Payments will be Software's Holy Grail
The most successful SaaS companies in 2020 will grow on the back of payments
Bob Butler, President, Payrix
Getting Real About Payment Facilitation
The payments industry has been generating significant noise lately, but the reality is the space is still largely occupied by legacy players who are consolidating and giving the appearance of innovation without actually changing the game for their clients. Without new solutions, payments will remain an unnecessarily complicated utility for companies processing transactions. And while the industry’s favorite buzzwords of payment facilitation paint a golden picture for monetization potential among clients with high payments aptitude and high risk appetite, they paint an incomplete picture of payment’s future potential.
To be clear - monetizing payments is a critical ingredient for the growth and success of the next crop of SaaS companies and digital marketplaces. But so few of those on the cusp of becoming the next Shopify, or GoFundMe, or MindBody employ a payments professional let alone a full staff for payments risk and compliance. The tip of the spear for these is the promise of revenues from payments and a solution that is more tech focused - a payments software as a service. But that’s not enough. Too many emerging players sell the idea of the software company becoming a payments company and leave their clients halfway to the promise-land: stuck with the cumbersome responsibility of full integration, risk boarding and compliance.
So how do tech businesses navigate around this? Let’s first start by clearly defining the newest models in the payments space - from payment partners to payment facilitation. I’ll start with the hot topic at hand, payment facilitation. When software companies are sold the idea of becoming a payments company, they’re buying into becoming a payment facilitator. In short, this makes the software a master merchant account provider who through a contract with an acquiring bank can board sub-merchants and facilitate payment transactions for them. That payment facilitator has ultimate ownership of their payments contracts, not just pricing but all associated risk. Beyond the basics of what it is, the path to facilitation can be an arduous journey - filled with due diligence, card brand registrations, tech development, certifications, and more. Conversely, integrated payments via a partner are a software platform’s simplified route to accepting payments through a facilitator’s master merchant account. With this, a platform is up and running quickly and relies on their payments partner to do the heavy lifting of technology maintenance, risk and compliance.
Building Total Enterprise Value
Having spent the past two decades working in payments I’m excited by the real promise of what payments revenue can bring to software companies’ total enterprise value. The key is finding the sweet spot between partner to payment facilitator for each SaaS provider. When I joined Payrix earlier this year I saw that gap in the market that could balance the simplicity and convenience of a click-to-apply partnership with the flexible and dynamic nature of a fully-owned payments experience. Payment facilitation is a huge opportunity that allows software companies take control of their payments experience as a part of their integrated software offering and maximize top-line revenue. But many software companies would be best served by a payment facilitator-like solution: control over their brand’s payment experience, full visibility and insights on the transactions, seamless boarding, revenue and the automated risk and compliance that is not on their plate. Payrix is the only fully-progressive payment facilitation solution. Our flexible platform is designed to empower tech-led businesses to control the payment experience and optimize revenue for maximum growth, whether customers are all-in on payment facilitation or better suited for a payment facilitation-like solution.
The holistic solution provided by Payrix is also what attracted Providence Strategic Growth and Blue Star Innovation Partners (BSIP) to invest earlier this year. Managing Director of BSIP Rob Wechsler is a decades-long payments industry expert who saw the shift toward payment facilitation, evaluated all of the players and placed his bet with Payrix. “Our review of a number of payment platforms made it clear that Payrix’s solution offered its customers an unparalleled opportunity by transforming payments from a cost center to a profit center in order to increase overall company value. The Payrix solution disrupts traditional payments systems, streamlining key processes while addressing critical risk and compliance issues. When combined with overall market excitement in the FinTech space, we are thrilled to be working with the Payrix team to accelerate its emergence as an industry leader,” said Wechsler.
And that flexibility and level of control is ultimately what attracts category-leading software partners to partner with Payrix. Our customers specialize in industry-best software solutions and CRM suites for verticals like childcare, non-profit, health and wellness, field service, religious and community-based, accounting and more. Across the spectrum of specialization, they’re able to fine-tune and customize their owned payments experience in a way that elevates their customers’ experience and furthers their brand’s goals. Most importantly, they see significant, needle-moving payments revenues from the moment they implement and begin processing through Payrix. Customers are modeling 5-year topline revenue growth from payments alone that reaches upwards of 1600%. That type of revenue growth secures new headcount, enables innovation, and significantly increases total enterprise value. And it is why I believe that 2020’s most successful software companies will grow on the back of payments.