The ability to accept payments is necessary for every business, however some business management software solutions require standalone payment technology that is independent of the application. In this situation, businesses must maintain duplicate data across business management software and their payment technology, which leads to a range of inefficiencies, including an increased likelihood of human error and a less-than-optimal user experience for both administrators and end-customers.
This challenge poses a unique opportunity for B2B software providers that deliver business management software to these organizations. By leveraging an integrated payments solution that connects into their own technology, businesses benefit from a unified back-office experience that streamlines financial processes, reduces the number of disparate systems, and minimizes operational errors.
In addition to the simplicity that an integrated payment and business management solution provides to a software provider’s clients, the software provider itself also benefits by monetizing a portion of the payment transactions processed through its system.
This is done through a revenue-share between the software provider and their integrated payments partner.
Revenue Share Explained
The opportunity for a revenue share in payments may not be obvious to the uninitiated, as it is usually a topic reserved for contract negotiations. Although we make it easy for our partners, digital payments are a complex process, with card brands, issuing banks, gateways, processors, and other technology vendors involved in each transaction.
Software providers will earn revenue by incorporating a fee into these transactions: a percentage and/or set amount that is set by your payment processor. When your clients have a steady stream of payments (whether subscriptions, regular bills, or one-off purchases) going through your system, this small fee will contribute to your bottom line in a big way.
But how to determine the best revenue share?
Monetization Models
Once you determine the need for payment capabilities, you must ensure that what you charge can move the needle on your company’s financials, without becoming a reason for your users to switch to a (cheaper) competitor.
The way that payment processors calculate the cost of a transaction for specific merchants varies widely. The most common model for this is to charge the merchant a set percentage of each transaction plus a small processing fee. When comparing partners, it would be easy to use these rates alone to make a decision. However, the lowest rate is not always the best deal.
There are other factors that you should consider when selecting a payment processor. The first is how easy their solution is to integrate into your software; it will be important that there is development support and a clear roadmap to get you started.
Once integration is completed on the back end, the onboarding of both new and existing merchants begins. Without assistance on this you risk having a great new solution that no one knows about.
Finally, ongoing partner and customer support is not an option provided by all processors. This means that when issues arise (integration problems, reporting, declines, chargebacks, or suspicious activity, for example), both you and your client could be left in the dark. Quality support from domain experts that goes beyond the initial 60-90 days is vital.
The Paya Way
When beginning a partnership with Paya, you can expect a good deal of fact-finding upfront. We’ll need to get accurate information on your client portfolio and DNA including number of merchants, their average volume of sales, and average number of transactions.
Using this information, we will guide you on the most beneficial revenue share model. Primarily, we operate on a percentage of the transaction, plus a set dollar amount per transaction, but we have some partners who prefer to charge a fee to the end user as a percentage.
With accurate historical information, we will be able to forecast your additional revenue and projected growth from integrated payments. If you’re ready to talk specifics about monetizing the payments within your solution, click here to book a consultation with one of our experts.