By Brandon Banks
Many SaaS companies are looking to include an integrated payment solution as part of their software. However, integrating payments into your software can feel like taking a treacherous voyage, with no assurance you’ll reach a safe harbor. There’s an overwhelming amount of technologies and options to consider, and it’s difficult to know where to begin.
Allow us to become your trusty navigator. We’ve traveled the daunting seas of payment processing before, and can help you set a course filled with clear skies and smooth sailing.
Navigating the Sea of Payments
An integrated payment solution is similar to a cargo ship. Your software acts like the ship itself, traversing the Sea of Payments to safely deliver its cargo — payment or money being exchanged for goods or services. The purpose of your ship is to get from its Port of Origin to its Port of Destination.
The Port of Origin (i.e. where ships begin their journey) represents consumers. They initiate a transaction by purchasing goods and/or services from a merchant and send the ship on its journey across the Sea of Payments.
The Port of Destination (i.e. where the ship ends its journey) represents merchants, also known as your customers. They’re the ones that ultimately benefit from your integrated payment solution because it makes it easier for them to accept payments from consumers.
Along the coastline of the Sea of Payments, the payment networks (i.e. Visa, Mastercard, American Express, and Discover) stand proud and tall like lighthouses on the shore. They guide ships safely into port by setting rules and regulations for processing payments.
These lighthouses are necessary because the Sea of Payments can be fraught with violent storms of declined payments which make it difficult to navigate manually, underwater fraud barriers that can damage your ships hull and put your cargo at risk, and unseen chargeback reefs that require precise navigation. You need to ensure your ship is properly equipped to handle any issue that could arise.
Equipping Your Integrated Payments “Ship”
In the United States, only financial institutions — like banks and independent sales organizations (ISOs) — are allowed to oversee the actual transfer of money. These organizations are often referred to as “acquirers” in the context of integrated payments systems. An acquirer acts as the motor and propellers on your ship because they provide the actual payment processing. Without them, your integrated payment system would be dead in the water.
In order to process a payment, the acquirer needs the consumer’s payment information. A point-of-sale (POS) terminal connects the consumer to the acquirer, which then processes and transfers the payment to the merchant. A POS terminal acts like your ship’s navigation system and directs your ship from the Port of Origin to the Port of Destination.
Note: For in-person purchases, the POS terminal is where you swipe or tap your card. For online payments, the POS terminal is where you enter your credit card information. The integrated payment system within your software will act as the POS terminal for your customers.
Your ship also needs a reliable anchor to stabilize it while cargo is being loaded and unloaded. In the world of integrated payments, the anchor is your payment gateway. A payment gateway is a software application that acts as an intermediary between the payment terminal and the acquirer’s systems. It’s responsible for securely transmitting the consumer’s payment information from the POS terminal to the acquirer, and for passing back transaction information to the merchant.
There are a variety of other technologies that play a role in the payment processing ecosystem, such as fraud detection systems, tokenization, and encryption. These financial technologies are like the crew on your ship, working tirelessly to keep everything running smoothly and securely.
Selecting Your Integrated Solution
Now that you have a clearer picture of the payment processing ecosystem, the big question is “Now what?” How do you actually integrate or embed payment processing into your software?
You can attempt to build the entire ship yourself, but that’s a monumental investment in time and funding. Unless you have decades of experience in the payment industry, we recommend you look for a payments partner to help you navigate the Sea of Payments.
An experienced payment partner will act as your ship builder. They’ll build the infrastructure to meet all the necessary compliance and safety standards and ensure your ship is seaworthy for any payment voyage. This allows you to stay focused on your company’s strategic vision instead of being bogged down by the complexity of payment processing.
You should research the four main embedded payment models and decide which one fits your company’s goals and future ambitions. With the right ship and a clear vision, even the roughest seas can be sailed through with ease.