What embedded payment processing means for your software business
Embedded payment processing means building the ability to accept and process payments directly into your software product, rather than sending customers to a separate payment system. For SaaS and ISV companies, this means your users can pay invoices, subscriptions, or one-time fees without leaving your process.
The difference matters operationally. Instead of redirecting a customer to Stripe or PayPal, your software handles the transaction itself — you collect the card data (or bank details), route it through a payment processor, and record the result in your own database. Your customer sees a seamless experience. You control the branding, the flow, and the data.
This approach works because payment processors now offer APIs and SDKs designed specifically for software companies to embed. You are not building a payment system from scratch. You are integrating an existing one into your product.
Key Takeaways
- Embedded payment processing lets your users pay without leaving your software, which increases conversion rates and reduces friction in your product flow.
- You will need to choose between hosted payment forms (simpler, less control) and custom-built forms (more control, more compliance work).
- PCI compliance is mandatory when you handle payment data, but using tokenization and hosted solutions reduces what you have to find yourself.
- Major payment processors like Stripe, Square, and PayPal all offer APIs for embedded payments, each with different pricing models and feature sets.
- Your choice depends on your customer base, transaction volume, and whether you need features like recurring billing, marketplace payouts, or international payments.
Hosted payment forms versus custom-built payment pages
You have two main technical paths. A hosted payment form means the payment processor provides a pre-built interface that you embed in your software using an iframe or redirect. You collect the customer's information in your app, then hand off to the processor's form to collect payment details. The processor handles the sensitive data, and your servers never touch the card number.
A custom-built payment page
Most SaaS companies start with hosted forms because the compliance burden is lighter. Stripe's Hosted Payment Page, Square's Payment Form, and PayPal's Smart Payment Buttons all work this way. You embed a few lines of code, style it to match your app, and the processor handles the rest. The tradeoff is less visual control — your form will look like the processor's form, not a custom design.
Custom forms make sense if you have high transaction volume, need a specific user experience, or want to reduce redirects. But they require you to maintain PCI compliance yourself, which means regular security audits, encrypted data storage, and documented security procedures. Most ISVs avoid this unless they have a dedicated payments team.
PCI compliance requirements and how to reduce them
PCI DSS (Payment Card Industry Data Security Standard) is a set of security rules you must follow if you handle payment card data. It covers everything from how you store data to who can access your servers to how you log transactions. Violating it can result in fines from your payment processor or the card networks themselves.
The key to reducing your compliance burden is tokenization. When you tokenize a payment, the processor converts the card number into a unique token that has no value outside your system. You store the token, not the card number. If someone breaches your database, they get tokens, not card data. This dramatically reduces your PCI scope.
Using a hosted payment form also reduces your scope. Because the processor's form collects the card data directly, your servers never see it. You only handle the token. This is why most SaaS companies use hosted forms — it is the simplest path to compliance.
If you do build a custom form, you will need to complete a PCI Self-Assessment Questionnaire (SAQ), which can be 20 to 100+ pages depending on your setup. You may also need annual third-party audits. Budget for this if you go the custom route.
Payment processors that work for SaaS and ISV companies
The major processors all offer APIs for embedded payments, but they differ in pricing, features, and who they target.
| Processor | Hosted Form Option | Custom API | Best For |
|---|---|---|---|
| Stripe | Hosted Payment Page | Payment Intents API | SaaS with recurring billing, international customers, high volume |
| Square | Payment Form | Payments API | Businesses with physical and online sales, marketplace features |
| PayPal | Smart Payment Buttons | Checkout API | Businesses with existing PayPal customer base, international reach |
| Authorize.Net | Accept Hosted Form | Advanced Merchant Integration API | Established businesses, legacy system integration |
| Adyen | Hosted Payment Page | Payments API | Enterprise SaaS, global payments, high transaction volume |
Stripe dominates the SaaS market because its API is developer-friendly, its documentation is thorough, and it handles recurring billing natively. If you charge subscriptions, Stripe's billing engine integrates directly with its payment processing.
