Vertically-focused Software-as-a-Service platforms scaling to the next level have discovered an effective growth engine: embedding payments and financial services into their core software. This concept of “better together” delivers more value to a software provider’s business clients and promises to generate significant revenue while increasing customer lifetime value.
According to Bain Capital, the US embedded finance market has reached $22 billion and will grow to $51 billion by 2026, with $20B attributed to payment acceptance and distribution.
Software company leaders should assess potential embedded payments partners on various criteria, including the technology platform, product features, developer environment, and support. Adequate due diligence ensures the best outcome for the software company and its customers.
Please don’t get caught blindsided when it’s time to sign that contract! Be sure to add a review of commercial terms early in the process, or you could waste valuable time only to discover unfriendly clauses relating to pricing, ownership, exclusivity, and more.
Commonsense contract terms put software companies in the driver’s seat
Most commercial contracts include restrictive terms that favor the provider and require time-consuming negotiations with the client. Software companies are at a disadvantage when negotiating payment processing terms because they don’t have the in-house depth of knowledge necessary to uncover and avoid any “gotchas.”
It’s time to flip the narrative. Find a provider that has a client-friendly contract that makes it easy to understand the commercial details early in your discovery process. You’ll save time, resources, and money and ultimately enter a relationship based on mutual trust.
Find a provider that is 100% focused on helping software companies monetize payments, not one that also solicits merchants directly.
Here are six key questions to ask during your evaluation of a provider’s processing agreement:
Can I put my brand front and center?
You’re adding payments as features in your software, under your brand. Understand where, if at all, a payment provider’s brand shows up. The provider’s brand should be completely transparent to the merchant.
Who owns risk and compliance?
You understand your core software, but you shouldn’t have to become an expert in everything related to payment processing and payouts. Ensure that your payments provider is entirely responsible for all processes related to managing risk, PCI compliance, merchant onboarding, and billing.
Is there an early termination clause?
Beware of contracts that lock you into a relationship or automatically renew for a set period and avoid anyone that assesses early termination fees. A partner committed to your success will win your business one day, one month, and one year at a time by extending a high level of integrity. Look for an ethical agreement that allows either party to terminate at any time.
Is there an exclusivity clause?
Requiring a software company to only work with one provider limits the ability to match customer needs with capabilities, especially if you expand into new vertical segments that call for new features. Only enter non-exclusive contracts so you can choose where to board your customers based on the best fit.
Are there minimum processing requirements?
You’re adding a new feature to your software. Customers may take a little while to adapt and switch to your payment solution. Any provider that requires a minimum monthly processing volume and charges fees if you don’t maintain that level does not have your best interest at heart. A true partner will help you develop and deliver programs to drive merchant adoption.
What about merchant portability? Who owns the data?
These are YOUR customers! If you decide to switch providers, don’t let a third-party processor keep the merchant contracts and the associated revenue. Ensure that you can effortlessly transfer customers to another payment processor at any time without restriction. And don’t forget the linked data: merchant processing data, onboarding data, de-tokenized card data, and even terminals.
Platforms deserve a transparent, friendly payments-as-a-service model that lets them embed payments successfully into every aspect of their business to monetize more of the payment stream without the underlying liability. Everything about Rainforest has been built intentionally with platforms in mind.
Your payment revenue fuels our success. We bring the people, processes, and technology to make that happen. Grow with us. Reach out today.
