ISVs have adopted payment strategies varying from referral models to registered PayFac(Payment facilitators) and everything in-between. Independent Software Vendors(ISVs) generally aim to address a couple of common issues when exploring a new partnership: monetize an additional revenue stream, control the users experience including through the payments process, satisfy customer requests for payment processor support and optimize their development efforts. Given these variables, we are going to look at how ISVs are effectively implementing a payment strategy in order to solve for as many of these issues as possible.

 

Plan for growth. ISVs are often vertically focused, making them a great fit for a payment facilitator solution. A Payfac implementation can often solve for many key areas of the payment flow. It effectively allows ISVs to control virtually every aspect of the payment flow, from onboarding to settlement. This can often be an intimidating endeavor. Given the right guidance and platform, an ISV can go through the complete lifecycle of using a PayFac platform to taking liability and becoming a registered Payment Facilitator. The key to taking a phased approach is that it will also allow you to tackle each step individually without a massive disruption to the ISVs development roadmap.

 

Driving adoption. The Carrot and Stick is often the most effective strategy for driving adoption of integrated payments. Shopify is a great example of  a successful implementation of this strategy. They send their customers to their registered PayFac but also support a gateway only option. This allows them to drive adoption on the preferred, most profitable path. At the same time they are also able to support customers that require their own processor. Adoption rates of 80% or more can easily be achieved with the proper structure. However, most ISV’s have found that 100% payments adoption or a closed loop system can often be detrimental to the growth of the software. Customers often require processor exceptions when working with: enterprise accounts, high risk accounts, entangled banking or associated loans. Servicing these accounts requires a one-to-many connection accomplished through a gateway function.

 

ISVs looking to check off these strategies and features can work with a new breed of PayFac. Some payment facilitators have recently come to market that are able to act as a platform but also as a gateway. This eliminates the need for multiple integrations and reduces maintenance costs. It will be interesting to see if Stripe, WePay and ProPay ultimately follow suit.