There is a wide range of payment solutions, from basic to full-featured, that can enable your users to accept payments through your application. Solutions from the simpler side of the spectrum seem to be popular, but they may not be the best choice for your clients – or for adding the most value to your software.
Nadia Choudhury, director of partner success, for Paystri, discusses the pros and cons of integrating your solution with a simple payment solution and shares some tips for making a smart choice in a payment processing partner.
What are the primary drivers behind ISVs choosing to integrate with simple payment solutions such as Stripe?
Choudhury: There are many reasons why ISVs might choose to integrate with simple payment solutions.
First and foremost, ISVs may be attracted to the perceived ease of integration. ISVs might also like the idea of a flat-rate pricing model that they can pass along to their merchants.
Second, in some cases, ISVs do not necessarily understand the nuances of payment processing and how various offerings compare to one another. However, thanks to big marketing budgets and awareness campaigns, players like Stripe can attract ISVs simply by name recognition.
In what ways does this type of payment integration limit merchants?
Choudhury: A simple payment solution integration can limit merchants in many ways, starting with the breadth of payment devices and terminals available to their business. There is no such thing as a one-size-fits-all model in payments, so no two merchants will have the same payment acceptance needs.
Also, these types of integrations can limit merchants to flat-rate pricing, such as 2.9 percent and $0.30 per transaction. While this type of pricing sounds simple and straightforward, it’s not always in the best interest of the merchant. Often these businesses would benefit from a detailed pricing analysis and a more competitive pricing model such as Interchange Plus.
Merchants can also face a lack of flexibility and customization. An out-of-the-box solution will not be built to the specific needs of an individual business. As customers continue to demand more personalized experiences, customization is critical for success.
Finally, reporting and data analysis are other areas where a simple payment solution might not be able to provide merchants with the depth of detail needed to improve their business operations.
How can limited payment functionality affect users’ impressions of the ISV’s software?
Choudhury: The merchant is predominantly buying the ISV solution, and payment processing is secondary to the features and functionality of the software. However, shortcomings on the payments side (the boarding experience, settlement, funding, pricing, service and support, device issues) will reflect on the ISV as the “owner” of the merchant relationship. The ISV is almost always the first point of contact when a merchant needs resolution and is often held accountable for payment processing issues when their merchants are dissatisfied.
For the ISV/reseller, what can integrating with a full-featured payment solution mean in terms of recurring revenue?
Choudhury: A full-featured processor offers ISVs and VARs the opportunity to create a secondary revenue stream. Revenue sharing and residual programs can create a significant source of monthly recurring revenue. For example, if an ISV takes advantage of a 50/50 residual program with a processing partner that shares income on a gross or net basis, the ISV can receive monthly revenue on a per merchant basis for the life of that merchant. If the merchant produces $100 in monthly revenue for the processing partner, on a 50/50 plan, the ISV would receive $50 a month per merchant. With 100 merchants, that could be $5,000 in monthly revenue. This income stream is something they won’t receive from a simple payment solution that lacks a revenue share program.
What advice do you offer ISVs choosing a payment solution to integrate with their software?
Choudhury: ISVs need to remember these three things:
- Find a true partner, not just a vendor. A true partner will support ISVs through every step of the process, including providing the APIs and SDKs, assisting with integration, supporting marketing efforts, establishing pricing models, and creating a frictionless merchant boarding experience.
- Ask about pre- and post-sales support. Is there a dedicated team that supports ISVs in getting their merchants properly boarded? Once boarded, is there a team that facilitates support calls and remedies processing issues? Will ISVs know their support team by name and have direct access to them? Customer satisfaction should be a top priority for all ISVs seeking a payment processing partner.
- Understand the value that ISVs’ merchants bring to a payment processor. An ISV’s customer portfolio is a valuable asset. Find a payment processing partner that shares your vision, appreciates your business, compensates you for it, is willing to help grow your business, and works with you as an extension of your team. Your partner should address the needs and concerns of your customers and safeguard your merchant relationships.