Merchants looking for the best way to accept card payments within a particular software are often presented with both integrated and embedded solutions to choose from. And while the end result is the same (you’ll get paid), the setup and fees are drastically different.
Understanding these differences matters because the wrong choice can lock you into inflated processing rates or a system that’s unnecessarily complex for your business needs.
Key Takeaways
- Integrated payments connect a third-party business software (like practice management system, POS, or CRM) to a payment processor through an API, allowing you to accept cards without leaving the software’s interface.
- Embedded payments are built directly into an application’s code as a native feature, typically used by software companies like Uber or DoorDash where the payments are part of the customer-facing experience.
- Most businesses using third-party software need integrated payments, not embedded.
- Embedded payments are usually reserved for companies building their own software products (or white-labeling software that their customers will be using).
- Integrated solutions typically offer limited processor choices and may include markups on top of standard processing fees, but they’re still much simpler to set up than embedded systems.
Integrated Payments Explained
An integrated payment system uses an API or gateway to connect payment processors with software. It’s designed for businesses that are using a third-party platform for a key business function (like dental practice management software, restaurant POS, or field service management systems) that has a payment functionality built into the workflow.
The key characteristic of an integrated payments setup is that you’re working with at least two separate companies:
- Software provider
- Payment processor
Here’s an example. When a dental office uses Dentrix or Eaglesoft to manage patient scheduling and billing, the practice can also accept payments directly through the same interface.
For this to happen, the practice management software needs to integrate with a payment processor on the backend to facilitate the transaction.
Integrated systems benefit businesses by eliminating manual data entry. So when a patient pays for dental services, that payment automatically updates the patient’s account balance, posts to the day’s revenue, and reconciles without requiring staff to enter the same information multiple times across different systems.
The software provider typically has partnerships with specific processors, which means your choice of payment processor will be limited to whatever that particular software supports.
Some software providers also offer their own branded payment solutions (like Gingr offers Gingr Payments, Mindbody offers Mindbody Payments, etc.). But those solutions still use a third-party processor on the backend to actually move money through the card networks.
Embedded Payments Explained
Embedded payments are built natively into a software application as a core feature (not added through an integration). The payment function is part of the application itself from the ground up.
This approach is almost exclusively used by software companies and SaaS providers.
The clearest examples of embedded payments are customer-facing apps like Uber, Lyft, DoorDash, and Airbnb. When you request a ride, order food, or book a rental, the payments are invisible in the background.
There’s no third-party payment screen because the transaction is embedded into the user experience.
From a technical standpoint, embedded payments require extensive custom development and deep integration with a payment processor that can support your needs. This makes embedded payments significantly more expensive and time-consuming to set up compared to an integration solution.
It’s important to choose the right provider from day one because switching is near impossible unless you’re willing to spend hundreds of thousands of dollars in redevelopment work.
Key Differences Between Integrated and Embedded Payment Solutions
To further understand how these payment systems work, let’s take a closer look at some major differences between integrated payments and embedded payments.
Third-Party Software
Integrated payments are specifically built for businesses using a third-party platform. If you’re a veterinarian who wants a practice management system, you can get software that happens to support payments through an API with certain processors. The integration already exists, you’re just enabling it.
There’s no third party involved in embedded payments. The software company itself (Uber, Airbnb, Shopify) build their own software from scratch with payments embedded as a native feature.
So unless you’re developing your own software as a customer-facing product, embedded payments aren’t really applicable to your business.
Processor Relationship
With integrated payments, you have a direct relationship with the processor. Regardless of the third-party software you’re using, you’ll still need to get a merchant account from the acquiring bank on the backend and work directly with the processor for all payments-focused needs.
The software facilitates the connection. But the processor is a totally separate entity in the arrangement.
Embedded payments are trickier. If you’re a giant like Airbnb, then you’ll work directly with the processor to set things up. But if you’re just white-labeling an existing SaaS or software product for your customers that include an embedded payments feature, your relationship will be limited and you don’t have as much control over who’s handling your payments on the backend.
