Every software company will encounter the ultimate question of generating revenue, sooner or later. While there are a few traditional ways to monetize your platform, the pricing pressures are making it harder to create a really profitable piece of technology. Monetizing payments as a payment facilitator is one way to both create new revenue streams and increase the value of your organization by broadening your service to clients.
Operating as a payment facilitator allows you to process credit card transactions for your customers. For many customers of software companies, payments is a cumbersome component of their business that is very inefficient. Becoming a payment facilitator would allow you to nearly eliminate the amount of effort your customers need to apply to payments, thus increasing your level of service to them, and their loyalty to you.
Your customers benefit from payment facilitation in a few ways:
- Minimize administrative responsibilities: Most customers probably utilize a number of different vendors to run various systems they use to operate their business. As a payment facilitator you are able to consolidate many of these resources into one, freeing them up to focus on their own customers.
- Increase their level of service to customers: By not having to spend so much time managing multiple vendors and services, your customers are free to spend more time on their core business. Additionally, when there is a payment dispute with a customer, they know who to call (you) instead of having to look for one of the many different vendors who would otherwise be managing their payments processing. This also creates more consistency for their customers, as you’ll operate under their name and not as an independent vendor. Under their current model, with multiple vendors, it’s hard to manage all the customer communication, and your customers are unable to limit the communication many of their current partners have with their customers.
- Drive better insights through reporting: As a payment facilitator, you can offer them greater transparency through reporting. Currently, your customers probably receive a number of different monthly reports from a number of different vendors. Compiling that report to make better decisions is a nightmare, if it’s done at all. As a payment facilitator you can combine multiple portions of their business management software onto a single platform, integrated with payments, so that your customers can make decisions in real-time, when it makes sense to them.
Of course, you may be curious about how payment facilitator services will impact your current product, especially with regard to revenue. Any new service changes your revenue stream to some degree. But how will payment facilitator services impact your fees and other compensation?
Original Service and Product Fees
You already collect some form of compensation from your customers for your core product or service. That may be through ongoing fees, transaction charges, or some other form of compensation.
This type of compensation isn’t affected by integrating payments into your offering. Operating as a payment facilitator is an expansion of your current service, and strengthens your current offering. It doesn’t replace the product you already have today.
Payment Processing Fees
Transaction processing is at the heart of payment facilitator services. That’s your role in the process. Your customer, also known as a sub-merchant, collects payment from the card holder. You then process the transaction and direct the money. You also manage related transactions like refunds and chargebacks, as well as fraud management and protection.
As you process payments, you’ll collect a small transaction fee. This compensation covers the administrative expense of the process and it also adds to your bottom line. A per-transaction structure is also helpful for your customer because it allows them to scale. They pay for the service as they collect revenue, so they can grow their sales and their processing needs without experiencing cash flow pressure.
Becoming a payment facilitator isn’t just about processing transactions, though. As a payment facilitator, you’ll also provide your customers with valuable service that could help them elevate their business. For example, you can provide robust reporting and data that gives them insight about their revenue. You could also offer strategic guidance so they can make more informed decisions. And you can provide centralized, streamlined support and service.
These services add real value to your customer’s business and they could be a source of additional revenue for you. You might collect compensation for reporting, guidance, or even elevated levels of service.
Becoming a payment facilitator is a great way to expand your service to your customers and thus strengthen your relationship with them. As you integrate new components into your offering to complement your current product and payments processing function, you deliver greater value to your customers and you create a complimentary revenue stream. It’s a win-win for all parties.
Stay tuned for more payments strategy guidance
Payments may not be your core business, but it may present a strategic opportunity for you to better serve your customers. Is it the right decision for you?
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