Why ISOs need to embrace software – and how they can do it

By Nick Starai
Nick Starai says independent sales organisations (ISOs) should start thinking about the value proposition of a software-led integrated payment offering.

The traditional payment processing and account management model can only take independent sales organisations (ISOs) so far in today’s landscape. Merchants need omnichannel payment processing to keep pace with the digitally sophisticated consumer landscape that emerged from COVID-19. That puts the onus on service providers to supply integrated, software-led solutions that can support frictionless transactions. But is it really worth the time and investment it takes for an ISO to become an expert in software development?

The answer is a resounding yes. Everyone wins when ISOs turn to software-led solutions. Merchants get an integrated, full-featured payment platform that helps them manage increasingly complex payment journeys and cultivate customer loyalty. The ISOs expand their market reach, strengthen partner relationships, and generate new revenue streams through upsell opportunities. Better yet, there are options for obtaining a platform regardless of your software development experience.

Service providers aren’t insulated from disruptions to the payments ecosystem that are driving merchants to omnichannel offerings. Here’s what your ISO stands to gain from integrated payment solutions and how to acquire, build, or partner on software that fits your business.

The value of integrated payment solutions

Think about the common pain points, inefficiencies, or gaps in your clients’ software applications that hinder their payment capabilities. Chances are, you’ve heard gripes about difficulty processing invoices, POS systems that keep malfunctioning, or one of the many other hurdles businesses face when trying to build full commerce capabilities. There’s a stark need for more convenient and efficient software solutions, which means your ISO’s value proposition to merchants improves significantly when you reach into the software space.

In particular, three advantages stand out:

1. Greater market reach – Some merchants have more substantial and complex payment needs than others. They boast a global presence or support a large customer base and can’t afford significant disruptions to their payments ecosystem. Flexible software solutions that are easy to use and integrate for omnichannel compatibility are a necessity to attract and retain business. 

When you can offer a product that meets all those criteria, you appeal to organisations that may not have considered your ISO previously or even knew of its existence. Moreover, merchants that need software packages to support their payment processing are also likely to have a level of operational strength associated with a larger processing volume. You can expect these accounts to be bigger revenue generators for your ISO.

2. Stickiness – While you’re reaping the benefits of larger, more profitable accounts, you can also count on lower churn among your existing client base. Credit Suisse found that payment platforms with software-integrated solutions see single-digit attrition rates against an industry average of around 15%.

Why? For one, it’s easy for merchants to switch payment processors. Merchants are able to make a relatively easy transition to other merchant acquirers or ISOs in search of better transaction rates. Software, on the other hand, is difficult to replace – the time and effort it takes to install a new platform, transition data into the new system, and then learn how to actually use it is a major hassle. Second, software services ingratiate your ISO deeper into your client accounts. Your integrated payment offering strengthens your partnerships with the merchants you serve.

3. Opportunities to upsell – Once you’re working with larger accounts and your merchant relationships are stronger thanks to your software platform, the stage is set to upsell your clients.

Software integration may start as a way to improve payment processing, but your platform can reach into related products and services that open up new revenue channels, such as payroll management and invoicing. Your merchants are sure to be interested in a more comprehensive software solution that limits the number of providers they need to partner with and the platforms they need to use. You could even use upsell opportunities to save your clients money while improving your organisation’s profitability by offering discounted bundle packages.

Three ways ISOs can embrace software

So, you're ready to take on integrated payment solutions. Now you just need the software. Fortunately, there are options for organisations with all levels of technological maturity and ambition to develop an effective software platform. Your choices can be broken down into three approaches:

1. Hire developers – If your organisation doesn’t have the means to build its own software, but you want the autonomy to create a bespoke platform, one option is to hire a team of developers. When executed properly, a developer team can help bring payment processing together with a software offering, creating a hybrid firm with personnel capable of keeping your organisation at the forefront with payments technology.

This is particularly true if your firm operates in specific industry verticals. In that case, look to bring in developers with experience in those sectors. They’ll understand your merchants’ needs and the designs and functions that appeal to your market and set your organisation apart.

However, starting your own team will require significant investments in both people and resources. You’ll need to offer competitive salaries to attract and retain top-tier talent and then pay for the hardware and software tools for building a platform. 

2. Build the code in-house with existing talent – There is also the hands-on option of creating your own software solution. This is a prudent choice if you or someone at your organisation has software development experience. If not, there are boot camps, online courses, and instructional websites for you and/or your employees to learn coding languages.

In-house coding capabilities will allow you to build sleek, user-friendly integrated payment solutions designed specifically with your vertical niches in mind. Over the long term, your organisation can quickly recognise and respond to emerging trends and respond with informed solutions that set up your company as an industry leader in integrated payments solutions.

This method requires the largest commitment and is by far the most difficult to execute. Although it sets your organisation up for future success, creating a software platform that can rise to the level of your competitors requires a level of coding expertise that doesn’t come easily, even when taking courses.

3. Find an outside partner – You’re not alone if your organisation doesn’t have the necessary technical knowledge to build your own software-led payment platform. Working with an outside partner is the path of least resistance, and it allows your firm to leverage existing tech and developer expertise to relieve the burden of building the tech yourself. Just make sure your partner is a good fit based on your organisation’s offerings, capabilities, and culture. You could create headaches for your merchants (and their customers) if issues with communication, flexibility or shared expectations between you and your partner firm cause friction or limitations in the payment process.

Stay ahead of the curve before you fall behind

The payments ecosystem will only experience further disruption as new technologies penetrate the market. Payment options may become easier and more secure for consumers, but for merchants, it’s a scramble to adopt and apply the offerings their customers demand.

The value proposition of a software-led integrated payment offering will set you apart from your competition, but it’s crucial to get your business ahead of this trend. The longer you wait, the more likely you are to end up playing catch-up.

About the author: Nick Starai is Chief Strategy Officer at NMI, a global payment enablement platform with more than US$180bn of payments processed every year. He has worked for the Chicago-based company for more than 21 years.

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