Construction is one of the slowest-paying industries in the U.S. economy, and the cost of that is no longer a rounding error. Rabbet's 2025 Construction Payments Report found that slow and inconsistent payments now function like a hidden 14% tax on projects, costing the U.S. construction market an estimated $299 billion in 2025. General contractors spend an average of 65 hours a month just managing payments to subs and vendors.

For the construction software platforms serving this industry — ERPs, project management tools, field service apps, procurement systems, subcontractor networks — that's not just a customer pain point. It's an opening. The software platforms that embed payments directly into their product don't just help their customers get paid faster. They turn a daily industry-wide frustration into a revenue line of their own.

Here's how construction payment processing actually works, where it breaks down, and what construction software platforms should look for in an embedded payments partner.

Why construction payments are uniquely hard

Unlike retail or e-commerce, where a transaction happens once and closes, construction payments are structured around long projects, milestone-based billing, and layered relationships between owners, general contractors, subcontractors, and vendors. The mechanics that make construction billing work are the same mechanics that make it slow.

Progress billing and retainage

Most construction contracts are paid in phases rather than in one lump sum. Contractors submit a payment application each period showing what percentage of work has been completed, what materials have been stored, and how much is owed. A GC on a $1M job that is 30% complete might bill $300,000 for that period, get reviewed, and then receive payment, often minus retainage.

Retainage is the portion of each payment (typically 5–10%) that is withheld until the project is substantially or fully complete. On a 10-month job with 10% retainage, that's $100,000 in deferred funds on a $1M contract, which for many subs represents most or all of their margin.

A payments layer that doesn't understand this structure forces every invoice into a generic "pay now" flow that doesn't reflect the contract. Software platforms that build around it (supporting milestone-based invoices, partial payments against open balances, automatic retainage tracking) become essential infrastructure for their customers.

Lien waivers and release documentation

Every payment in construction is tied to a piece of paperwork. Conditional waivers, unconditional releases, and final lien waivers have to move alongside funds to keep everyone legally protected. Miss a waiver and you're exposed to liens on work you've already paid for.

Platforms that link payment release to waiver exchange — subcontractor uploads the signed waiver, the system releases funds — collapse a chronically manual process into a workflow. That's a feature generic processors can't offer, because they don't know construction.

Multi-party flows and subcontractor payouts

A single GC might be paying dozens or hundreds of subs and vendors on a given project, each with their own payment terms, tax documentation, and compliance requirements. The GC is effectively running a small payments operation on top of their actual job. Field service platforms, subcontractor management tools, and construction ERPs that handle payouts natively take that operational load off the customer and put it inside the software.

The real cost of slow payments (and why your customers feel it every day)

The $299B number is shocking at the aggregate level, but what matters for software platforms is how it shows up in the day-to-day experience of the contractors and subs using their products.

• Cash flow stress. 98% of general contractors report increased reliance on personal savings, credit cards, and retirement funds to keep their businesses running (Rabbet 2024).
• Inflated bids. 97% of GCs increased bid prices in 2024 to account for payment delays, and contractors inflate bids by an average of 8% to protect themselves against slow pay (DocJoist, 2026).
• Lost bidding opportunities. 88% of GCs declined to bid in the last 12 months due to an owner's slow-pay reputation (Rabbet 2025).
• Work stoppages. 78% of subcontractors experienced work delays due to delayed payments to their crews (Rabbet 2024).

Payment friction isn't an accounting annoyance. It's the single biggest operational drag on the industry. Software platforms that solve it don't just earn processing revenue, they become the reason their customers show up to work in the first place.

The revenue opportunity hiding in your platform

The construction SaaS market is on track to nearly triple by 2035, rising from $16.3 billion to $45.5 billion. More platforms, more submerchants, more transaction volume flowing through software that was built to manage projects but not to own money movement.

Most construction platforms today fall into one of two buckets. Either they don't process payments at all, or they use Stripe Connect and collect almost none of the economics. Both leave money on the table.

