Integrated payments: Powering the one-to-many payments ecosystem

PaymentEye recently spoke to Carla Erlick, SVP Business Development at Paysafe, about integrated payments and the crucial role they play in supporting business growth

What are integrated payments?

Integrated payments are the invisible force that underpin the one-to-many payments ecosystem; they allow Value Added Resellers (VARs), Independent Service Vendors (ISVs) and Software as a Service (SaaS) e-commerce platforms to provide a ‘one-stop-shop’ solution to their merchant clients. They do this by combining payment processing with other vital business tools – such as points of sale, Customer Relationship Management (CRM), accounting, scheduling, and marketing – within the confines of a single platform or application.

In today’s fast-moving world, merchants need a way of processing payments quickly and securely, and in a way which reflects the needs of their customers. However, the onboarding process, which is where new merchants are added to the VARs, ISVs or SaaS’ platform, can often be slow, with complex and costly set-up fees. Integrated solutions not only remove these pain points; they also help support business growth through a number of unique benefits.

Could you tell us a bit more about these benefits?

The right integrated payments solution leverages state of the art APIs, making it a fast and simple way for ISVs/VARs (developers, fintechs etc.) to integrate payments capabilities into their core offering. This single point of integration allows businesses to increase their merchant enrollment as merchants no longer require multiple solutions to process different types of transactions. In addition, with the right partner that has connectivity to global payment rails, the ISVs/VARs can extend their reach into new territories as they’re able to support the local currency and payment methods in these markets. This latter point is proving to be a really exciting game changer for many businesses that we’re speaking to.

Is this something all acquirers and PSPs are promoting?

No it isn’t, simply because not all acquirers and PSPs are structured to be able to handle such a complex ecosystem which is heavily dependent on technology. Not only do PSPs need to be able to provide the things one might expect from a reliable payments partner – frictionless onboarding, a robust payment gateway, the ability to accept a wide range of payment methods, watertight security and risk management, etc –  all of this needs to be made available via user-friendly APIs, supported round-the-clock by a team of local experts and detailed back end reporting.

Which sectors have been the earliest adopters of integrated payments?

We have seen strong growth in the membership platform sector, particularly in the health and well-being and professional association industries. For example, gym membership platforms may integrate a global payment solution which is then white labelled to serve smaller gyms and yoga studios. This allows these merchants to provide a holistic service – everything from class scheduling to membership management, and most crucially, online, recurring or on-site payments. We have also seen significant traction in education, field service and donor management platforms as well as gig marketplaces.

Which industries have been slower to adopt?

Enterprise platforms have been slower to adopt integrated payments strategies. Industries like healthcare, insurance and supply chain management have complex infrastructures and legacy technology that make adoption of some of the latest integrated payment technologies a challenge.

It’s quite likely that there may be a switch from players who have the market share today, to smaller, more agile organisations that are better placed to launch apps and offer a better customer service than their larger counterparts. Large organisations and incumbents are starting to realise that if they don’t embrace new payment technologies, they’re going to lose their market share to more tech-savvy competitors.

Where do integrated payments have potential to cause the greatest market disruption?

One of the biggest markets set to benefit from integrated payments is tech. Fintech start-ups, whether based in Silicon Valley or London’s Silicon Roundabout, are constantly coming up with new and interesting apps and tools, but often struggle to monetise them. Integrated payments are a great fit for fintech businesses because they allow them to focus on what they do best, and leave the payments to the experts; and because they’re tech-savvy, they can often manage the implementation themselves, while knowing exactly what features and payment methods their users desire. Integrated payments provide a way for these start-ups to monetize their offerings and start to turn a profit through a share of payment revenue.

There is also huge scope for the field service sector. In the event of a boiler breakdown for example, a platform that allows engineers to accept payments while on-site is beneficial for everyone involved as it eliminates the need for bank transfers or cheques, cuts down on transaction processing times, and reduces admin. Along the same lines, imagine a home renovation project where you can receive an estimate electronically, make a deposit online or in app and pay the balance online using your card on file or on-site upon completion of work. While an individual engineer may be a sole trader or run a micro-business, if 5,000 engineers can be onboarded, this is an easily scalable market and you’re looking at a very different, very profitable scenario. Again, because the onboarding process is so streamlined, engineers can start accepting payments almost immediately – removing the barriers that may have prevented the individual from implementing this type of solution themselves.

In the US, we’re seeing growth in the property rental market. Many renters pay their rent via cash and cheques, but this is beginning to shift towards payments being made by e-cheques, direct debits and credit cards via rent management platforms.

Is the US leading the charge here then?

I’d say so, yes. Some of the biggest adopters of integrated payments are US businesses, or those who do most of their business in the US, and as such there is a sense that they are setting the pace for their UK counterparts. However, with the UK fintech industry growing as it is, and showing no signs of slowing anytime soon, I anticipate a significant uplift in integrated payments adoption in the next few years – both in the UK and throughout Europe.

With integrated payments working on a one-to-many model, how difficult is it to complete KYC and KYB checks as part of the onboarding process?

Onboarding is seen as one of the biggest challenges in the one-to-many payments model, but it doesn’t have to be. By using a fully automated User Interface (UI) or API – instead of traditional paper applications – back-end checks and decisions can be made in real-time; meaning merchants can start trading straight away. This eliminates paper, wet signatures, and a lot of unnecessary admin and friction.

There are also complexities around increasingly popular “freelance marketplaces”. These are markets that rely on the prevalence of freelance, short-term or contract work. It can be complicated for PSPs and acquirers to have full visibility on where transactions ultimately end-up from these types of business models, and payment providers need to ensure that funds at the end of the transaction chain aren’t being used for illegal activity or wrongdoing. I believe this is an area that will need to be more regulated in time and payment providers will pave the way for the technology and regulatory changes needed.

Are integrated payments the next big thing for the payments industry?

I absolutely believe that integrated payments are going to be a hugely significant component for many payment processors – but probably not all. Some, like us, will choose to operate in this area and others will shy away due to the complex nature of the industry.

As always, merchant business growth and consumer behaviours and expectations are intimately linked. Consumers should continue to remain oblivious to the ‘invisible payments’ that the integrated payments model offers, however they will be the first to leave a merchant and search for an alternative should they offer a disjointed or unavailable payment process and experience.

Ultimately, the merchants that succeed are the ones leveraging a platform with an integrated payment solution. In order to land grab market share, platforms are going to need to make it simple for their sub-merchants to adopt new technology – including payments. Payment processors that have a good understanding of the market are very well positioned to facilitate this process.

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