Vertically focused integrated payments takes payment processing to the next level by embedding it directly into specialized business software platforms designed for specific industries. Whether it’s healthcare, retail, hospitality, or automotive services, these tailored platforms cater to the unique needs and workflows of each sector. By seamlessly incorporating payment functionalities, they streamline operations and enhance the user experience, making transactions smoother and more efficient.
For example, a healthcare management system might allow patients to book appointments, manage records, and pay for services within the same platform. A restaurant point-of-sale system may integrate payment processing with table management, order tracking, and staff scheduling.
This is compelling for these reasons and more:
- Seamless user experience: Payment features are embedded into everyday operational tasks, reducing user friction.
- Industry-specific tools: The software addresses the unique needs of a particular vertical, enhancing usability.
- Improved efficiency: Businesses save time and resources by managing payments alongside other operations in a single platform.
- Increased revenue: Software companies unlock a new path to significant revenue. Their merchant-acquiring partners get quick access to the merchants these software companies support, bolstering their revenue as well. TSG knows software companies making 10x more revenue from payments than software license fees alone.
The rise of integrated payments is reshaping the traditional merchant acquiring model:
Cost to Value
Merchants increasingly view payments not as a standalone service but as part of a holistic solution that drives efficiency.
Software-led
Software companies are increasingly entering the acquiring space, either by partnering with payment processors or becoming payment facilitators themselves. Examples include Shopify integrating payments into its e-commerce platform with its own gateway. In return, offering a proprietary point-of-sale product for in-store use or Toast offering restaurant-specific software with built-in payment solutions.
To stay competitive, acquirers need to adapt by partnering with or acquiring vertically focused software companies. Alternatively, developing their own integrated payment solutions, similar to a feature-rich ecosystem that Square has developed, with hundreds of in-house tools built for various verticals
Lower Attrition
Integrated payments increase merchant loyalty because switching platforms becomes more complex when payment processing is embedded into business-critical software. For example, a retail store using an inventory management system with built-in payments will hesitate to change processors due to potential disruptions.
TSG’s AIM analytics platform shows that merchants integrated into their acquirer through software partners have ~5% less attrition than non-integrated merchants. TSG data also shows that software-integrated merchants are typically 20% larger than non-integrated merchants.
Market Consolidation and 2025 M&A Focus
Fintechs, and software providers are joining forces to dominate specific verticals. Strategic partnerships can be critical for expanding into underserved niches. Quickly gaining cutting-edge, API-driven solutions the market is expecting, and scaling across regions and industries.
In one of TSG’s software company surveys, respondents were unsatisfied with their payment processing partners. Unsatisfied because of a lack of innovation, difficult implementation, and ambiguous pricing. To thrive in this evolving landscape, merchant acquirers should:
- Increase automation: Payment workflows will increasingly rely on AI to streamline applications, invoicing, reconciliation, and fraud control.
- Offer omnichannel capabilities: Integrated solutions will unify in-store, online, and mobile payments, providing merchants with a seamless payment ecosystem.
- Explore embedded finance: Beyond payments, vertical software platforms will integrate additional financial services such as lending, insurance, and payroll. In one TSG survey, 91% of software companies that currently have an embedded banking solution said it was very or extremely important to their business.
Modern acquirers need to focus on developer experience and understand the software community through market research. In addition, direct collaboration to build a high-performance channel in a competitive space. Clear, transparent communication and terms, and data-driven insights add value.
Merchant acquirers must embrace this transformation to remain competitive and capitalize on emerging opportunities. Acquirers can accomplish some of this through M&A.
These opportunities expand capabilities, penetrate niche markets, and capture more value by aligning with the growing trend of vertical integration. Acquirers should target software providers that serve high-growth verticals. Verticals like healthcare, hospitality, or construction and identify gaps left by competitors. Honing in on niche opportunities for growth that will mesh with the acquirer. Ensure that the team covers expertise in operational, regulatory, and technical requirements. Such as HIPAA considerations in the healthcare space, or coverage of payment methods used in the vertical or geography in focus. Acquiring vertical-specific platforms allows acquirers to embed payment solutions into software already used by merchants in these sectors. When doing this, acquirers need to be aware of channel conflict with software partnerships.
Zooming Out
Nine out of 10 ISVs surveyed by TSG feel that payments are either ‘very’ or ‘extremely’ important to their core business model. Software-integrated payments requires significant attention, investment, and planning. It is not an area to be ignored. Merchant acquirers should view M&A and partnership opportunities in the integrated payments space as an essential strategy to stay competitive. By targeting high-potential software platforms and executing effective integrations, acquirers can unlock new growth opportunities and position themselves at the forefront of modern payments.
TSG is a leader in all things integrated payments, offering solutions built for acquirers to develop high-performance programs in the integrated space. Contact us to discuss today.
- We provide monthly updated analytics on the integrated channel, helping acquirers identify opportunities tailored to their needs while benchmarking their performance.
- We create detailed target lists of software companies categorized by vertical.
- We give strategic recommendations on areas like product, pricing, staff, risk, and go-to-market strategies.