Embedded Payments Revenue: Why Volume Beats Low Processing Rates
Software companies that are only focused on finding the cheapest solution for embedded payments processing may be making, as one software CEO recently said, the “biggest mistake of their professional careers.”
Is it more important for your software platform to have the lowest-cost solution for embedded payments processing, or to make the most money from your embedded payments solution?
While this may seem like a trick question, it’s often difficult for partners to answer. For almost all ISVs, it’s the latter. Vertical software providers who are considering embedding payments into their solutions are doing so to maximize the revenue they can make, and to generate as much money as possible by processing payments through their platform.
But what most of them don’t always understand is there are several ways to achieve that goal, and multiple levers they can pull to make the most money possible.
Lever #1: Price-hunting for the lowest-cost payments partner
In a perfect world where every partner offered the same functionality, user experience, onboarding, customer service, and sales and marketing support, this would be the right approach. Unfortunately, payment processing services are not a commodity, and there are significant differences between payments partners that all add up to one thing: you get what you pay for.
If you’re solely shopping for the lowest-cost provider available, you might get lucky. Or you might, as one CEO I recently spoke with said, be making “the worst decision of my professional career.” You’re likely to end up with a partner that will cost you time, money, and merchants — and you’ll never achieve your goal.
Beyond the limited onboarding support, poor user experience, and low functionality, you may also find yourself 100% responsible — and liable — for any fraud, compliance costs, and more. While that may seem negligible in the beginning, especially if you aren’t entirely sure what you’re doing and don’t have a partner who is willing to guide you, it can add up. Fast.
At the end of the day, you’ll have a low-cost payment provider. But does that matter when your processing volume, and therefore your revenue, is just as low? You may want to consider lever #2…
Lever #2: Increase the payments volume flowing through your platform
If you’re really looking to boost your margins when it comes to embedded payments processing, the best solution is not to find a lower-cost provider, but to increase the volume of payments flowing through your platform. That means signing up more merchants, encouraging them to use your solution, and growing with them over time.
In our experience, this has a way bigger impact on your bottom line than finding the lowest-cost provider ever could. For ISVs that are truly successful in monetizing payments, they understand this and work with partners who support them in this effort to increase their attach rates and maximize the volume flowing through their platform.
What exactly does that support look like?
- Sales Support: Does your payments provider offer to train your team on how to sell payments? Can they help with pricing structures, or provide scripts for how to discuss your solution with merchants?
- Marketing Support: Once your payments solution is in place, you’ll have to tell your merchants about it to get them on board. That means websites and landing pages, email campaigns, in-app messaging, and social media copy to drive adoption. Will your partner provide all that, or will you be on your own?
- Onboarding Support: No matter how easy a partner may promise their solution is to sign up for, there will always be merchants who need extra help. With the right partner, they can drive adoption and do the legwork required to increase the percentage of merchants that complete the process.
- Ongoing Support: Once you’re up and running, what next? A true partner in your payments journey will continue to ensure you have the right products and features available, and consider you in their product roadmap as they work to add more. They’ll also offer fast and easy customer support, all to keep merchants on your platform and reduce attrition.
When you partner with a payments processor that offers this level of support, you are partnering with someone who is just as invested in your success as you are. When the focus lies on increasing payments volume, there is unlimited upside for both of you — a win-win partnership.
On the other hand, lower-cost providers that offer none of this leave you to do it on your own.
So, I’ll ask it again: is it more important to find the lowest-cost solution, or to make the most money? Your answer to that question could have huge implications for the future of your business.
Remember the CEO I mentioned earlier? The one who said it was the “worst mistake of his professional career” to go with a low-cost legacy provider? His ISV is now partnered with Tilled, and receiving all the support they need to pull lever #2 and increase the volume of payments flowing through their platform. The result so far – a 56% increase in their attach rates. Meaning 56% more volume flowing through their platform. I call that a win-win.
Learn from his mistake, and try to see the whole picture before selecting your payments partner. If you have any questions, our sales team would love to answer them. Reach out today!
