Embedded Payments Revenue Share Explained
A straightforward explanation of how payment revenue share works and what software platforms should examine in the agreement.
What embedded payments revenue share means
Revenue share is a commercial arrangement in which a software platform receives a portion of the economics generated by payment processing. The platform brings merchant relationships, product distribution, or transaction volume; the processor provides acquiring, underwriting, settlement, technology, and operational support.
The share can be expressed as a percentage of net revenue, as economics above a defined buy rate, or through another negotiated formula.
Gross revenue is not the same as net revenue
A merchant may pay a processing rate that includes interchange, network assessments, processor costs, gateway costs, and margin. Revenue-share agreements usually apply to a defined portion of the remaining economics—not the entire amount collected from the merchant.
That is why the contract’s definition of net revenue matters more than the headline percentage.
Example of a net-revenue model
Suppose the processor calculates $10,000 of net payment revenue from the ISV’s merchant portfolio for a month and the contract provides the ISV with 30% of that defined amount. The ISV would receive $3,000 for that period. If volume and net revenue grow, the payment income grows with it.
This is only an illustration. Actual economics depend on merchant pricing, interchange mix, fees, costs, refunds, chargebacks, and the specific contract.
Contract terms to review carefully
- Exact definition of net revenue and permitted deductions
- Revenue-share percentage or buy-rate schedule
- Reporting frequency and transparency
- Merchant ownership and non-solicitation terms
- What happens after termination
- Pricing authority and approval rights
- Portability or migration rights
- Treatment of refunds, chargebacks, reserves, and losses
Revenue share should support adoption
The highest percentage is not automatically the best deal. Revenue depends on how many merchants actually board, activate, remain processing, and grow. Strong onboarding, underwriting fit, product usability, and merchant support can be more valuable than a higher percentage attached to a program that is difficult to scale.
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