Many ISVs initially think they are in the software business, but the real profit often comes from payments.
The Revenue from Payment Processing Outperforms the Software Revenue
Here’s how the revenue model of payment processing works. The fees that the merchant pays to accept credit and debit cards are comprised of the following:
- The banks who issue the cards to consumers earn the wholesale interchange rate and transaction fee, which comprises the bulk of credit card processing fees.
- On top of that, Visa, MasterCard, Discover and American Express take a small %.
- Every payment processor charges a markup on the payment transaction rate and transaction fee, plus adds monthly fees, for servicing the accounts.
The payment processor splits its profit, or markup, with sales reps and ISVs, who provide them leads for new merchant accounts. The ISV already has customers (merchants) using their software, who also need to accept payments. Therefore, it is an easy way for ISV’s to add to their revenue from software license fees, and merchants benefit from having payments integrated with their software for their own convenience and business operations.
Embedded Payments Increase Merchant Retention
When payments are integrated into the software:
- merchants are less likely to leave
- switching becomes difficult
- the software becomes mission-critical
This dramatically improves customer lifetime value.
For software companies, this can transform payments into the most profitable part of their business model.
How Software Companies Benefit from a Dedicated Payments Relationship Manager
As more software companies and ISVs integrate payments into their platforms, they quickly discover that accepting payments is only part of the equation. Payments introduce a completely different set of responsibilities that software companies typically were not built to handle. The real challenge often comes from managing the operational side of merchant services.
A strong payments relationship partner does more than simply provide the technology and hardware devices to process transactions.
- They provide human expertise to help manage the application process
- Merchants need help filling out applications correctly
- The application process requires continued coordination with extra documentation requests
- Underwriting requirements must be met
- They assist with onboarding
- They provide ongoing support regarding payment questions and concerns which pop up continually in servicing the merchant account and keeping the hardware devices humming along without errors. Merchants need support ongoing with merchant services for the life of the relationship. They have questions about funding, chargebacks, merchant fees, hardware issues, or compliance requirements.
This is where having a dedicated relationship manager from an independent sales office of the processor (ISO) becomes incredibly valuable.
- A good relationship partner with a payment processor increases the stickiness of the software customer to the ISV
- Good payment support lets software teams focus on software.
The wrong choice of processor can cause the ISV to lose software clients.
The Bottom Line
Embedded payments have become one of the most powerful revenue opportunities available to software companies and ISVs.
But the success of an embedded payments strategy often depends on the support structure behind it.
By partnering with a payment processor that provides a dedicated relationship manager, software companies can simplify merchant onboarding, provide better payment support to their customers, and keep their internal teams focused on developing and supporting their software.
I am Gingergaye, president of Electronic Money Company. I can guarantee you that EMC is one of those rare payment processing relationship partners.
Here is what Rob Weinstein of Event Rental Systems has to say:
“Here is why Electronic Money Company has clients for life and why we integrated their payment processing to our software… As someone who has tried quite a few merchant service providers over the years I can tell you that all of my relationships have turned sour due to hidden fees and percentages creeping onto monthly bills over the course of time and 1-800-IGNORE-ME customer service. All except for one. Electronic Money Company has been the first HONEST company I’ve ever worked with. They have delivered as promised helping our clients get approved and boarded with ease. Their ongoing service and support has been outstanding! When our client’s have a question, they answer it or find the answer quickly. If you need integrated payments for your software, Electronic Money Company is the place to be. ”
Call me at Electronic Money Company at 505-296-2847 to discover for yourself how our partnerships can exponentially grow your revenue stream adding payments to your software.
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Other topics you might be interested in: Avoid Costly Mistakes: Download our free report, 5 Mistakes to Avoid When Choosing a Credit Card Processor