Implementation Costs
The cost to set up an integrated payment solution is minimal for merchants. The software provider already has the integration infrastructure set up. So you’re just activating an existing feature.
You may have to pay some small activation fees or application fees to the processor or software, but it’s a few hundred dollars at most. And the timeline to do this is days or weeks.
Embedded payments can easily cost $100k+ to build from scratch because you’re doing custom development work, which can take months or years. Or if you’re white-labeling an existing embedded system, you’ll likely be paying a monthly, quarterly, or annual subscription.
Ongoing Costs
Integrated payment processing typically involves a markup on top of standard interchange rates. The difference here is that your processor may have to pay the software provider a commission for supporting the integration, which may inflate your rates slightly than if you were working with that same processor directly without a third-party software involved.
Embedded payments almost always use flat-rate pricing with limited to no room negotiation. Shopify Payment is a good example of this. The platform sets the price, and that’s what you pay.
Flexibility
Integrated payment systems are limited to payment processors that are supported by the third-party software you’re using. In some cases, there may only be two or three options. So the merchant doesn’t have the flexibility to just use any processor they want.
Embedded payments offer zero flexibility. If you’re building the software from the ground up, then you can find a processor to handle this for you. But if you’re using an existing solution, you can’t choose your processor because everything is already set up. The payment system can’t be separated from the platform itself.
Support
Integrated payment support is typically split between the software provider and payment processor. If you have questions about how the payments work within the software interface, you’d contact the software company. But if you have questions about fees on your statements or you want to negotiate your rates, you’d need to contact the processor directly.
Embedded payment support is handled through a single point of contact. It’s whoever is facilitating the platform.
What to Consider When Deciding Between an Integrated Payments Setup or Embedded Payments Provider
For the vast majority of businesses reading this right now, the decision has already been made for you based on your situation.
- If you’re using a third-party software for a core business function (practice management, CRM, ERP, etc.), you need integrated payments.
- If you’re a software company that’s building a customer-facing application, you’ll likely need an embedded solution.
Beyond this key distinction, there are few other key considerations that you should keep in mind when evaluating your options:
- Figure out which payment processors support your needs and how many options you have to choose from.
- Look closely at the pricing structure and separate the processing fees completely from the software fees.
- Make sure you can get on an interchange-plus pricing plan, where you pay the wholesale processing rate plus a small markup directly to the processor.
- Consider how deeply the software integrates with your other business operations (accounting, inventory, customer records, scheduling, etc.).
- Think about the long-term implications of switching (once you’re set up, you probably don’t want to change anything because it will be disruptive and expensive to switch).
Don’t rush into this decision. Depending on your industry, you may have several different options to choose from.
For example, let’s say you’re looking for a field service management system for your pest control business. One particular software might have all the features you need. But if they only support a single integrated processor, your rates will likely be inflated.
You might be better off going with your second choice software if they support more processing APIs. This added competition can help you get a better rate, which can save you tens of thousands every year.
Those savings can be worth it, even if the software wasn’t your first preference.
Final Thoughts
Figuring out if integrated payments or embedded payments makes sense for your business is actually pretty easy. It’s totally based on your situation, and there’s rarely an overlap where either option works for the same business because the solutions are so drastically different.
The one constant between these two payment setups comes down to your costs.
Generally speaking, payment processors are always looking for ways to charge you more to accept payments. And that’s without any complex technical setups.
Once you bring in the terms integrated or embedded, your processor will immediately use that as an excuse to charge even more (even if it’s not warranted).
So you need to really pay close attention to how much you’re actually paying in processing fees.
Since you’re likely not going to switch providers in either of these situations, you’ll need to find other ways to lower your processing costs. Let our team here at MCC audit your statements to find cost saving opportunities. We can help negotiate better terms whether you have an integrated or embedded setup, so you won’t have to change anything or disrupt your operations.