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Ease of Entry for Software Companies

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Payments players are simplifying integrations and prioritizing partnerships

Software companies are integrating payments in their solutions making them more valuable and stickier with their end users, which is ultimately leading to higher valuations. Our previous article, Options Abound for Software in the Payments Space, looked high-level at services, models, and partnerships software companies may consider. In this article, we dive further into partnerships and what makes them successful. Stay tuned – our upcoming third article in the series will discuss developing a payments-forward strategy.

Ease of Integration

The significance of integrating payments seamlessly continues to grow as software companies forge partnerships with payments companies to efficiently handle the payment acceptance requirements of their merchant clients. Notably, the software company responsible for powering a merchant’s operations is increasingly assuming the role of the payment processing provider as well. To do this, a software company typically partners with a dedicated payment processing company, which can range from companies referred to as merchant acquirers, payment processors, payment service providers, payment gateways, payment platforms, or similar terms. Examples of these partners include Adyen, Bank of America, CSG Forte, FIS, Fiserv, Global Payments, JPMorgan Chase, North American Bancard, Stripe, and many others. 

As part of this growing trend, the importance of the API has increased, and forward-thinking payments partners have been making integration better for software companies (within and outside of APIs). The days of complex documentation, long boarding timeframes, and puzzling error messages are rapidly ending. The integration of least resistance is a critical concept in today’s environment.  

TSG often surveys software companies to understand their payment-related experiences and partnership dynamics. One of these studies found that software companies care most about the experiences they have when selecting a preferred payments partner. Experience ranked higher than areas such as external reviews, pricing, and superior products. The most important types of experiences noted have to do with the quality of the account management they receive, the ease of implementation, and general positive past interactions with the payments partner. Beyond experiences, the desire for greater profitability is a key driver of software companies looking for a new payments partner, showing that revenue share considerations are also vital.  

The payment partners, with simple integration interfaces and helpful documentation, make it easier for their software partners to get into payment processing. Software companies are moving towards the providers that have invested in this area.   

Payment gateway software is at the forefront of this aspect. A gateway is defined by TSG as an intelligent application that routes transactions, often from online shopping carts or physical point-of-sale devices to payment processing companies. It is an internet-based service that transports payment information so it can be verified and processed. Recently, TSG analyzed 110+ payment gateways serving a variety of geographies & identified these API-related insights:

  • 66% of gateways analyzed have open developer center pages with full access to their APIs without requiring credentials; this share is up from 48% in 2020.   
  • 18% of the gateways were classified as having “quasi-open” API sets where APIs are not entirely inaccessible to third parties but require an additional step, such as filling out API access forms or creating sandbox accounts.   

Software Partner Prioritization    

Beyond the specific focus on integration, most large and medium payments partners are highly prioritizing their software company partnerships overall, connecting with thousands of software companies each. This prioritization is giving software companies a variety of unique avenues to get into payments. For example, Fiserv launched ‘Clover Connect’ – a platform-as-a-service built for software companies that allows them to run their own business management software on Fiserv’s proprietary Clover hardware devices and give users access to the Clover App Market.  Similarly, payments company Stripe offers Stripe Connect, intended for software companies and online marketplaces to be able to connect into payments easily through APIs. Stripe Connect offers tools for merchant onboarding, compliance, and more. Examples of software companies using Stripe Connect include Xero, Blackbaud, and Mindbody. 

Other solutions offered in the market include white-labeled merchant onboarding, modular configurations, support staff focused on software companies, quick access to commissions, and more.   

Software companies can choose to partner with many kinds of payments partners: there are large direct payment processors, smaller regional entities, managed-service payments partners, and more. Software companies can partner with an established leader, a startup fintech player, or a player somewhere in between. In a TSG analysis of nearly 150 software companies serving the field services (defined as merchants that operate ‘in the field’ such as landscapers, plumbers, and pest control companies) market, over 25 unique payments partners were found to be connected to this group alone.  

There are pros and cons to partners in each option, and partnership attributes are generally unique to each provider. Pricing, service, technology, geographic coverage, vertical-specific know-how, and other factors all vary by payment partner and by each specific contract with a software company. It is recommended that software companies shop around to evaluate their options and find a good fit.  

One partnership success story is when a healthcare-focused software company chose to partner with a top five U.S. payments company. Custom integrations, previous software experience of the payments company, onsite training, and ancillary products were key reasons the software company decided to go with their payments partner. Since completing the integration, the software company has seen numerous improvements to their business because of their partnership, such as enhanced communication via social media tools. 

 With pre-built custom tools tailored to software companies, dedication to the market by payments partners of all types, and the growth in API accessibility, software companies can begin to enjoy the critical and rewarding world of payments easier than ever before.

At TRANSACT, the Electronic Transactions Association (ETA), the largest trade association for payments industry, underscored the expanding influence and significance of software in the payments industry. In fact, the Top 10 Payments ISVs were honored on a dedicated stage focusing on embedded payments. This recognition exemplifies ETA’s commitment to supporting software companies. With offerings like Transactions Trends publication, upcoming events, educational materials, and committees, ETA provides a wealth of resources to assist software companies on their payments journey. 

New Revenue

Software companies come to us when they seek to enter payments and uncover new revenue streams from their merchant customers. For example, TSG helped an ISV serving the manufacturing industry create $1.7M in new annual revenue.