It’s no longer a question: software companies that leverage embedded payments are not just enhancing their product offering, they’re unlocking a powerful growth engine. TSG is seeing software clients realize multimillion-dollar returns. Our analytics platform shows that software companies embedding payments have ~5% less client churn in their payments programs and have 20% larger accounts than non-integrated companies.
While the benefit of embedded payments is clear, the path forward often isn’t, which raises many questions.
Common Questions
Our firm works with a wide array of software companies. These are some of the most common questions we encounter:
- “What monetization model is right for my business?”
- “Which payment processing partners should I consider?”
- “Is our processing contract on par with the market?”
- “How do I know if our transaction fees are optimized for margin and client satisfaction?”
- “Am I losing out on revenue because of how we manage interchange?”
- “How do we improve adoption into our payments program?”
- “What is your approach to integrating my software with a processing partner?”
- ”How do I enhance my product to get the most from payments?”
Navigating payments can feel like learning a new language. With this complexity, getting the most out of payments requires a solid monetization strategy.
To set a strategic foundation, here are four considerations for an optimized strategy:
1) Strategic Fit
Payments can be deployed in multiple ways, allowing for alignment with broader business goals. Leadership should decide if payments will be a core part of the business, a simple referral stream, or something in between.
It’s wise to consider what types of embedded products to offer. For example, beyond payments alone, services like lending, insurance, and payroll can be embedded. In a recent TSG survey, 91% of software companies with an embedded banking solution said it was very or extremely important to their business.
2) Payments Education
Success requires buy-in across the company. Everyone needs to understand the vision and the operational lift.
A foundational understanding of the payments industry is essential. While our quick guide to credit card processing covers the basics, it’s equally important to grasp the associated risks, responsibilities, revenue allocation, and key contract terms.
Learn about how our experts help software companies
3) Operational Models & Financials
There are multiple ways to embed payment processing, each with unique responsibilities, risks, and revenue potential. Common models include referral partner, retail ISO, wholesale ISO, managed payment facilitator, and traditional facilitator. We’ll dive deeper into these structures in an upcoming piece.
One of the biggest differentiators in high-performing payment strategies is control over transaction fees. Yet too many companies miss the mark by relying on broad-stroke pricing instead of data-driven discipline. This leaves revenue on the table. That’s why our benchmarking analytics are a go-to resource for industry leaders.
Another recurring challenge is underestimating the operational, compliance, and technical layers required for successful execution.
For perspective, a recent TSG study of 100+ software companies found that, on average, 40% of software payment volume was monetized after 18 months. The goal is to outperform that benchmark. But this isn’t just about chasing revenue; it’s about building a payments strategy aligned with your customer experience, go-to-market vision, and valuation objectives.
4) Partner Selection
Selecting the right payment processing partner starts with technical and cultural alignment. For some, a global processor with proprietary technology is ideal; for others, a local reseller is the right choice.
Best-in-class partners deliver frictionless onboarding, intuitive interfaces, and responsive support. Expect self-service portals, robust APIs, instant sandbox access, and modern SDKs.
When it comes to choosing a payments partner, transparency is non-negotiable. Uptime metrics, contractual SLAs, and clear incident protocols are must haves. This is made clear in a recent TSG survey that found ease of implementation ranks among the top three decision drivers for software companies. Software companies don’t need to settle for complexity.
Running a structured RFP is a smart move. When our experts support these evaluations, we combine deep familiarity with current market terms and a proven framework (below) to ensure the right fit.
While economics matter, strong partnerships aren’t defined by margin, they’re built on accountability and trust. Regular touchpoints, shared CRMs, and partner portals foster transparency and long-term success.
Final Thought: There’s More to Get from Payments
Whether you’re just exploring payments or already embedded, there’s likely more value to unlock. If you’re ready to take the next step, start by asking the right questions. Evaluate your strategy, align your teams, and choose partners who understand your space.
The TSG Difference
TSG empowers software companies to unlock scalable growth, often increasing revenue by 3-5x.
Since 2006, TSG has been purpose-built for payments. As an objective consulting, analytics, and solutions-focused firm, we help startup and Fortune 500 software companies reach their goals. From education to execution, we combine proprietary data with real-world expertise, tailored for every journey.