Optimizing Payments Integration: Introduction to Platforms

Forward-thinking software platforms are choosing white-label, integrated payment solutions to deliver seamless, branded payment experiences without the cost and complexity of developing the underlying infrastructure themselves. In addition to providing technical simplicity, payment facilitator (payfac) as a service offerings also protect software platforms from the operational and compliance issues associated with being an approved vendor and pave the way for optimized payments monetization and scalable global expansion.

So what does the future hold for integrated payments and how can businesses take advantage of this rapidly growing market? Let’s take a closer look.

In-App Payments: A Brief Introduction

The term integrated payments refers to the integration of payment processing capabilities directly into a company’s software or platform. There are two general approaches to integrating payments into your platform: become a payments facilitator and handle all aspects of payments in-house or partner with a payments provider for white label payments. Both approaches give platforms access to the benefits of payments integration, including increased revenue from payments monetization, optimized customer experiences, greater control over the payment process and competitive advantages; However, becoming a payfac adds several layers of complexity and risk.

Partnering with a third-party payment provider is a simpler solutionenabling software platforms to deliver a branded payments experience without having to develop the technology, manage operations and take on the risks themselves. Additionally, white label payment providers offer the global scalability necessary to adapt to different markets and regulatory environments, allowing platforms to expand into new regions without the associated complexity of managing everything in-house. It is not surprising that 89% of companies choose to collaborate with established payment providers rather than develop and maintain these systems themselves.

How to optimize in-app payment programs

As in-app payments — whether developed internally or powered by a partner — continue to gain traction, software platforms must pay close attention to emerging trends to stay ahead of the competition. Many platforms have been reactive in developing their initial in-app payments offering – whether in response to competitors, customers or something else – and, now seeing the value of in-app payments, are looking to optimize their programs.

Let’s look at three common scenarios platforms find themselves in and how they could optimize their in-app payment programs:

They integrate payments by becoming Payfac

Software platforms are realizing that there is no point in becoming a payments facilitator when they can partner with vendors to reap the benefits of payments monetization. In January 2024, payfacs registered in North America experienced a 6% annual attrition rate; the EU and UK speak of an annual attrition rate of 14%. It’s clear that while many platforms thought becoming a payfac was the right or only path to integrating payments, they are changing course after realizing the operational and financial burdens.

By partnering with a provider to enable integrated payments, platforms enjoy the benefits of additional revenue, increased customer loyalty, and greater value without the risks and overhead associated with becoming a payment facilitator. This approach will allow more platforms to add payments to their software at a faster pace. Any platform considering becoming a payment facilitator itself should carefully consider the associated costs – they are often higher than most platforms anticipate.

Optimize by choosing a payment provider that can be a true partner

The right payments partner should provide guidance and support in all aspects of developing a payments program, from merchant onboarding and monetization strategies to risk management and support. Payment providers must offer expertise and capabilities to help you deliver the experience you want to your customers. Don’t settle for a support team that just tells you what happened; insist on a team that can explain to you Why something has happened and offers a pragmatic recommendation for improvement.

They simply added payments as a feature

When many software platforms got their start in the payments space, they responded to requests from customers to improve their billing and payment capabilities, without realizing that payments could be a very profitable business segment in itself. According to Bain & Cie.integrated B2B payments will reach $2.6 trillion by 2026, generating $6.7 billion in revenue for platforms and facilitators.

To remain competitive and reap profits, platforms must re-examine their payment offerings to position themselves for maximum profitability.

Optimize by understanding your payment monetization options and potential

Monetizing your payments is about designing a solution where software and payments create tangible value for your customers. Depending on the vertical, common areas of focus include improving authorization rates, accelerating cash flow, reducing transaction risk, increasing addressable market, easier reconciliation, and better compliance.

Platforms that create value through a combination of software and payments can often charge more than standalone payment providers. Once you’ve identified your value proposition, think about all the ways you can monetize it, including higher SaaS fees, transaction fees, payer fees, or other new fees directly related to your proposition of value.

They chose the wrong partner

Many platforms knew that partnering was the best option, but didn’t have enough experience to know how to evaluate which payment provider was best for their business. Perhaps they chose the vendor with the biggest name or the one that seemed to offer the largest percentage of revenue share.

Payments can be a risky business. Choosing the wrong payment partner can hinder your ability to grow, lose money for you and your customers, and even put your business at risk. Platforms should consider their long-term in-app payments strategy and then choose the partner best positioned to help them achieve their goals.

Optimize by redefining what a good onboarding experience looks like

In-app payments can succeed or fail depending on your ability to onboard merchants quickly, efficiently, and compliantly. Look for a partner who can take care of AML and KYC for you without sacrificing speed to market for your customers. If you already have a customer portfolio, choose a new partner who will migrate it for you, so that your merchants don’t lose anything.

Preparing for the future of integrated payments relies on the right partnership

Now is an exciting – and profitable – time for software platforms to re-examine or add in-app payments to their offering. Over the past few years, platforms have learned that white label in-app payments provide the highest ROI. All you need to do is make sure you have the right payment partner.