research estimating 3–4x growth over existing subscription revenue.
- Greater Control Over User Experience: Businesses can control the payment flow, branding, and supported methods within their own platform instead of sending customers to a separate provider.
- Direct Access to Transaction Data: Payment data can feed into the platform's reporting and reconciliation systems, helping businesses track transactions and make better operational and product decisions.
- More Efficient Troubleshooting: Having payment activity connected to the platform makes it easier to investigate failed payments, refunds, and disputes without relying on multiple disconnected systems.
- Stronger User Retention and Stickiness: Saved payment details, mandates, transaction history, and integrated payment workflows can make the platform harder for users to replace.
For Customers
- Speed and Convenience: Customers can pay within the platform without leaving the app or repeatedly entering their payment details.
- Improved Trust and Experience: A familiar, branded checkout reduces the disruption and uncertainty that can come with being redirected to an unfamiliar payment page.
- Greater Security: Features such as tokenisation and real-time fraud detection help protect payment information without adding extra steps for the customer.
What Are the Challenges and Hidden Costs of Embedded Payments?
The main challenges of embedded payments include technical integration, regulatory compliance, ongoing maintenance, merchant onboarding, pricing complexity, and the added work of expanding into new markets.
- Integration Complexity: Connecting payment APIs, webhooks, authentication, error handling, and transaction processing to an existing platform can require substantial development work. The system must also handle payment volumes without affecting the platform's performance.
- Regulatory Compliance: Businesses handling card payments need to meet applicable PCI DSS requirements, while other obligations depend on the payment method, business model, and markets served. Non-compliance can expose a business to penalties, processing restrictions, and financial liability following a security incident.
- Ongoing Maintenance: Payment systems need continuous monitoring, security updates, bug fixes, and compatibility changes as payment standards and provider APIs evolve. Engineering teams may also need to investigate failed transactions and maintain the reliability of the payment flow.
- User Adoption and Change Management: Changing an existing payment process can create resistance among customers or internal teams. A successful migration therefore needs clear communication, simple transition paths, and a demonstrable improvement over the previous experience.
- Compliance Burden Shift: Depending on the implementation model, a SaaS platform can take on responsibilities that previously sat with a payment provider. These may include merchant onboarding, KYC verification, fraud monitoring, dispute and chargeback management, payouts, and tax documentation.
- Onboarding Friction: Merchants may need to provide business, identity, and banking information before they can start accepting payments. If the KYC and verification process is lengthy or poorly designed, it can slow activation and cause merchants to abandon onboarding.
- Hidden Costs in "embedded" Flows: An integrated payment experience does not automatically mean low-cost processing. Transaction charges, currency-conversion spreads, transfer fees, and other costs can accumulate. For example, PayPal India currently charges 4.40% plus a fixed fee for international commercial receipts, while its currency-conversion charges can add another 3% or 4%, depending on the conversion. In some cross-border payments flows, the combined cost can therefore reach the 5–10% range before other applicable charges.
- Scalability and Global Complexity: Expanding embedded payments into new countries can require support for different currencies, local payment methods, settlement requirements, and regulatory frameworks. Each new market can therefore add both engineering and compliance costs.
Real-World Embedded Payments Examples
Real-world embedded payments are common in apps where payment is built directly into the service. Ride-hailing, food delivery, quick-commerce, and e-commerce platforms let customers complete transactions within the same app instead of sending them to a separate payment page.
Ride-Hailing and Mobility
Ride-hailing apps make payment part of the journey, i.e., right from booking the ride to settling the final fare.
- Uber India and Ola: Customers can add a card, UPI account, or wallet as a payment method and use it for subsequent rides. Once the trip ends, the fare can be charged through the selected method without requiring the customer to leave the app and complete a separate payment.
Food Delivery and Quick Commerce
Food and grocery apps integrate payment directly into the ordering process, thereby keeping checkout within the same experience.
- Swiggy, Zomato, and Zepto: Customers can use options such as UPI and saved cards from the cart or checkout screen. Refunds and wallet-related transactions can also be managed within the app, reducing the need to switch to another payment interface.
E-Commerce and Super Apps
Large commerce platforms combine shopping with integrated payment options so customers can complete purchases without leaving the ecosystem.
- Flipkart and Amazon Pay: Customers can complete purchases through native checkout using saved payment methods and supported instant-payment options. Amazon Pay also integrates services such as Pay Later into the checkout experience.
