Merchant acquirers and other payment service providers have long provided merchants the tools they need to process payments. But in a quickly changing world, merchants now require simple, secure and frictionless along with easy integrations, cloud-based solutions, mobile applications and digital enablers—just to name a few hot terms in today’s payment market. Business management solution providers [also referred to as Independent Software Vendors (ISVs) in the payments space] are increasingly looking to expand their product offerings from traditional business management solutions to integrated business and payment solutions. Thereby providing value-added merchant servicing and delivering innovation lift to both transactions and businesses to ultimately benefit the end consumer.
Market conditions are ripe for ISVs to move into payments. Consumers stay eager for friction-free, omnichannel experiences online and at the point of sale (POS). Merchants therefore need to adapt. According to Worldpay’s 2018 Global Payment Report, mobile payments usage globally will grow to 28 percent in 2022¹. Integrating payment acceptance with business management solutions helps merchants, particularly small businesses, both to process payments and run their businesses in innovative ways. More software companies are enabling payments. Recent Accenture Payments research found that one-half of the ISVs surveyed with payments-relevant software integrate payments into their software. Furthermore, we estimate that ~70 percent of market sales volume is being processed through integrated solutions.
Given that many software providers are already enabling integrated payments through the business solutions, monetizing the payment transaction is a small leap for ISVs. Though ISVs may enable payment acceptance, about half the time ISVs do not monetize the payment flows of their customers. Gaining the ability to enable and monetize payments is an opportunity for ISVs to turn single-product income into a recurring revenue stream with minimal additional expense. There are several partnership options for ISVs to work with traditional merchant acquirers and both parties will benefit from the partnership. The new revenue streams could take the form of net revenue/processing margin share, monthly fixed fees, performance-based bonuses and per-merchant fees. The added expense of moving from enabling payments to monetizing payments is minimal; it may include some additional processing expenses, technology updates and relationship management resources. Our analysis showed that monetizing payments at one global software provider, for example, could increase revenue from its current operations by 15 percent to 35 percent, net of any transaction-related expenses.
Traditional acquirers benefit via a steady stream high-quality merchant acquiring customers. The shift is happening and is set to bring organic disruption to the payments acceptance industry. Changes can already be felt across the payments value chain:
ISVs have plenty to gain and little to lose by adding payment acceptance into their existing software and applications, and monetizing payment flows as part of their integrated POS service offerings. Considering the prospects of higher user satisfaction, faster processing speeds, new revenue streams and more, there’s no reason for software developers to wait.