PSPs Don't Lose to Other PSPs. They Lose to Software.
The traditional PSP competitive landscape looks like this: Stripe vs Adyen vs Worldpay vs Checkout.com. Product features, pricing, geographic coverage, developer experience.
But that's not where PSPs are actually losing deals.
PSPs lose deals when a software platform — an ERP, a contact centre, a booking engine, an insurance platform — embeds a competitor's gateway as the default. The merchant never evaluates PSPs directly. They use whatever their software provides.
The shift: Payment decisions are moving from merchants to software platforms. The platform picks the PSP. The merchant follows.
This isn't a future trend. It's happening now:
Shopify routes the majority of its merchants through Shopify Payments (powered by Stripe)
Toast processes restaurant payments through its own stack
ServiceTitan embeds payments into field service workflows
INSTANDA embeds payments into insurance platform workflows
In every case, the PSP that's embedded in the software wins the volume. The PSPs that aren't embedded don't even get evaluated.
The Distribution Problem
Every major PSP recognises this shift. Their strategy decks include "platform partnerships" and "ISV distribution" as growth priorities.
But execution is hard:
1. Custom Integrations Don't Scale
A PSP that wants to be embedded in 50 software platforms needs 50 custom integrations. Each platform has its own API design, onboarding flow, compliance requirements, and settlement process. Building and maintaining these integrations is expensive and slow.
Most PSPs can resource 3-5 direct platform integrations per year. The platforms that don't make the cut get a generic API and a "figure it out yourself" developer portal.
2. Platforms Want PSP Choice, Not PSP Lock-In
Enterprise software platforms increasingly resist single-PSP lock-in. Their customers demand specific PSPs based on geography, existing contracts, and compliance requirements.
A platform that embeds only Worldpay loses deals where the merchant requires Adyen. A platform that embeds only Stripe can't serve enterprise customers with mandated regional acquirers.
The platforms that win enterprise deals offer PSP flexibility. That means supporting multiple PSPs — which is the opposite of what any individual PSP wants.
3. New Payment Channels Need New Infrastructure
Platforms are expanding beyond online checkout into voice payments, payment links, AI agent payments, and pay-by-bank. Each channel needs payment infrastructure.
Most PSPs cover checkout and mobile well. Few cover voice. Fewer cover AI agent payments. None cover all channels through a single integration.
For PSPs, this creates a gap: even if you're embedded in a platform's checkout flow, you might not be embedded in their voice, links, or AI agent channels.
The Distribution Layer Model
Instead of building custom integrations with every platform, PSPs can get distribution through a payment layer that's already embedded in those platforms.
How it works for the PSP:
The payment layer integrates with software platforms. One integration per platform, maintained by the payment layer provider.
The PSP integrates with the payment layer. One integration that gives the PSP access to every platform connected to the layer.
When a merchant on any platform chooses (or is configured for) that PSP, transactions route automatically. No additional integration work for the PSP or the platform.
New channels (voice, links, AI) are handled by the payment layer. The PSP receives transactions through those channels without building channel-specific infrastructure.
The maths: Instead of building 50 platform integrations, the PSP builds 1 integration with the payment layer and reaches 50 platforms. Each new platform the payment layer onboards is additional distribution for every connected PSP.
What PSPs Gain Through a Distribution Layer
1. Access to Platform-Embedded Volume
Every platform connected to the payment layer is a potential distribution channel. When a merchant on that platform selects your gateway — either by choice, by mandate, or because your rates are best for their region — transactions flow to you automatically.
This is volume you'd never see through direct merchant acquisition, because the merchant's payment decision was made at the platform level.
2. Enterprise PSP Mandate Capture
Enterprise merchants frequently mandate their PSP. "We use Worldpay. Whatever software we adopt needs to process through Worldpay."
Through a distribution layer, these mandates become automatic routing. The platform configures the merchant's required PSP, and transactions route there. For PSPs with strong enterprise relationships, this turns mandates into embedded volume.
