How Adjacencies Are Defining the New Margin in Embedded Payments

The story of payments innovation is, at its core, a story about margin.

From the early days of merchant acquiring to the rise of mobile wallets, each breakthrough opened a new avenue for value creation. Until, one day, it didn’t.

As with most innovations, what typically begins as a lucrative arbitrage opportunity for early adopters inevitably matures into a crowded, commoditized space where take-rates collapse, customer expectations rise and the once-fat margins shrink to razor-thin slivers.

That cycle is potentially on the cusp of playing out again in embedded payments. Once hailed as the golden differentiator for software companies, embedding payments into a platform has now become a requirement rather than a revelation.

That ubiquity has a cost. As adoption widened, differentiation narrowed. Margins began to compress under the dual pressures of rising customer expectations and declining willingness to pay for what had become a baseline feature.

The question now confronting CFOs, finance teams and product leaders is no longer whether to embed payments, but how to extract durable margin from a capability that is becoming table stakes.

Read more: Nine Payments Execs Weigh In on the Impact of Value-Added Services on Growth

Embedded Payments Move From Breakthrough to Baseline

Embedded payments rose to prominence in the late 2010s when vertical SaaS platforms discovered they could integrate payments directly into their workflows. A gym management app could let customers pay for memberships without leaving the app; a property management system could collect rent with a single click.

The allure was irresistible. Payments provided a new revenue stream, often doubling or tripling per-customer economics, while also deepening product stickiness. The take-rates were attractive, hovering around 2.5% to 3% in many markets. Early adopters built formidable businesses on the back of integrated payments.

But the success invited competition, and commoditization does not simply flatten take-rates; it raises the cost of entry. Platforms today must invest heavily in compliance, risk management and customer support to maintain payments capabilities that their users now take for granted.

Recent marketplace news reveals the onslaught of action happening in the embedded space as companies look to acquire and integrate solutions. On Sunday (Sept. 7), Aiwyn acquired QuickFee’s U.S. payments business to add new capabilities to Aiwyn’s payments and collection platform for accounting firms.

Separately, payments and FinTech company Fiserv last week (Sept. 4) acquired CardFree and will integrate that company’s order, payment and loyalty solutions for enterprise merchants.

The most promising answers to the question of where else platforms can turn to capture margin may lie in the adjacencies, services that are enabled by, but not limited to, payment rails. Each transaction creates a byproduct of data, trust and liquidity that can be harnessed for new, higher-margin offerings.

Embedded payments platforms are uniquely positioned to underwrite credit. They see real-time transaction data, giving them an information edge over traditional lenders. And as fraud grows more sophisticated, businesses are increasingly willing to pay for advanced detection and prevention.

Meanwhile, payments create liquidity flows that can be optimized. Platforms that manage funds in transit can capture spread by offering features like instant payouts, yield-bearing accounts or even cross-border treasury solutions.

Perhaps the least glamorous but most sticky adjacency is data. Platforms that can analyze transaction flows to help merchants optimize pricing, forecast demand or identify churn risk can create defensible revenue streams beyond the margin of payment processing itself.

See also: Picking the Optimal Payment Mix for B2B Growth

Moving Up the Value Chain in Payments

The strategic playbooks emerging can be grouped into a few archetypes.

Some platforms are becoming financial supermarkets, bundling a full suite of services from payments to lending to insurance. Others are doubling down on vertical specialization, offering tailored financial workflows for industries like healthcare or construction. A third path is infrastructure ownership, where platforms seek to build or control enough of the financial stack to capture margin that would otherwise leak to partners.

Each path carries risk. Supermarkets can become unwieldy, vertical plays may cap total addressable market, and infrastructure bets demand heavy upfront capital. But the common thread is clear: margin will accrue not to those who simply process transactions, but to those who intelligently expand beyond them.

The momentum is clear: businesses are embracing embedded and digital payment solutions. The PYMNTS Intelligence report “Virtual Mobility: How Mobile Virtual Cards Elevate B2B Payments” found that virtual cards and mobile wallets are helping firms wrestle back control over cash flow and late payments. Eighty-two percent of merchants said they will expand use of digital wallets in 2025.

The companies that could be most likely to sustain superior economics may be those that successfully layer higher-margin financial services onto their payments base. Industry observers have noted talk centered around “ARPU (average revenue per user) expansion through financial services” rather than “payments attach.” The market is shifting from excitement over gross payment volume to scrutiny of net revenue retention driven by adjacencies.