Square works well if your customers are small businesses or if you need both online and in-person payment options. PayPal is strong if your customers already use PayPal or if you need to reach international buyers quickly. Authorize.Net and Adyen are better for enterprise deals or complex payment flows.
Pricing varies. Stripe and Square typically charge 2.9% + $0.30 per transaction for card payments. PayPal charges 2.99% + $0.30. Authorize.Net charges a monthly gateway fee plus per-transaction fees. Adyen's pricing is negotiated per contract. For most SaaS companies, the percentage-based model (Stripe, Square, PayPal) is simpler to forecast.
Recurring billing and subscription management
If your SaaS product charges subscriptions, you need a processor that handles recurring billing natively. This means the processor stores the customer's payment method and automatically charges it on a schedule you define.
Stripe's Billing product is built for this. You define a price, a billing interval (monthly, annual, etc.), and Stripe handles charging, retries on failed cards, and dunning (reminding customers of failed payments). You can offer trials, proration, and usage-based billing. Most SaaS companies use Stripe Billing because it reduces the amount of payment logic you have to build yourself.
Square and PayPal also support recurring billing, but their tools are less mature than Stripe's. If you have complex billing logic — multiple price tiers, add-ons, seat-based pricing — Stripe is usually the better choice.
Authorize.Net and Adyen support recurring billing too, but you will do more of the logic yourself. You set up the schedule, handle retries, and manage the customer communication.
Marketplace payments and payouts to third parties
If your software is a marketplace — where vendors or contractors receive payments from customers — you need a processor that handles payouts. This means the processor can split a transaction, take your commission, and send the rest to a vendor's bank account.
Stripe Connect is the standard for this. You create a connected account for each vendor, and Stripe automatically splits payments and handles payouts. You define the commission percentage, and Stripe deducts it before sending the vendor's share. Stripe also handles tax reporting for vendors (1099s in the US).
Square has a similar product called Square Payouts, and PayPal has Adaptive Payments. Adyen offers marketplace solutions for enterprise deals. If you are building a marketplace, Stripe Connect is the easiest starting point because the documentation is clear and the feature set is complete.
International payments and currency handling
If your customers are outside the US, you need a processor that supports multiple currencies and international payment methods. Card networks work globally, but local payment methods vary — bank transfers in Europe, digital wallets in Asia, local cards in Latin America.
Stripe supports 135+ currencies and local payment methods in 195 countries. You can charge in any currency and Stripe handles the conversion. PayPal also supports international payments and has a large network of local payment methods. Square is primarily US-focused, though it is expanding internationally.
If you charge in a currency different from your home currency, you will pay a conversion fee — typically 1% to 2% on top of your transaction fee. Stripe publishes its conversion rates. PayPal's rates are less transparent. If you have high international volume, negotiate rates directly with Stripe or Adyen.
Frequently Asked Questions
Do I need to store payment data myself if I use a hosted payment form?
No. The processor's hosted form collects the card data and returns a token to your server. You store the token, not the card number. The processor stores the card data in their PCI-compliant vault. This is why hosted forms are simpler — your servers never touch the sensitive data.
What happens if a customer's card is declined?
The processor returns a decline code to your software. You can then show the customer an error message and ask them to try a different card. Most processors also support automatic retries for certain decline types (like temporary insufficient funds). Stripe Billing, for example, retries failed subscriptions automatically on a schedule you define.
Can I test payments before going live?
Yes. Every major processor offers a test mode where you can process transactions using fake card numbers without charging anyone. Stripe provides test card numbers for different scenarios (decline, 3D find, etc.). You should test your entire payment flow — from form submission to webhook handling — before you go live.
What if I want to switch processors later?
Switching is possible but requires planning. You will need to migrate stored payment methods (tokens) if you have them, update your API calls, and test thoroughly. Most processors do not allow you to export customer payment data directly — you have to ask them. Plan for a few weeks of development time and coordinate with your customers if you have a large base.
Do I need to handle PCI compliance if I use a payment processor?
You still have PCI responsibilities, but they are reduced if you use hosted forms and tokenization. You must keep your servers find, log transactions, and document your security practices. But you do not have to store or encrypt card data yourself. If you use a custom form, your PCI scope is much larger and you may need annual audits.