Payments are becoming an increasingly important part of the software experience. According to the Federal Reserve, cards account for 79% of all non-cash payments by number in the U.S.
For SaaS platforms, that creates both an opportunity and a technical question: What’s the best way to facilitate those transactions?
Two common approaches are payment gateways and embedded payments. While both enable digital transactions, they differ in how payments are integrated, who controls the experience, and the role payments play in your product.
Here’s how they compare and what to consider when choosing between them.
| Payment gateway | Embedded payments | |
| Primary purpose | Connect software/checkout to payment processing | Make payments a native software capability |
| Integration | Payment functionality connected to the platform | Payments integrated deeply into product workflows |
| User experience | May involve external/hosted payment experiences | Typically stays within the SaaS experience |
| Control | More dependent on gateway/provider setup | Greater ability to shape payment UX |
| Monetization | Usually payments are a cost/function | Can create a new revenue stream |
| Merchant onboarding | Often handled separately | Can be incorporated into platform |
| Payment data | May live across multiple systems | Can be integrated with platform data |
| Implementation | Generally simpler | Typically more involved |
| Compliance/risk | Provider handles portions of payment security | Responsibilities depend heavily on the embedded model/provider |
| Best suited for | SaaS businesses primarily needing to accept payments | Platforms enabling their customers to accept payments |
What is a payment gateway?
A payment gateway is technology that securely transfers payment information between a customer, a business, and the financial institutions involved in a transaction.
It acts much like the digital equivalent of an in-store card terminal that securely transmits payment information from an online checkout for authorization and processing. When a customer enters their credit card or other payment details, the gateway encrypts that information and sends it along for authorization, helping businesses accept online payments securely and efficiently.
How a payment gateway works
When a customer enters their payment details at checkout, the payment gateway encrypts that information and securely sends it to the payment processor.
From there, the transaction travels through the appropriate card network to the customer’s bank, which approves or declines the purchase.
That decision then travels back through the payment system to the business, often in just a few seconds. The gateway doesn’t actually move the money—it provides the secure connection that helps payment information get where it needs to go.
What does a payment gateway for SaaS do?
A payment gateway for SaaS gives software companies the infrastructure they need to accept payments through their platforms without building that functionality from scratch. Depending on the provider, a SaaS payment gateway can support credit and debit cards, digital wallets like Apple Pay and Google Pay, recurring payments, and multiple currencies. It can also provide security features such as encryption, tokenization, and fraud detection.
For subscription-based SaaS businesses, gateways may also integrate with billing tools that help manage recurring charges and failed payments.
What are embedded payments?
Embedded payments are payment capabilities built directly into a software platform, allowing users to make or accept payments without leaving the product. Instead of connecting customers to a separate payment experience, the SaaS platform has payment processing embedded into its existing workflows.
For example, a salon management SaaS platform might let businesses book appointments, manage customers, and collect payments, all within the same software. This creates a more seamless experience while making payments a native part of the product.
How embedded payments work
Embedded payments connect a SaaS platform to payment infrastructure behind the scenes, typically through an embedded payments partner (for example, Stax Connect). The SaaS provider integrates capabilities like merchant onboarding, payment acceptance, processing, and reporting directly into its product.
This allows users to accept payments without setting up a separate system or leaving the platform.
The biggest distinction: Who is accepting the payment?
Before comparing your options, start with one simple question: Who actually needs to accept the payment?
SaaS company accepting payments from its own customers
If customers pay your company directly to use your software, you’re mainly solving a billing problem. Think monthly subscriptions, annual plans, upgrades, and add-ons. In this case, a payment gateway paired with the right billing tools may give you everything you need. Your priorities will likely include:
- Accepting multiple payment methods
- Managing recurring billing and subscription payments
- Recovering failed payments
- Keeping payment information secure
- Controlling transaction fees and other payment costs
In this case, payments support your SaaS business, but they aren’t necessarily part of the product you sell.
SaaS customers accepting payments through the platform
The equation changes when your customers need to accept payments from their customers. Say you run software for wellness providers. Your users might want to schedule appointments, manage client profiles, and take payment without jumping between different systems.
That’s where embedded payments can make sense. They can help SaaS platforms:
- Let customers accept payments directly within the software
- Keep payment and transaction data connected to other workflows
- Create a more seamless payment experience
- Simplify merchant onboarding
- Generate additional revenue from payment processing
Here, payments aren’t just supporting your product. They’re part of the product experience.
Payment facilitator vs payment gateway: Where does the PayFac model fit?
