A third party payment gateway connects your software to a processor, but each merchant manages their own processing account. That makes a gateway simpler to launch, though the merchant relationship and payments revenue stay outside your platform. Embedded payments build processing into your software, giving you control over onboarding, checkout, and revenue. A gateway works best when payments are secondary, and embedded payments work best when payments are central to your product.
What Is a Third Party Payment Gateway?
A third party payment gateway is an outside service that securely captures payment details inside your software and passes them to a payment processor for authorization. A separate company owns and runs the gateway, and each merchant typically holds their own processing account that the gateway connects to.
How a Third Party Gateway Works Inside a Software Platform
In a typical third party gateway setup, your software includes an integration with one or more gateways. Each merchant signs up for processing on their own, either with the gateway provider directly or with a processor the gateway supports. The merchant then enters their gateway credentials, usually an API key, into your platform’s settings, and transactions start flowing.
From that point on, your software triggers the payment, but the processing relationship belongs to the merchant and their provider. Pricing, underwriting, funding schedules, and payment support all happen outside your platform. That separation keeps your team out of the payments business, and it also keeps you out of the economics and the merchant experience that come with it.
What Are Embedded Payments?
Embedded payments are payment processing built directly into a software platform, so merchants can sign up, accept payments, and manage their funds without leaving the product. The software company offers payments as its own feature, while a payments partner, or the ISV itself, handles processing, underwriting, and compliance behind the scenes.
With a third party gateway, merchants leave your platform to set up processing. With embedded payments, they never have to. That difference changes who owns the merchant relationship, who controls the payment experience, and who shares in the revenue every transaction generates.
ISVs can offer embedded payments by becoming a registered payment facilitator (PayFac) or by working with a payments partner that handles underwriting, compliance, and risk on their behalf.
Third Party Gateway vs. Embedded Payments: Key Differences
The biggest differences between the two models come down to ownership of the merchant relationship, the experience, and the revenue.
Merchant Onboarding
- Third party payment gateway: The merchant applies with the gateway or processor outside your software.
- Embedded payments: The merchant applies inside your software through a branded onboarding flow.
Merchant Relationship
- Third party payment gateway: The merchant and their payment provider own the relationship.
- Embedded payments: Your platform owns the relationship, with your payments partner supporting it behind the scenes.
Payments Revenue for the ISV
- Third party payment gateway: Your platform typically earns nothing, or a referral fee where a provider offers one.
- Embedded payments: Your platform earns revenue share on processing volume, structured with your payments partner.
Checkout Experience
- Third party payment gateway: Checkout often happens through a redirect or hosted page, depending on the gateway.
- Embedded payments: Checkout is native to your product and consistent with your interface.
Support Ownership
- Third party payment gateway: Support is split between your team and the merchant’s provider.
- Embedded payments: Support is coordinated through your platform and your payments partner.
Reporting and Data
- Third party payment gateway: Payment data lives in the provider’s portal, separate from your software.
- Embedded payments: Payment data lives in your platform alongside your operational data.
Time to Launch
- Third party payment gateway: Launch is usually quicker because merchants handle their own processing setup.
- Embedded payments: Launch time varies by model, and a managed partner launch is typically faster than becoming a PayFac.
In short, a third party gateway lets you add payments with minimal involvement, while embedded payments make payments part of what your platform owns and earns from.
When Does a Third Party Payment Gateway Make Sense?
A third party gateway is still the right choice for some platforms, especially when payments play a smaller role in the product. If any of the situations below describe your business, a gateway may serve you well for now.
- Your product is early stage. While you are still finding product-market fit, a gateway lets you accept payments without committing to a payments strategy before you understand your merchants’ needs.
- Processing volume is low. If your merchants process modest volume, the revenue opportunity from embedded payments may not yet justify the work of launching it.
- Payments are not central to your workflow. Some software supports only occasional transactions. When payments sit at the edge of how customers use your product, keeping them outside the platform can make sense.
- Your merchants insist on keeping their own processor. In some verticals, merchants have long-standing processing relationships or negotiated rates they do not want to give up. Supporting the gateways they already use removes a barrier to adoption.
Many platforms start with a gateway and revisit the decision as they grow. The key is knowing which signals tell you it is time to make that move.
Signs Your Platform Has Outgrown a Third Party Gateway
These signals tend to show up gradually. If several of them sound familiar, embedded payments are likely worth a serious look.
- Merchants keep asking you for payments help. When merchants contact your team about declined cards, funding delays, or rate questions, they already see payments as part of your product, even though you do not control it.
- Support tickets bounce between vendors. Your team tells merchants to call their processor, the processor points back to your software, and the merchant is stuck in the middle, which can erode confidence in your platform.
- Reconciliation is a recurring headache. Payment data lives in one system while invoices, orders, or appointments live in yours. Merchants spend time matching them up by hand, and the frustration lands on your product.
- Competitors are bundling payments. When competing platforms offer built-in payments, prospects start comparing your setup against a simpler, all-in-one experience.
- Payments revenue is going to someone else. Every transaction your software enables generates processing revenue, but with a third party gateway, your platform typically does not share in it. Embedded payments open the door to payment monetization, where your platform earns a portion of that revenue.
- Onboarding stalls at the payments step. New merchants who must set up processing elsewhere before going live may delay or drop off, which slows activation.
- Your roadmap needs more control. If you want to offer faster payouts, unified reporting, or features built on transaction data, a third party gateway limits what you can build.
Recognizing these signs early gives you time to evaluate partners carefully before a switch becomes urgent. That matters because the fastest integration is not always the right one. ISVs that choose a payments partner on speed alone often find the gaps later, when pricing that worked at low volume starts compressing margins or a ticket-based support model leaves them waiting during a production issue. By then, switching means re-onboarding every live merchant, so the decision is far easier to get right the first time.
Frequently Asked Questions
Is a payment gateway the same as a payment processor?
No, they do different jobs. A payment gateway captures and securely transmits payment details from your software, while a payment processor moves the transaction through the card networks and handles authorization and settlement. Some providers offer both in one product, which is why the terms are often confused.
Can a software company earn revenue from payments through a third party gateway?
In most cases, the software company earns little or nothing from processing through a third party gateway. Some gateway providers may offer referral or reseller programs, but the processing relationship and its economics usually belong to the merchant and their provider. Embedded payments models are typically designed to give the software platform a share of payment revenue.
Do I need to become a PayFac to offer embedded payments?
No, becoming a registered PayFac is only one option. Many ISVs offer embedded payments by working with a payments partner instead. The partner can handle things like underwriting, compliance, and risk, while the ISV earns revenue share and keeps a branded merchant experience.
Can I switch from a gateway to embedded payments without disrupting existing merchants?
With careful planning, ISVs can usually make the switch with minimal disruption. Existing merchants generally need to complete new onboarding, so ISVs can start by offering embedded payments to new merchants and then migrate existing ones in phases. A payments partner with ISV migration experience can help sequence the move so processing continues smoothly.
How Celero Fusion Supports ISVs
Celero Fusion is an embedded payments platform built for integrated software vendors. Fusion lets software companies offer payments inside their own product and earn revenue share without becoming a payments company, and every ISV works with a dedicated team that knows their business.
If your platform is weighing a third party payment gateway against embedded payments, the Fusion team can help you compare both paths based on your merchants and your growth plans. Contact us to start the conversation.