Payment integration is a powerful way to improve the user experience on any software platform by offering benefits that extend far beyond simple transaction processing. However, many business owners may hesitate to hand over such a critical function to an outside party.
During a PaymentsJournal podcast, Jessica Tate, manager of customer success at CSG Forte, Nathan Miller, president and founder of Rentec Direct, and Don Apgar, director of merchant payments at Javelin Strategy & Research, discussed the benefits of integrating payments, the remarkable growth it can drive, and the future of payments integration in the software industry.
One-Stop Shop
One of the central benefits of payment integration is its ability to keep users engaged on the platform. However, users also have high expectations for the payment experience, including access to diverse payment options and secure transactions. Meeting these demands can be a heavy lift, which is why many software companies partner with dedicated payment providers.
“It’s a one-stop shop, which improves the user experience,” Tate said. “Merchants can offer multiple payment options like ACH, credit cards or debit cards, which accommodates diverse customer preferences. There are also increased revenue opportunities. Some payment partners offer revenue-sharing models, while others will bill the merchant directly. Or we can bill a partner and the partner will, in turn, bill their merchants.”
Integrating payments also opens opportunities for upselling and cross selling by leveraging insights from payment data to identify new products or services to offer. As an added benefit, many payment processors can leverage their connections to a larger framework of financial institutions and processors.
Most payment partners offer advanced fraud detection and prevention tools alongside their payment integration solutions. They also offer data encryption and compliance tools to ensure secure handling of sensitive payment data, which helps maintain trust with end users.
“For a software company like us, we want to focus on what we do well,” Miller said. “We write software for property managers and landlords, and our job is to streamline their day and make their life and their processes easier. Payment processing is a whole different beast, and we wouldn’t want to recreate that when it’s already been created by others. It makes a whole lot more sense for us to integrate into an existing solution.”
A Growth Driver
Better payment processing improves the user experience, and is also a powerful growth driver for organizations. Faster transactions improve cash flow, allowing companies to reinvest in operations more quickly. Reducing payment failures also ensures consistent revenue.
“A lot of software companies are realizing that payments are not only integral to the functionality of the software, but a good revenue driver as well,” Apgar said. “Our research found that less than half of merchants now source their payment acceptance or merchant account from their bank versus their technology provider, which really speaks to the fact that payments align better with the technology workflow than with a bank.”
Turning to a dedicated payment partner can help software platforms implement a recurring payments model for steady and predictable income streams from subscriptions. Organizations will also be able to streamline their operations because all services and functionalities are available on a single platform.
“It reduces the need to switch between different systems or interfaces for the customer, and in tandem with that comes increased time efficiency,” Tate said. “Payments platforms can provide real-time data sharing across departments or teams, which enhances collaboration. Software companies can also leverage integrated data to offer tailored recommendations or services to their customers, which enhances the user experience by customizing it.”
A Double-Pronged Challenge
In the case of property managers, the ability to accept online payments is customers’ most requested feature. Adding payment support can not only bring in new customers, it can also help existing customers add more services.
“Payments is probably the number one reason for a software like ours to grow,” Miller said. “In fact, just in the last four years, we doubled the percentage of online payments that we were taking, while simultaneously adding about 1,200 customers a year. That’s a huge growth percentage that’s based around online payments.”
One of the major challenges in the property management space is that renters come from all backgrounds and span a wide range of ages, and some demographics are more familiar with (and comfortable using) payments technology than others. This means the platform must be simple enough for all users to make or schedule a rent payment in just a few clicks.
Simplifying billing related to merchant accounts presents another challenge, because these accounts are often highly complex. The right payments platform can ensure that property managers only see the charges they need to see on their bill.
“There are two layers of the customer experience in the software space,” Apgar said. “There are the merchants, in this case the landlords, who are looking for better reconciliation, automated posting and the business tools to manage payments better. At the same time, the end user is looking for an easier, low-friction way to pay. The software company has a double-pronged challenge to make it easier for both the merchant, [who’s] their direct customer, and for the end user.”
An Instant Payments World
The ease of use for all customers is one of the reasons that payments will continue to be integrated into the software landscape across all verticals. However, new challenges will arise as emerging new payments technologies, especially faster and instant payments, are connected to software offerings.
“Our customers love the idea of instant payments,” Miller said. “They want a tenant to make a payment and for it to land in their bank account three seconds later. On the flip side, when they pay their owner, they want to be able to run the report, email the report to the owner and the owner to be able to check their bank balance and it’s there. The dream of an instant payments world is always there.”
Unfortunately, with faster payments comes higher potential for fraud. When there is a one- or two-day hold, all parties have a chance to evaluate the transaction. That safety net isn’t there with instant payments, so it is important that the software companies and payments providers that are moving toward instant payments acceptance understand the risks.
Aligning With Payments
The risks associated with payments processing are one of the main reasons why many software companies are turning to payments platforms. In addition to fraud concerns, platforms must also be aware of the Payment Card Industry (PCI) standards and any local regulations.
The goal is to find a partner that can mitigate all these risks while facilitating the best user experience. The partner should be equipped to support the platform’s current payments volume, but also able to scale as the company grows.
“My biggest advice would be to understand your business needs and your user needs,” Tate said. “How do payments align with your product? Are you facilitating rent payments, subscriptions, one-time purchases or marketplace transactions? All these things shape your payment integration strategy and help you create a seamless, intuitive payment experience.”