A payment facilitator (PayFac) and a payment gateway play different roles, so it’s not exactly an apples-to-apples comparison. A gateway securely passes payment information between systems. A PayFac, on the other hand, lets businesses accept payments as sub-merchants under its broader merchant relationship.
For SaaS companies, the PayFac model can make it easier to offer payments directly within their software. Rather than requiring each customer to establish a separate merchant account, the platform can streamline onboarding and get them set up to accept payments faster. SaaS providers can become registered PayFacs themselves or work with a PayFac-as-a-Service or embedded payments partner that handles much of the underlying infrastructure and risk.
When does a payment gateway make more sense for a SaaS platform?
A payment gateway makes sense when you need to accept payments without turning payments into a core part of your product. If customers pay your SaaS company for subscriptions, upgrades, or add-ons, a gateway can connect your checkout to the payment processing infrastructure you need.
It’s also a practical choice if you already have billing tools in place and simply need a secure way to handle transactions.
For SaaS companies that don’t need to onboard merchants, monetize payment volume, or build payment capabilities into customer workflows, a gateway may offer the simpler path.
When do embedded payments make more sense?
Embedded payments make more sense when your customers need to accept payments through your software. Instead of sending users to a separate provider or payment system, you can make payments part of the workflows they already use.
This approach works particularly well for platforms where transactions happen naturally within the product, such as booking, ecommerce, field service, or property management software.
Embedded payments can also give SaaS companies more control over the payment experience, connect transaction data with other product features, and create opportunities to generate revenue from the payments processed through their platform.
What to look for in a SaaS payment gateway
The right payment gateway should work for your business today without limiting how you accept payments tomorrow.
Payment method support
Customers have different payment preferences, so look for a gateway that supports the methods they actually use. That may include credit and debit cards, Apple Pay, Google Pay, and alternative payment methods. For recurring or future transactions, the gateway should also support tokenization so you can securely store payment credentials without keeping sensitive card details yourself.
Recurring billing capabilities
For subscription-based businesses, recurring billing is a must. Look for support for automated subscription payments, billing schedules, and plan changes. Strong recurring billing tools should also help recover failed payments through automated retries or dunning when a card expires or a customer has insufficient funds.
Security and fraud prevention
Your payment gateway handles sensitive payment information, making security a key consideration. Look for encryption, tokenization, PCI DSS compliance capabilities, and built-in fraud detection tools.
Integration and developer experience
A gateway is only useful if you can make it work with your platform. Review its APIs, SDKs, documentation, and available integrations. Your developers should be able to integrate payment processing without unnecessary complexity and connect payment functionality with the workflows that matter to your users.
Pricing
Compare the full cost, not just the advertised transaction fee. Providers may charge transaction fees, monthly fees, gateway fees, or other costs. Also consider whether pricing changes as your transaction volume grows.
Reliability and payment performance
Payments need to work when customers are ready to pay. Consider uptime, scalability, authorization performance, and how the provider handles failed payments. The gateway should continue delivering secure, efficient transactions as your payment volume increases.
What to look for in an embedded payments partner
Your embedded payments partner will handle a significant part of the infrastructure behind your payment experience, so choose one that fits both your product and business model.
Merchant onboarding and support
Look at how quickly and easily customers can get set up to accept payments. Ask who handles underwriting, verification, merchant support, disputes, and other issues once customers start processing transactions.
Payment capabilities
Consider the payment methods and currencies the partner supports, along with recurring payment capabilities if subscriptions are part of your customers’ businesses. The underlying infrastructure should also scale reliably as your platform adds merchants and processes more transactions.
Security and risk management
Get clear on who handles PCI compliance, fraud detection, chargebacks, and risk monitoring. More importantly, understand where your responsibilities end and your partner’s begin. Those lines should be clearly defined from the start.
APIs, data, and reporting
Review the partner’s APIs, developer tools, and documentation to see how easily payments can fit into your existing product. You’ll also want access to useful transaction data and reporting, both for your own team and the merchants using your platform.
Pricing and revenue
Finally, understand the economics. Compare processing costs, platform fees, and any other charges against the revenue-share or monetization opportunities available to your SaaS business. Consider how that structure changes as your transaction volume grows.
Choosing the right payment approach for your SaaS platform
Payment gateways and embedded payments solve different needs. If you primarily need to collect payments from your own customers, a gateway may be enough. If your customers need to accept payments through your software, embedded payments can make transactions a more natural part of the product experience. Ultimately, the right approach depends on your business model, payment needs, and the experience you want to create for your customers.
If you’re ready to start monetizing your platform with embedded payments, get in touch with the experts at Stax Connect below.
