The Future of Embedded Payments: Why Licensing-as-a-Service is the Next Strategic Lever

As software platforms evolve into central hubs for commerce, the relationship between payments and the digital experiences they enable is undergoing a profound transformation. No longer an afterthought, payments are becoming a core feature of software itself, seamlessly embedded, deeply integrated, and increasingly owned by the platforms that use them. But ownership comes with complexity.

For many independent software vendors (ISVs), the journey from referral partner to full payment facilitator (PayFac) is fraught with barriers: high capital requirements, lengthy licensing timelines, and the operational demands of building out risk, compliance, and settlement infrastructure. For years, this has limited the ability of platforms to take control of their payments experience. However, that’s beginning to change.

At the heart of this shift is a new model: Licensing-as-a-Service. It’s a modular approach that gives platforms and fintechs a way to progressively assume more responsibility and value across the payments stack, without having to build everything themselves from day one.

Modular Journeys, Not Binary Choices

In the past, platforms had to make a binary choice: become a full PayFac or stay a referral partner. But increasingly, we're seeing companies ask, “What’s the next step I can take toward owning the experience?”

That might mean moving from a referral model to an ISO (Independent Sales Organisation) setup, where they manage customer relationships but still rely on a licensed acquirer. Or it could mean taking on underwriting and contract management in a PayFac-lite model before fully assuming licensing and scheme relationships.

These modular journeys allow for flexibility. They reflect the reality that not every business has the same scale, appetite for risk, or engineering capacity but many share the same ambition: to own more of the value chain.

Why Embedded Payments Matter Now

What’s driving this momentum? Three converging trends.

Firstly, the customer experience imperative. Platforms don’t want fragmented onboarding or inconsistent support across the payment journey. They want to deliver unified experiences where payment setup is as intuitive as any other feature.

Secondly, the commercial opportunity. Owning the merchant relationship, whether through PayFac models or BIN sponsorship, unlocks new revenue streams, pricing flexibility, and ultimately enterprise value.

Thirdly, competitive necessity. As embedded payments become the norm, platforms that don’t evolve risk being disintermediated by those that do.

A few years ago, a large retail platform I spoke with decided against becoming a PayFac due to the investment required. Fast forward to today, and the conversation has changed. It’s not about if they want to own more of the experience, but how they can get there without derailing their roadmap.

The Shift from Processor to Partner

This shift isn’t just about technology but about changing roles in the ecosystem.

We’re seeing ISVs act more like acquirers. Processors are thinking more like infrastructure enablers. Payment providers are being asked not just to process transactions but to become growth partners, offering compliance, licensing, and even scheme connectivity as services.

And with ISVs expected to control up to 70% of merchant acquisition within the next few years, this redistribution of power and responsibility will only accelerate.

This raises important questions:

• Should a platform seek its own licences, or partner with someone who already holds them?
• What functions are best kept in-house, and what can be safely outsourced without losing control?

There’s no single answer, but the industry is clearly moving away from rigid models and toward more collaborative, layered ones.

Looking Ahead: Licensed Services at the Core

As we look toward the future, I believe that licensing-as-a-service will become a central component of how platforms scale payments. Not because it’s a shortcut but because it aligns incentives. It allows ambitious software companies to move faster, control more of their user journey, and bring payments closer to the heart of their business model, without taking on unnecessary risk too early.

But this model only works if it’s built on trust. As a licensed acquirer, the responsibility doesn’t disappear when someone else uses your infrastructure. If anything, it increases. Risk and compliance are non-negotiable, and any offering that helps others scale must be built on a foundation of operational maturity and regulatory rigour.

In five years, I believe many payment businesses will look more like infrastructure enablers than transaction processors. The value won’t lie in the payments themselves, but in how flexibly and safely they can be delivered to others.

For platforms, the future of embedded payments is about defining their role in the commerce ecosystem. And for those ready to take that step, a modular path to licensing could be the most strategic move they make.