- Tata Neu: Payments, UPI functionality, and rewards are integrated into its broader ecosystem, allowing customers to manage shopping and related services within the same platform.
Each of these examples show how embedded payments can remove friction from everyday transactions. Indian freelancers and agencies receiving international payments can apply the same principle to cross-border collections, with straightforward pricing, payment tracking, and automatic remittance documentation without unnecessary gateway redirects or hidden FX markups.
Also Read: Future of cross-border payments: 2030 and beyond
Embedded Payments vs Integrated Payments: Key Differences
The key difference between embedded and integrated payments is how deeply payment functionality is built into the platform and how much control the platform retains over the payment experience. Integrated payments connect software with an external payment provider, while embedded payments make payment capabilities a native part of the platform's workflow.
| Parameter | Embedded Payments | Integrated Payments |
|---|---|---|
| Definition | Payment functionality is built into the platform's own workflow and interface | The platform connects its software to an external payment provider through an API, plugin, or other integration |
| User Experience | Payment feels like a natural part of the product, with little or no visible third-party interaction | The payment experience may still expose a third-party interface or redirect, depending on the integration |
| Onboarding | Payment onboarding can be incorporated into the platform's own user journey | Users may need to complete onboarding directly with the external payment provider |
| Customisation | Greater control over the payment interface, branding, and workflow | Customisation is generally constrained by the capabilities and interface of the external provider |
| Control over Payments | The platform can take greater ownership of payment workflows, onboarding, and support, depending on its setup | The external provider retains more responsibility for the payment service and related operations |
| Security & Compliance | The platform has additional security and compliance responsibilities, although a provider may handle parts of the infrastructure | The external provider handles its own regulated payment infrastructure, while the platform still has responsibilities for its own integration and data handling |
| Revenue Potential | Can create additional revenue through transaction fees or other payment-related offerings, where permitted | Revenue opportunities are generally more limited and may depend on the commercial arrangement with the provider |
| Ideal For | Platforms that want payment to be deeply integrated into their product and have greater control over the experience | Businesses that want to add payment functionality quickly without taking on as much payment infrastructure |
- Integrated Payments: The platform connects to an external processor through an API or plugin. This reduces manual steps and data-entry errors, but the payment service remains a separate component that the platform depends on.
- Embedded Payments: Payment becomes part of the platform's own workflow. The platform can have greater control over checkout, onboarding, payment data, and support, depending on how its embedded payment model is structured.
Integrated payments generally leave the regulated payment services with the external provider, although the platform still has its own security and data responsibilities.
Embedded payments can shift additional obligations to the platform, including merchant onboarding, KYC, fraud monitoring, and dispute management. A PayFac-as-a-Service provider can take on some of these responsibilities.
How Does Skydo Help Indian Businesses Receive Global Payments
Skydo is one such payment gateway that simplifies international payment collection for Indian businesses and freelancers by combining multi-currency receiving accounts, transparent pricing, fast INR settlement, and automated remittance documentation in one platform. This reduces the manual work often involved in receiving and reconciling overseas payments. Skydo offers:
- Free Virtual Accounts in Multiple currencies: Skydo provides virtual receiving accounts in USD, EUR, GBP, SGD, AUD, and CAD. Overseas clients can use local payment rails where supported, avoiding the need to navigate a traditional SWIFT transfer for every payment.
- Flat Transparent Pricing: Skydo charges $19 for payments up to $2,000, $29 for $2,001–$10,000, and 0.3% above $10,000, plus applicable GST. There is no monthly subscription fee, and zero FX charges.
- Settlement Within 1 Working Day: Funds are settled to the Indian business's bank account in INR within 24 hours, providing a more predictable timeline than traditional international bank transfers.
- Automatic FIRA: Skydo automatically generates a free instant Foreign Inward Remittance Advice (FIRA) for eligible transactions. This provides the remittance record needed for export-payment documentation without requiring the business to manually request the certificate for every payment.
- eBRC and EDPMS Assistance: Businesses can link their DGFT account once and use Skydo's workflow to bulk-upload shipping bills, map IRMs, and generate eBRCs. Skydo also provides assistance with EDPMS closure.
Skydo setup takes 5 minutes. The platform supports goods and service exporters, freelancers, and Amazon Global Selling sellers receiving international payments, subject to the applicable documentation and eligibility requirements.
What are embedded payments?
Embedded payments are payment capabilities built directly into a software application or platform. Customers can initiate and complete payments within the product's existing workflow rather than being sent to a separate payment page.
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