Pedram Tadayon, CEO at Yabie
Across the payments industry, a commercial shift is underway that deserves more serious attention than it is currently getting. The providers growing fastest right now have embedded themselves into the daily operational lives of their merchants in a way that makes the relationship genuinely difficult to unpick. It’s a different kind of growth, and it is built on a different kind of proposition.
The transaction rail remains important, of course. But as payment processing has become increasingly commoditised, the margin and retention story has moved decisively into the software layer sitting alongside it. Understanding how to capture that layer efficiently and at scale is the defining commercial question for acquirers and PSPs over the next several years.
Starting with the merchant
The average high-street operator is managing a fragmented technology picture. Payments, inventory, staff scheduling, loyalty, promotions and reporting frequently sit across separate systems owned by different vendors, none of which communicate particularly well with each other. The merchant becomes a de facto IT integrator, spending time and energy on reconciling data that could be spent on the business itself. Our data suggests that merchants who consolidate onto a unified platform recover somewhere between 20 and 25 percent of their working time.
This points to a real and largely unmet demand for a unified centre of commerce, a single platform that brings the operational threads of a business together into one coherent system. When a payment provider can offer that, the nature of the merchant relationship changes considerably. Switching becomes a much more considered decision, not because the merchant is locked in contractually, but because the software is useful to them and shapes a streamlined, increasingly effective customer experience in-store.
The case against building
The natural instinct for many providers exploring this space is to build proprietary merchant software. The logic is straightforward: own the stack, own the margin. In practice, it tends to be more complicated. A commerce platform that truly serves the operational complexity of retail, hospitality, and services takes years to build to a standard merchants will actually trust. Roadmaps expand as vertical requirements become clearer, and the competitive window can narrow considerably while the build is still in progress.
This is because building modern, customer-centric software is usually not in the DNA of payment processors. Their core strength has historically been building and maintaining large-scale, compliant, resilient backend platforms.
Acquiring a legacy merchant software vendor accelerates the timeline but frequently brings technical debt and a product designed for a commercial environment that has since moved on. The model gaining the most traction is a third path: payment networks partnering with a modular, API-first software layer and deploying it through existing distribution relationships. The speed to market is faster, the capital requirement is lower, and the merchant proposition is strong from the outset.
Where the value compounds
The first place value makes itself known is onboarding. Merchants form early impressions of a partnership and those impressions tend to stick. Automated set-up, configuration defaults that reflect the merchant’s vertical, and a fast path to going live all signal product quality at a stage when the relationship is still being established.
Beyond that, value compounds through daily operational utility. A platform that turns real-time transaction data into practical guidance on inventory, margins and demand gives merchants something they will return to every day. That kind of active utility builds a different quality of loyalty than a payment mechanism alone can generate, and changes the retention dynamic in a way that is quite difficult for a competitor to unpick on price.
For the provider, the margin profile reflects this. Software assets carry structurally higher margins than transaction fees, customer lifetime value increases as switching costs become real rather than theoretical, and the portfolio becomes considerably more resilient against low-cost competitors.
A practical opportunity
The direction of travel is fairly well understood across the industry. What is less appreciated is how practically achievable the shift has become for providers willing to pursue it through the right partnership model rather than an internal build programme.
The race to the bottom on transaction fees is already over, and the current pure-play payments processing model is unfit for purpose. The future belongs exclusively to the acquirers and PSPS’s that anchor their volume to the software layer, turning a standard utility into an indispensable centre of commerce.