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What Software Providers Should Know About Embedded Payments for Their Platforms

Written by: April Grudier

While payments used to be simply a part of the checkout process, for software platforms, they’re now an opportunity to meet client demand and generate revenue.

According to Jordan McKee, Principal Research Analyst at 451 Research, part of S&P Global Market Intelligence, 13% of merchants use payment processing services that are embedded in software they already use. And 75% of those who do not currently use payment services embedded in the software they already use, wish they could. Merchants see the value in being able to consolidate where their services come from.

Not only are clients expecting payments to be a part of their platform experience, but those platforms that embed payments see an increase in revenue. JP Morgan has found that software companies that embed payments into their platforms see a 2- to 5-time increase in revenue per client.

Adding payment functionality to your software platform with embedded payments or payfac-as-a-service solutions offers a number of opportunities for your business.

The Benefits of Embedded Payments

Embedded payments have tangible benefits for the software providers, including:

You Own the Payments: When a software company does not have payments embedded in the platform, the clients decide which payment solutions they want to use with your software. This can lead to integration requests and sometimes even troubleshooting for a third-party software you don’t benefit from. But when you embed payments into your software, you own the payment experience completely and eliminate extra work without the rewards.

Increased Stickiness: Your clients have the need to accept payments. By fulfilling this need, you create more value in what you can provide them, leading to a longer tenure for your clients. After all, the more they leverage your software platform, the more they depend on you to run their business. And, as businesses look to consolidate vendors, having a robust offering of what they need, including payments, makes you a promising contender.

Increased Revenue: Embedding payments into your software allows you to monetize the payments your clients accept via your platform. You will also be able to land new clients that were looking for a more comprehensive set of features.

Global Expansion: Even software platforms that have become payfacs domestically might be facing challenges when it comes to offering payment services internationally. With the right embedded payment or payfac-as-a-service solution, you can support global payment acceptance with the right payment types, payment methods, banking relationships and more.

Embedded payments can have big benefits for software platforms – if you implement them the right way. Depending on the size of your business and where your clients operate, you have different options.

Embedded Payment Options for Software Platforms

Software platforms have a few options for embedding payments. It’s important to weigh each solution and, if applicable, ensure your provider can provide the frictionless, convenient experience you want to provide for your clients.

Become a Payfac: A payment facilitator (or payfac) provides electronic payment services to businesses. Some software providers choose to become their own payfac, which entails building their own payment technology and handling all of their payments in-house.

The pros and cons of this option fall on the extreme ends of the spectrum: while you have total control over the solution, its data and operational decisions, you also have total responsibility for compliance, data security, development and keeping the payment solution up-to-date. It can take years to develop a functional payment platform and requires the full-time focus of multiple developers.

This option becomes even more complex and labor-intensive if your clients are selling in more than one region, subjecting you to more compliance regulations, as well as needing to solve for different currencies and payment methods. In such cases, software platforms that have become payfacs may enlist the help of a partner to expand their domestic capabilities globally.

Becoming your own payfac comes with a lot of responsibility, and it’s typically only feasible for very large companies that process tens of millions of dollars in payments a year.

Using a Payfac Partner: The second option is to work with a payfac partner. Working with a partner to embed payments into your platform can provide you and your clients with all of the same benefits of becoming a payfac while outsourcing a lot of the risk and labor involved in building a platform.

The benefits of using a payfac partner include less time to launch, fewer compliance and maintenance responsibilities, and less overall risk for your company. Additionally, a quality payfac partner will provide access to benefits like global payment capabilities and local card acquiring.

With payfac partners, software platforms have two options:

  • Hosted payments: In hosted payments, the payfac’s branding is visible to your clients.
  • White-labeled payments or payfac-as-a-service: White-labeled or payfac-as-a-service options allow the software platform to create a completely branded payments experience in which your clients may not even realize the payfac is involved.

Depending on the payfac partner, there could also be varying degrees to how much you can control your clients’ payment experience, staged risk and underwriting, and more.

When choosing a payfac partner, it’s critical to evaluate your options and choose carefully. The right partner will allow you to enjoy all the benefits of embedding payments into your software while creating value for your clients, while the wrong processor can create as many headaches as they do positive outcomes.

How to Find the Right Embedded Payments Partner

As embedding payments into software platforms is becoming more popular, payfacs are popping up left and right. So how do you know who is the right partner for you? Here are some things to consider as you evaluate potential partners.

Flexibility: Your software deserves more than a one-size-fits-all approach to embedding payments. Look for a payfac partner that can meet you where you are on your journey, but that also has the flexibility to support you as you progress. You want a partner that has the flexibility to provide help where – and when – you need it.

Easy, Fast Onboarding: Onboarding your clients should not be difficult or time intensive. Look for a partner that allows for an expedited onboarding experience with options that can work for you and your clients.

Global Payment Capabilities: Even if your software platform is not global today, you should choose a payment solution that has the ability to grow with you and can serve your clients wherever they are. Look for a payfac partner that has extensive global capabilities including an extensive list of currencies and payment methods, as well as robust local card acquiring to increase revenue and global compliance.

Branding: Are you hoping for a white-labeled payment experience, cobranded or without any of your branding at all? Look for a payfac that offers what your business needs.

Underwriting and Risk: You should be able to decide the level of risk your business takes on. Look for underwriting and risk staging so you can mitigate the risk you take through each step in the process. Also look for a payfac partner that can give you visibility into the underwriting process so you know where your clients are in the process.

A Great Payment Solution for Your Clients: Embedding a payment solution is not enough – you want to embed a robust solution that truly creates value for your clients so they stay with your platform. With the right payfac, you should be able to offer your clients a full suite of payment capabilities with a single integration so as not to create unnecessary drain on your technical team.

Expert Support: Many businesses have unique payment needs, and an ideal payfac partner will provide expert support for your business and clients to ensure all payment needs are met. You and your clients shouldn’t have to wait hours or days for a response, so make sure the partner you go with is committed to support.

Embed Payments into Your Platform a Better Way with BlueSnap

With BlueSnap’s Embedded Payments and Payfac-as-a-Service, you can own a global customized payment experience for your clients that increases revenue for your business. BlueSnap offers flexible solutions that allow your platform to own the payments experience, customize the experience for your clients, and grow globally and expand revenue.

Want to learn more? Talk to one of our payment experts.

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