To be attributed to: Nikhita Hyett, European Managing Director at BlueSnap
In today’s fast-paced business environment, success hinges upon versatile software. As the use cases of business software continue to grow, there’s demand among customers to get payments as part of their package. And the upside is clear for vendors. Software firms can experience a 5x increase in value per client by offering payments – opening the door to bigger profits.
Yet, becoming a payment provider is not as easy as turning on a switch. To become a licensed PSP, software platforms need to understand the financial regulations per country and region all the whilst implementing a whole new business process. Not only is this a long costly journey but software platforms will face the same scrutiny as banks – to ensure they can securely hold customer funds and are powerful enough to process transactions at scale.
Enter payment orchestration – a form of payment technology that allows software platforms to turn different payment functions on and off on demand, including by country, product, issuer and more. Software platforms leveraging payment orchestration through payment partners, already have an advantage over their competitors. Namely, they avoid the high costs of maintaining multiple payment integrations themselves. Instead, software platforms choose just one partner – the right one – to take care of their payment needs across global markets.
Payment orchestration – the best-kept secret in payments
Payment orchestration has snuck in under the radar as the number one way for businesses to grow their revenue by optimising their payment processes.
To put this simply, picture an orchestra. Much like the many musicians playing a specific instrument, each company will have a payment provider carrying out different parts of the payment process. The same way a conductor brings an orchestra together, a payment orchestration platform consolidates all the payment use cases, capabilities and geographies into a single platform.
This solves a challenge most businesses face when levelling up their payment process, technical debt. Businesses that use two to three payment gateways increase their overheads by having to hire a specialised team of fintech developers.
By consolidating all the payment needs under one hood, businesses have more control over their payment stack. They also have the flexibility to customise their payments process to reduce inefficiencies. By routing transactions through a global network of banks, businesses can drive down cross-border fees, foreign exchange rates and increase authorisation rates. And a huge factor in all this is that businesses are also protected by built-in failover and redundancy – where failed transactions are re-routed to backup banks.
Why are software platforms selling payments?
Nearly half of software platforms (48%) are outperforming their rivals by turning to one of the use cases of payment orchestration – embedded payments. This is where non-financial companies like software platforms integrate and embed payments into their product. And the trend has exploded in popularity for two reasons: demand and diversification.
Since businesses are becoming increasingly married to their software, there’s a demand for everything from CRM to payments to happen under one hood. It’s why we’ve seen SaaS platforms like Toast and Shopify see the success they have. Businesses using these platforms don’t need to switch between different platforms or start a whole new business implementation – that ease of use and integrated data is what’s driving this tipping point.
For software platforms themselves, it’s about the diversification element. With the software industry becoming crowded, many are using payments as a way to diversify from subscription fees and add-on services. Rather than solely generating revenue from software subscriptions, these platforms now monetize each transaction – earning a slice of every payment facilitated through their software.
There’s a very tangible Return on Investment (ROI) too. SaaS firms can see up to a 5x increase in value per client by embedding payments into their core product. This is why platforms like Shopify have seen tremendous growth. By embedding payments they’re able to create mutual incentive for them and the businesses they serve – shared profit. This is a win-win as customer businesses can drive a higher volume of transactions, and improve loyalty, while their end users benefit from a seamless payment experience.
Partnering with an expert will get your further
For software platforms to tap into these lucrative benefits, there are two routes they can take: become a Payment Service Provider (PSP) themselves or partner with a global payment orchestration platform.
It’s a lengthy and costly process to become a PSP, with over half of platforms citing that it took them longer than a year. Not only this, but there’s a higher risk of technical debt if you’re a global platform, and need massive compliance requirements to help with underwriting and risk processes.
Since payment orchestration reduces the strain on resources and financial risk, forward-thinking firms prefer to turn to the experts. And, because it’s not a “one size fits all” approach, software companies can tailor their payments infrastructure to their business – depending on their global markets, product, issuer and more.
Want to offer SEPA to your customers in just Germany? Done. Prefer stricter fraud rules on your new software update in France? A payment orchestration platform can make it happen. Only want to embed payments in your existing market before expanding? No problem.
It’s this sort of flexibility that’s led 89% of software leaders to choose to work with a payments expert rather than become a registered payment facilitator or PSP.
Achieving ROI is more than reducing costs
Investing in new technology is always seen as a big cost driver for a business. But true ROI goes far beyond simple cost-cutting. When comparing old tech to new, ask yourself: does it improve operational efficiency? Will this new technology open up new – or enhance existing – revenue streams? Will it help us comply with evolving regulation? These are the key factors that need to be considered when deciding whether a new tech investment will achieve ROI.
Payment orchestration ticks all the boxes. With the growth of sector-specific software platforms emerging, it’s clear why legacy players and new entrants alike are looking to payment orchestration as a way to stay ahead.
