Not long ago, a concrete company and a takeout restaurant could end up running their business on the exact same software. Systems built for everyone, in practice, worked perfectly for no-one—and bending them to fit the realities of a small business was often frustrating or simply impossible.
Vertical software-as-a-service (SaaS) solutions emerged to solve this problem, quickly evolving from the exception to the norm. The reasons for this growth are largely self-evident: vertical SaaS enables rapid implementation with minimal customization. In many cases, merchants feel these platforms are built for their business rather than retrofitted to it. However, the operational benefits of SaaS are diminished if payments aren’t integrated into the solution.
In a recent PaymentsJournal podcast, Brad Pinneke, Head of Enterprise Development at Worldpay, now Global Payments, and Don Apgar, Director of Merchant Payments at Javelin Strategy and Research, discussed how embedded payments have become a critical driver of vertical SaaS—a synergy that will only strengthen as new trends and technologies reshape the landscape.
The Case for Embedded Payments
One of the most notable aspects of the rise of vertical SaaS is that it has largely been market-driven. Adoption has accelerated as industries not typically known as early adopters—such as healthcare, construction, and financial services—have come on board, despite heavy compliance and consumer protection requirements.
With the advantages of vertical SaaS now well established, these platforms will continue gaining traction and carving out new niches.
“POS systems were so generic that everybody had to customize it, and most merchants were finding that that customization wasn’t possible because the platform didn’t support the features that they needed for their business,” Apgar said. “Now that these features are being identified, it’s created these micro-markets for POS platforms to be focused on the needs of specific business types, and payments are part and parcel with that.”
Payments are a logical addition, given that vertical SaaS solutions increasingly encompass nearly every aspect of a small business. A pizzeria’s platform, for example, may manage everything from payroll to inventory.
Yet few functions are as mission-critical as payments. This is why embedded payments and vertical software are increasingly in lockstep. By embedding payments directly into workflows, businesses can complete transactions at the exact moment a customer is ready to pay—whether when a service is completed or a product is purchased.
“I’ll give you a great example from the last couple of years: field services,” Pinneke said. “In the past, the tech used to complete the job and then the office staff would send an invoice and the payment would arrive weeks later. Then, they have to reconcile that payment, take it to the bank, and cash flow was unpredictable.”
“Fast forward to today, where embedded technology comes into play,” he said. “The job is marked complete, the payment is scheduled instantly, the receipt is automatically sent out, and the funds are settled predictably. You’re limiting the back-office intervention, which has huge impact to smaller businesses.”
Automatic, Not Forensic
One of the benefits of vertical SaaS solutions is the ability to deliver holistic business insights through a unified dashboard. Embedded payments extend this value far beyond checkout.
“The embedded impact is that things like payouts and fees and balances are visible alongside operational metrics,” Pinneke said. “In the past, you had the system of record showing one thing and then you had a payments portal showing something else and the reconciliation between those was tough.”
“That’s a big part of it today—it’s automatic, not forensic,” he said. “Forensic was such a big part of small business challenges; they just didn’t have time. Now, the reporting reflects reality, not just an estimate, and that’s critical for businesses today.”
When implemented correctly, this seamless integration can improve cash flow while streamlining the customer experience.
However, these gains depend on thoughtful placement within the platform. Payments should not exist as a separate or disjointed process; instead, sales, onboarding, and customer experience should reinforce a single, cohesive journey.
Equally important is timing. Successful platforms introduce payments early in the customer lifecycle. Too often, organizations treat payments as an afterthought—only addressing them once users are trained and ready to deploy the solution.
In short, platforms that succeed with embedded payments don’t position them as a value-add—they treat them as critical infrastructure that completes the workflow.
“When POS evolved into vertical SaaS, it wasn’t uncommon for the merchant to say, ‘I’m going to shop for my software and now I’m going to shop for my payment solution,’” Apgar said. “Successful SaaS providers have figured out that it’s not a check-the-box optional feature. A lot of what’s driving the move toward embedded finance is that the vertical SaaS software is enabling a single source of truth database—starting with payments and eventually evolving into supplier payments and other functions that work off that same data set.”
“It’s critical to the functionality of the system to drive off that single data set to have payments embedded in the SaaS solution,” he said. “The SaaS company has to embrace that and make that part of the go-to market strategy. It’s not a bolt-on or an add-on, it’s core to the function of the platform.”
The Time Resource
Merchants and platforms that embrace embedded payments as a core component of vertical SaaS will be better equipped not only for today’s challenges but also for a future shaped by artificial intelligence.
“For the SMB that is the typical vertical SaaS user, AI is going to be a game changer,” Apgar said. “The most critical resource in the life of the business owner is time. With the centralized dataset within the vertical SaaS platform, the common option has been to create dashboards. So, we create marketing dashboards and payment dashboards and cash flow dashboards and say, ‘Here’s all the information that the business owner needs.’”
“The bottom line is the business owner doesn’t have time to sit there and sift through all this,” he said. “That’s what AI does best, it manages large volumes of data to impute trends and make recommendations.”
AI-driven decisioning is especially valuable at key points in financial workflows where human intervention can be slow and costly—such as determining whether funds should be released.
Rather than relying on manual review, AI can sift and analyze vast datasets to flag suspicious or high-risk transactions, then approve, deny, or delay them accordingly. This helps financial institutions meet growing demands for real-time transactions while maintaining strong fraud protections.
AI also plays a crucial role in payments orchestration, selecting the optimal payment rail based on factors like cost or efficiency. As new payment methods emerge, AI will become increasingly central in determining the best route for each transaction.
From Reactive to Proactive
Ultimately, AI is shifting organizations from reactive reporting to proactive insights. Historically, businesses often accessed key data weeks or months after the fact. Today, AI can process information in real-time, transforming areas such as predictive risk assessment and exception handling.
These efficiency gains also create opportunities for cost reduction, including areas that directly impact merchants’ bottom lines.
“AI feels like back when reliable internet became available, it’s such a driving force today,” Pinneke said. “The number one thing I get asked is ‘How do we handle chargebacks?’ If you look at AI, there is probably the greatest opportunity to let AI engines figure out the chargebacks in real time and deal with them.”
“If you think about the entire process, it’s essentially broken,” he said. “People dispute something, it comes back, and the merchant and retailer has to go and collect data and show proof and all of that,” he said. “Imagine if AI tools did more of the upfront work. We would probably see a lot less chargebacks, and that turns into real dollars. That’s probably the number one place where AI is making a difference for everybody up and down the food chain.”