3. Multi-Channel Reach
The payment layer handles voice, links, chat, and AI agent channels. Transactions from these channels route to the configured PSP — giving the PSP volume from payment surfaces they don't support directly.
A PSP that doesn't have voice payment infrastructure still receives voice-originated transactions through the payment layer. The same applies to AI agent payments, payment links, and any new channel the payment layer supports.
4. Reduced Integration Burden
Every platform integration a PSP builds directly requires ongoing maintenance — API updates, compliance changes, testing, support. Through a distribution layer, the PSP maintains one integration. The payment layer handles the platform-facing complexity.
The Strategic Question for PSPs
PSPs that embed directly in platforms gain deeper control and typically higher margins. PSPs that distribute through a payment layer gain broader reach with lower integration cost.
The optimal strategy depends on scale:
PSP Size | Direct Integration | Distribution Layer |
|---|---|---|
Top 5 global (Stripe, Adyen, Worldpay, Checkout.com, PayPal) | Can resource direct integrations with top 20-30 platforms | Still can't resource the long tail of 1,000+ niche platforms |
Mid-tier (Mollie, GoCardless, Square, regional acquirers) | Can resource 5-10 direct integrations per year | Distribution layer extends reach to platforms they can't resource directly |
Regional / niche (local acquirers, specialist processors) | Struggle to get any platform integrations | Distribution layer is the only viable path to platform-embedded volume |
For most PSPs, the answer is both: direct integrations with the highest-value platforms, plus distribution layer coverage for everything else.
Why This Matters Now
1. Platform Payments Volume Is Growing Exponentially
Embedded finance is projected to reach $7.2 trillion by 2030. An increasing share of total payment volume flows through software platforms rather than direct merchant relationships.
PSPs that aren't embedded in platforms will see their addressable market shrink — not because they're losing merchants, but because merchants are making fewer direct PSP decisions.
2. AI Agents Are Creating New Payment Surfaces
AI voice agents and chat agents are processing payments in production. These are entirely new payment channels — they didn't exist two years ago.
PSPs that don't have infrastructure for AI agent payments can still capture this volume through a payment layer that does.
3. Geographic Expansion Requires Local Rails
Platforms expanding internationally need PSPs with local acquiring in each market. No single PSP covers every geography competitively. The platforms that support merchant-chosen PSPs (via a payment layer) give regional acquirers access to volume they'd never see through direct sales.
FAQ
Does using a distribution layer mean the PSP loses its merchant relationship?
No. The PSP still has a direct contractual and financial relationship with the merchant. The payment layer handles transaction routing and multi-channel support, but the PSP relationship (rates, settlement, support) remains direct.
What about PSPs that want to own the full stack?
Some PSPs (notably Stripe and Adyen) are building vertically — owning the platform solution end-to-end. This works for merchants happy to standardise on that PSP. It doesn't work for enterprise merchants who mandate a different PSP or platforms that need PSP flexibility. Both models will coexist.
How does pricing work for the PSP?
The PSP charges its standard processing fees. The payment layer charges separately (to the platform). The PSP doesn't subsidise the payment layer — it gains distribution that would otherwise require direct platform integration.
Can a PSP be on both sides — embedded directly AND in the distribution layer?
Yes. Most large PSPs will have direct integrations with their top platform partners and use distribution layers for broader reach. These aren't mutually exclusive.
Related Reading
How Platforms Monetise Payments Without PSP Lock-In — the platform-side view of embedded payment revenue
When Your SaaS Outgrows Stripe Connect — why platforms are moving to multi-PSP architecture
Agentic Payments in 2026: The Infrastructure Guide — AI agents are creating new payment surfaces PSPs need to reach
Shuttle vs Adyen for Platforms — why even Adyen can't serve all merchants across all geographies
What is a PSP? | What is PSP-Neutral? | What are Embedded Payments?
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