Why the journey matters more than the destination
Vertical SaaS companies don't arrive at mature embedded payments programs — they evolve toward them. The evolution follows a recognizable pattern, and understanding where you are in that pattern determines which decisions are in front of you and which are behind you.
Most SaaS companies enter this journey at Stage 1 without a map. They discover Stage 3 exists only after spending years at Stage 2 wondering why their payments economics don't match what they read in fintech newsletters. This post is the map.
Stage 1: Collecting payments from customers
The SaaS company accepts card payments or ACH from its own customers for SaaS subscriptions, service fees, or software licenses. Stripe is the typical implementation. The economics are simple: the company pays a processing fee and receives net revenue. There is no embedded payments program — this is payment acceptance.
What Stage 1 looks like: Stripe dashboard, 2.9% + $0.30, monthly subscription billing, occasional failed payment recovery. The SaaS company is a merchant, not a payment program operator.
Economics: negative. The company pays processing fees rather than generating payment revenue. The payment function is a cost center.
Who owns what: Stripe owns everything. The SaaS company owns nothing except the customer relationship and the SaaS product.
Stage 2: Facilitating payments between parties
The SaaS company has customers who pay other parties through the SaaS platform — a marketplace model, a platform that facilitates supplier payments, a workflow tool where the payment is part of the process. The SaaS company is no longer just accepting payment from its customers — it is facilitating payment between its customers and their counterparties.
What Stage 2 looks like: Stripe Connect or a PayFac arrangement, marketplace payouts, some form of revenue share or transaction fee. The company is earning something on payments — usually a flat fee or a small percentage — but the economics are not optimized. The platform is earning referral-level economics on program-level volume.
Economics: marginal positive. The company earns transaction fees or a small revenue share — typically 5–20 basis points — while the payment infrastructure captures the majority of the economics.
Who owns what: the payment infrastructure (Stripe, the PayFac, the BaaS provider) owns the bank relationship, the interchange economics, the compliance framework, and the product decisions. The SaaS company owns the customer relationship and the workflow. The company is a distribution partner for the payment infrastructure's program.
The Stage 2 trap: many SaaS companies stay at Stage 2 indefinitely because the economics are positive and the operational overhead is low. The cost is not visible — it is the economics they are not capturing on volume they have. At $5M monthly facilitated volume, the difference between Stage 2 economics (10–20 bps) and Stage 3 economics (80–120 bps) is $300,000–$500,000 annually.
Stage 3: Owning payments in the workflow
The SaaS company has made deliberate decisions about its payments program — program model, bank relationship, compliance framework, economics design — and now captures meaningful payment economics as a direct result of those decisions. Interchange flows to the program. Float yield is negotiated. Fee structures are designed. The payments function is a revenue center.
What Stage 3 looks like: a direct bank relationship or a well-structured BaaS arrangement with specific economics terms, interchange-plus pricing, a designed compliance framework, and take rates of 80–120 basis points or higher on card volume. For AP and B2B programs, VCard interchange at 150–250 basis points plus monetized ACH revenue.
Economics: significantly positive. The company captures the majority of economics generated by its payment volume rather than passing them through to the infrastructure.
Who owns what: the SaaS company owns the bank relationship (or has negotiated direct terms with a BaaS provider), the compliance framework, and the economics design. The payment infrastructure owns the technology execution layer. The distribution of ownership is inverted from Stage 2.
What it takes to get from Stage 2 to Stage 3: a deliberate program design process, a sponsor bank relationship (6–12 months to establish), a compliance infrastructure build, and an economics negotiation. The investment is real. At meaningful volume, it pays back in under 12 months.
Stage 4: Orchestrating the full payments relationship
The SaaS company has built a full payments infrastructure — card issuing for its customers, disbursement capabilities, float economics, multi-rail orchestration — and the payments program is a product in its own right, not just a feature of the SaaS product. The company competes with standalone fintech programs on payments capability.
What Stage 4 looks like: card issuing programs, embedded lending alongside payments, treasury management for customers, full float economics, multiple payment rails with dynamic orchestration. The SaaS company has effectively become a financial services company within its vertical.
Economics: substantial. The payments program generates revenue that rivals or exceeds the SaaS subscription revenue for some companies. The payment economics are a primary business model driver, not a secondary feature.
Who owns what: the SaaS company owns the full payments program — bank relationship, compliance program, economics design, product decisions, customer relationship. The payment infrastructure provides rails and technology execution. Ownership is maximized.
Most vertical SaaS companies should be targeting Stage 3 with a designed path to Stage 4 elements where the customer workflow justifies them. Stage 4 in its entirety requires investment and operational complexity that only makes sense at significant scale.
Knowing which stage you're at — and what the next one requires
The most common mistake: SaaS companies at Stage 2 believe they are at Stage 3 because they are earning some payment revenue. The test is not whether payment revenue exists — it is whether the economics design is deliberate. If you don't know your take rate, don't know your bank's revenue share terms, and don't have a compliance program you designed, you are at Stage 2 regardless of how the payment revenue line looks on your P&L.
Not sure which stage your payments program is at? The leakage calculator can help you estimate the gap between your current economics and Stage 3. Or talk with us directly.