How do software companies make money from payments?
Software companies make money from payments by embedding payment acceptance in their product: their customers become the merchants, and the platform keeps part of the fee each merchant pays per transaction. That fee splits four ways — interchange to the card-issuing bank, assessments to the card networks, a markup to the processor, and the remainder to the platform. What the platform keeps depends on the model: referral deals keep the least, PayFac-as-a-service keeps the spread while a vendor handles compliance, and a full payment facilitator keeps the most and bears the most risk. The metric is net take rate.
Reviewed by Jane Podbelskaya · last reviewed 2026-07-28 · how we produce answers
The platform sits in the middle of the transaction
Software companies make money from payments by enabling their customers to accept payments from their own end-customers. A field-services platform helps contractors schedule jobs, adds invoicing, enables in-app payment links — then processes those payments natively and captures a share of every dollar that flows through. In the guide’s worked example, that share is 50 basis points on every dollar, which at scale becomes a nine-figure revenue stream built on an existing customer relationship with near-zero incremental customer acquisition cost. The full mechanics live in the introduction chapter of the embedded payments guide.
The direction of value is the key distinction: your customers (the restaurant, the contractor, the property manager, the gym) are the merchants, and their customers are the payers. Your platform facilitates that exchange and earns from it.
Where the merchant’s fee goes
Every card transaction generates a fee paid by the merchant — the Merchant Discount Rate (MDR). It is not a single number; it is a stack of four layers, each flowing to a different party:
| Layer | Who receives it | Typical rate | Negotiable? |
|---|---|---|---|
| Interchange | Issuing bank (cardholder’s bank) | 1.5%–3.15% + per-item fee | No — set by the networks |
| Network / assessment fees | Visa / Mastercard | 0.13%–0.14% + per-auth fees | No — set by the networks |
| Processor / acquirer markup | The processor or acquirer | 0.10%–0.60% | Yes |
| Platform revenue | The software platform | Residual spread | Yes — the platform sets the sell rate |
On a $100 consumer credit transaction at a 2.90% + $0.30 sell rate, the merchant pays $3.20 in total: $1.90 goes to interchange, $0.16 to network fees, $0.15 to processor markup — and $0.89 remains with the platform. The first two layers are set by the card networks (rates per the schedules effective October 2025 for Visa and April 2025 for Mastercard); a platform’s economics live entirely in the last two.
What the platform keeps under each model
How much of that residual a platform keeps depends on which operating model it runs:
| Model | How it works | Share of economics | Risk and burden |
|---|---|---|---|
| Referral / ISO | Resell a third party’s processing; earn a revenue share or residual | Lowest capture | Minimal — the processor owns onboarding and risk |
| PayFac-as-a-service (PFaaS) | Deliver a branded, in-app payments experience on a vendor’s infrastructure | Platform keeps the spread | Vendor handles compliance |
| Full PayFac | Register with the card networks; act as merchant of record for sub-merchants | Highest capture | Platform underwrites merchants, handles settlement, bears risk |
The step between tiers is large: the guide’s economics chapter puts the revenue uplift of moving from a referral/light model to full PFaaS at 4–5x on the same volume — the case for running a vendor RFP around $50M in annual GMV.
Three public and private benchmarks show the spectrum in practice. ServiceTitan (field services) began on an ISO referral model with thin margin and 10–20% adoption, then moved to an embedded PFaaS model; by FY2026 its FinTech take rate had climbed from 22 bps to 29 bps on $82.1B GTV, with an implied 55+ bps fully-attached opportunity still ahead. Toast (restaurant tech) built payments in from day one as a fully integrated PayFac and earns a 50 bps core payments net take rate, with FinTech Solutions at 85% of total revenue in FY2024. Mindbody (fitness/wellness) climbed the ladder from referral to full PFaaS; a typical subscriber pays about $150/month for software plus about $100/month in payment fees — roughly a 66% LTV uplift from the payments overlay.
[Review: Jane] The model-by-model net take-rate ranges by GMV tier (e.g., referral 0–20 bps through full PayFac 100–120+ bps) appear in the take-rate answer page and the benchmarks work, but not in the three chapters this page draws from. Confirm whether to add that range table here with its own citation, or leave the sideways link to the take-rate answer to carry it.
Take rate: the number that measures it
The standard metric is net take rate: net payment revenue (after interchange, network fees, and processor costs) divided by processed volume, expressed in basis points. One basis point is 0.01% — on $100M of volume, 50 bps is $500K of revenue.
The pattern repeats across software categories in public filings: Toast in restaurant tech (50 bps core, 85% of revenue from FinTech Solutions), Bill.com in SMB AP/AR (31 bps on $329.8B TPV, roughly 69% of FY2025 revenue from transaction fees), Lightspeed in retail and restaurant POS (75 bps, 70% of revenue transaction-based), ServiceTitan in field services (29 bps and 25% of revenue in FY2026), and AppFolio in property management (value-added services, led by payments, growing 33% year over year in FY2024). And as of the May 2026 Rainforest study, take rates in vertical SaaS are rising, not falling: 60% of platforms reported take-rate increases over the past two years, against 1% reporting decreases.
When payments is not a revenue line
Not every software company with a payments integration is making money from payments. A SaaS company using a processor to collect its own subscription fees is on the other side of the line: it pays interchange and processing margin out the door, and payments is a cost center, not a revenue line. The economics, organizational design, and regulatory exposure of the two positions are entirely different — and a platform below roughly $10M in annual processable volume will find the referral end of the spectrum keeps little of the economics until volume grows. Knowing which side of that line your platform is on is the foundational decision.
Where to go from here
The introduction chapter is the spine of this answer; the payment economics chapter unpacks the fee stack layer by layer. To size your own opportunity, run the take-rate and unit economics calculator or work through the payments model navigator, and compare providers in the payments vendor database. For the broader category, see What is embedded finance? and, for how to judge the resulting number, What is a good payments take rate for vertical SaaS?
FAQ
Is this the same as using a processor like Stripe for our own subscriptions?
No. A platform processing its own SaaS billing pays interchange and processing margin out the door — payments is a cost center. A platform processing its customers' payments earns from the transaction — payments is a revenue line. They share infrastructure but not business model.
How much do platforms typically earn from payments?
As of the May 2026 Rainforest benchmarking study of vertical SaaS platforms, the median net take rate is 98 bps with a C-suite payments leader, 83 bps with a dedicated leader below the C-suite, and 53 bps with no dedicated payments leader. Vertical medians run roughly 90+ bps for consumer/community platforms, 80 bps for services/healthcare, and 70 bps for B2B/institutional.
Do we have to become a registered payment facilitator to earn payment revenue?
No. Mindbody's path is the common one: referral first, then white-label partnerships, then full PayFac-as-a-service — generating revenue at every step while building internal capability. Full PayFac registration is one end of the spectrum, not the entry requirement.
Sources
- SEC EDGAR 10-K and 10-Q filings (Toast FY2024; Bill.com FY2025; ServiceTitan FY2026; Lightspeed FY2025; AppFolio FY2024) (2025–2026)
- UBS Global Research, Toast: FinTech Net Take Rate Analysis & Core Payments Framework (December 2025)
- Rainforest, 2026 Vertical SaaS Embedded Payments Benchmarking Study (Q1 2026 fielding) (May 2026)
- Visa US Interchange Reimbursement Fee schedule (October 18, 2025); Mastercard US Region Interchange Programs and Rates (April 11, 2025) (2025)