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  • Writer's pictureJaime González Gasque

Payment optimisation

Nikhita Hyett discusses how payment orchestration is helping software platforms monetise their payments, earn a slice of transactions they process and see a possible five-time increase in value per customer

How payment orchestration helps software platforms drive :

From accounting and payments to resource planning and customer relationship management, every part of business needs software – in fact, modern businesses can’t survive without it. Specifically, there’s a growing demand for software and payments to be offered in one package.

Think of an e-commerce software like BigCommerce coming equipped with all the payment needs it’s end users desire. It’s no surprise there’s increasing demand in this space as SaaS (A SaaS company is a company that hosts an application and makes it available to customers over the internet). Companies can see a 5x increase in value per client by offering payments.

However, this means SaaS firms need to become a licensed PSP, which is a very lengthy and costly process. Not to mention the homework that needs to be done about global financial regulations.

So, what is facilitating SaaS companies to switch towards payments? It’s one of the best kept secrets in payments – payment optimisation. This is 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. This allows them to switch on embedded payment capabilities, generate new revenue streams, all the whilst avoiding the high costs of maintaining multiple payment integrations themselves – ultimately opening the door to bigger profits.

An overlooked innovation 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.

The benefits of software and payments all in one

Nearly half of SaaS firms (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.

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.

Payment experts smoothen the transition

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.

More to ROI than cost cutting

The fundamental benefit of payment orchestration is the impact on the bottom line. Investing in new technology can be a cost driver, but the ROI here goes beyond cost cutting. SaaS firms tapping payment orchestration can expect improved operational efficiency, new revenue streams, and assistance with evolving regulations.

From this, it’s clear that true ROI can be achieved by adding this new technology, and choosing the right payment expert, will take all the sting out of stepping into the unknown. As the software industry continues to mature, SaaS firms selling payments using payment orchestration will undoubtedly hold or gain competitive advantage in the years to come.

Nikhita Hyett is European Managing Director, BlueSnap

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