The Executive Interview Series provides readers with exclusive insights from movers and shakers in the payments industry. The Payments Industry is under continuous transformation, as such this series provides diverse perspectives on everything from strategy to payments technology and to the future of the industry.
In this interview, TSG Marketing team member Rachel Hartley spoke with Matt Thomas, Director of Business Development at Payrix, to discuss software companies and their navigation through integrated payments solutions. Matt offers up crucial advice and knowledge that any software company should consider.
Background: Matt Thomas is an accomplished payments professional focusing on helping SaaS platforms accelerate their growth, boost customer engagement, and deliver unparalleled experiences through the strategic use of embedded payment technology. By leveraging Payrix’s API-first technology, Matt collaborates with companies to design, scale, and monetize embedded payment solutions within their platforms to unlock unprecedented success.
Q: Rachel H.
Talk about Payrix, Worldpay for Platforms, and your role as Director of Business Development.
A: Matt T.
Payrix is an embedded payment technology platform. We enable software companies to deploy and monetize payment acceptance and banking solutions directly within their applications. Our API-first, white-labeled tech stack allows our software partners to control the entire merchant-facing payment experience. While Payrix operates as the registered payment facilitator (PayFac) handling the heavy lifting of underwriting, risk management, etc.
Payrix was acquired by FIS in December 2021, combining our embedded PayFac-as-a-Service solution with the power of the global payment and banking capabilities of FIS and Worldpay. Today, Worldpay for Platforms provides an all-encompassing suite of solutions to meet software companies wherever they are in their embedded payments journey.
I joined Payrix in the fall of 2020. As Director of Business Development, I manage our strategic relationships with value-added service providers, referral partners, as well as private equity and venture capital firms. Then deploy embedded payment monetization initiatives across their portfolios.
Q: Rachel H.
In your opinion, what led to the integrated payments opportunity? Why is the industry focused on software-led and enabled payments?
A: Matt T.
Integrated payments have been fueled by the rapid expansion of vertically focused, web-based software platforms entering the market over the past 5-10 years. In today’s digital-first environment, SMBs rely on these software companies to power critical operations across their business, including commerce. Integrated payments have evolved from a value-added service to a core feature for many software companies serving SMB merchants. Most importantly, merchants have embraced integrated payments and the simplicity of having an all-in-one service provider. Software platforms have recognized the opportunity that integrated/embedded payments solutions can provide to them and their merchants. Software companies have become a primary distribution point for acquiring new SMB merchants. As a result, the payment industry has shifted its focus to serving these software companies through a multitude of integrated payment solutions.
Q: Rachel H.
What are the biggest challenges that software companies face when looking to monetize payments? Is there any advice that you could offer these software companies?
A: Matt T.
One of the biggest challenges is onboarding. Legacy merchant boarding and underwriting processes can take days or weeks to complete, lack transparency, and create friction with merchants. All of which can dramatically impact a software company’s payment adoption rates. To avoid this, software companies should seek payment companies with automated boarding systems, which can underwrite a merchant and provision their account in minutes.
Another challenge is risk management and cash flow disruptions. Some processors use a one-size-fits-all approach to underwriting merchants and managing transaction risk. This can cause merchant funds to be held without warning, significantly disrupt their cash flows, and expose software companies to higher levels of fraud from bad actors posing as merchants.
Failing to establish cohesive internal payment processes is also a common challenge for many software companies. Especially those monetizing payments for the first time. Payments is a highly regulated industry with many nuances and complexities. Without the right expertise and guidance, software companies can quickly be overwhelmed with issues that create poor customer experiences.
To avoid these issues, software companies work with payment processors specializing in embedded payments. At Payrix, we use proprietary, automated underwriting and risk management tools that are customized for each software partner. We also hold extensive training and go-to-market strategy sessions with our partners to help them deliver a frictionless experience to their customers.
Q: Rachel H.
We are seeing a shift from integrated payments to embedded payments. What is the difference between the two and how is it changing the way software companies’ function?
A: Matt T.
With integrated payments, software companies have less control over their customers’ payment experience. Merchants usually work directly with the processor, who handles pricing, boarding, and support, and in return, the software company receives a small share of the processor’s revenue. This creates a fragmented user experience and limits the company’s ability to drive significant revenue on their payments volume.
Embedded payments are the next evolution of software-led payment acceptance. They allow software companies to create a seamless customer experience, price and sell their payment solutions how they want to, and maximize their ability to monetize the transactions flowing through their products. When deployed correctly, embedded payments can be a massive growth accelerator and generate millions of dollars in new revenue for software companies. For example, the average Payrix partner will see over 260% ROI and $7mm NPV in their first three years.
Embedded payments also make it easier for software companies to launch, adapt and scale their solutions in an ever-evolving market. Ride-sharing and gig-economy platforms, early adopters of embedded payments, disrupted entire markets because they made transactions between buyers and sellers a seamless, intuitive experience for both sides.
Q: Rachel H.
As we’re all aware, there are a lot of solutions in the market targeting software companies. What is one big misnomer in the market?
A: Matt T.
That software companies need to become payment facilitators (PayFac) to maximize their revenue. While it’s true that becoming a PayFac can increase margins, it also requires a substantial amount of time, resources, and an experienced team to launch and maintain your own PayFac successfully. I advise starting with a managed PayFac solution (like Payrix Pro). These let you control the merchant-facing experience and earn significant revenue without becoming an actual payment company.
Q: Rachel H.
As the landscape continues to evolve, what should software companies be focused on as it relates to their payments roadmap?
A: Matt T.
Focus on finding a partner who offers flexibility, a robust suite of backend tools, and automation wherever possible. These will enable your product, sales, and support teams to efficiently launch and scale your solutions without increasing overhead costs. Deploying a successful payment strategy takes much more than API documentation. Understand the core payment needs of your clients and build solutions that meet those needs to drive adoption. Once they embrace your core products, you can start offering complementary products like banking-as-a-service, lending, etc. Above all else, find a partner who understands your business and is equally invested in your success and delighting your customers.
Q: Rachel H.
How do Payrix and Worldpay for Platforms stand out from other payments companies who offer integrated and embedded payments solutions?
A: Matt T.
We are in a unique position with the technology, people, and experience to meet software companies wherever they are in their payment journey. Worldpay developed the original payment facilitation model (and invented the term ‘PayFac’). Now sponsors hundreds of other PayFacs on the world’s largest acquiring platform. Payrix pioneered the managed PayFac business model and offers a white-labeled platform that makes embedded payments easier for software companies to deploy and manage at scale. We even provide more traditional integrated payment referral partnerships for software companies who desire a hands-off solution. No matter where you are in your payments journey, we have the people, tools, and experience to help you maximize the impact of your embedded payment strategy.