When a platform owns the payments layer with the right partner, every transaction becomes a revenue event. Embedded payments can add 30–50% to effective revenue per customer without touching your SaaS pricing, which on most construction platforms rivals or exceeds their core SaaS ARR.

That's why the majority of ISVs expect embedded payments to be central to their growth strategy in the next year. The platforms that move now own the customer relationship going forward.

What construction software platforms need from a payments partner

1. Revenue share from transaction one

Stripe Connect got a lot of platforms to market quickly, but the economics don't scale. At 2.9% + $0.30 per transaction, your submerchants are paying retail rates and you as the ISV are collecting almost nothing.

A genuine embedded payments partnership should pay you a share of every transaction, starting on day one. Interchange-plus pricing beats flat-rate economics at virtually any meaningful volume, and the difference compounds.

2. Instant settlement for your subcontractors and vendors

This is the single biggest unlock in construction. Most subs operate on razor-thin margins with no working capital buffer, and waiting two to three days (let alone 30) for funds to clear is what drives them to float payroll on personal credit cards.

Platforms that unlock instant or same-day settlement for their subcontractor and vendor customers solve a daily financial pain point, and create a feature competitors built on standard rails can't match.

3. Flexible payment methods for every tier of the flow

Owners often pay by ACH or wire. GCs pay subs by ACH, check, or card. Homeowners paying for residential work want to use credit cards. Your payments layer needs to handle all of it through one integration, including:

• ACH and bank transfers for high-value B2B flows
• Card payments (credit and debit) for smaller jobs and residential work
• Wire support for large draws
• Push-to-card or RTP for instant payouts to subs

A single API that supports all of these means your engineering team isn't stitching together multiple providers as your customers' needs grow.

4. Built-in fraud protection and chargeback indemnification

Construction payments are a prime target for fraud. Business email compromise, vendor impersonation, and check fraud are all common; the U.S. saw more than 680,000 Suspicious Activity Reports for check fraud in 2022 alone. For a software platform facilitating payments, a single chargeback or fraudulent transfer can wipe out weeks of processing margin and expose you to compliance risk.

A payments partner that handles fraud prevention, AML/KYC on submerchant onboarding, and chargeback indemnification shifts that risk off your platform and lets you scale without hiring a risk team.

5. Integration support that doesn't take six months

Most construction platforms don't have a payments engineer on staff. The right partner meets you where you are: sandbox access from day one, architecture review before you write code, and real human support instead of a help center article. The timeline should match your roadmap, not theirs.

The compliance reality in construction payments

Construction payments sit at the intersection of multiple regulatory regimes. Most U.S. states have prompt payment laws requiring contractors and subs to be paid within a defined window (often 7–30 days) after receipt of funds from the owner. Miss those deadlines without justification and you can owe interest or face licensing consequences.

Beyond prompt pay, platforms facilitating payments in construction have to think about:

• PCI DSS compliance for any card data handled
• Tax reporting (1099s) for payments to independent contractors
• KYC and AML on submerchant onboarding
• State money transmitter considerations if you're holding or routing funds

Building this stack in-house is a multi-year project. Partnering with a provider that has the licenses, certifications, and audit posture already in place (PCI DSS Service Provider Level 1, SOC 2, and registered entities in the markets you serve) collapses that from a years-long compliance program into an integration.

From cost center to revenue line

Construction platforms sit in exactly the kind of vertical where embedded payments deliver the most: high volumes, long-suffering end customers, and complex billing structures that generic processors treat as edge cases.

Coinflow Launchpad is our accelerator for small and mid-sized ISVs under $10M ARR. We give construction software platforms the full payments stack (interchange-plus pricing from day one, instant settlement for submerchants, automatic payment splitting, built-in KYC and chargeback indemnification) plus revenue share on every transaction your subs and vendors run through your platform.

The construction industry is losing $299 billion a year to slow payments. Your customers feel it every day. The platforms that help them stop feeling it, and earn a share of the economics in the process, are the ones that build the stickiest, most valuable products in the vertical.

Apply to Launchpad or talk to our team to see how we can help.