The Path to Payment Control: How Software Companies Can Maximize Revenue and Enterprise ValueVertical SaaS

The Path to Payment Control: How Software Companies Can Maximize Revenue and Enterprise Value

Last Updated on March 22, 2024

For software company executives, maximizing revenue, profitability, and enterprise value is of utmost importance. A key factor in achieving these goals is having a solid integrated payment strategy in place — one that allows for control, ownership, and leverage over customer relationships and payment service contracts.

It’s no secret that strategic buyers and investors are seeking software-as-a-service (SaaS) companies with comprehensive integrated payment strategies, as they understand the importance of flexibility and control in making strategic decisions and changes to payment infrastructure in the future.

But in a world of restrictive contracts with payment partners, how can you know if you have the control you need to demand the highest business valuation possible? In this article, we’ll cover everything you need to know to find a payment partner that will help you achieve your goals instead of becoming an obstacle to your success.

The Importance of Control in Integrated Payments

Control plays a crucial role in your integrated payments strategy. Owning your merchant portfolio (or payment service contract) is an essential aspect of control in the payments industry. This enables you to make strategic decisions, implement new features, and respond to changing market conditions without being tied down by restrictive contracts or third-party limitations.

Drawbacks of Not Having Control and Ownership

Lack of control and ownership of your merchant portfolio can hurt enterprise value and revenue for software companies in several ways, including the following:

  • Reduced flexibility — Without control and ownership, making strategic decisions and changes to the payment infrastructure becomes more challenging.
  • Diminished asset value — The asset value is diminished when controlled entirely by a third-party payment processing partner.
  • Limited opportunities — A lack of control and ownership may result in fewer opportunities to develop new revenue streams and extract more margin from payment processing volume.
  • Hindered growth — Potential strategic buyers or investors may be less interested in companies that lack control and ownership over their payment relationships and service contracts.

Benefits of Having Control and Ownership

On the other hand, having control and ownership of your merchant portfolio offers several advantages, including the following:

  • Increased flexibility — Control and ownership allow for easier implementation of strategic decisions and changes to payment infrastructure.
  • Enhanced asset value — By controlling and owning the customer portfolio, software companies can improve the overall asset value of their business.
  • Greater opportunities — Control and ownership open up additional paths for developing new revenue streams and extracting more margin from payment processing volume.
  • Attractive to investors — Companies that demonstrate control and ownership over their payment relationships and service contracts are more appealing to strategic buyers and investors.

Obtaining Control and Ownership

Obtaining control and ownership over your merchant portfolio can be a daunting task for most software companies. Typically, this involves registering as an Independent Sales Organization (ISO) or a payment company, which comes with a myriad of responsibilities, operational burdens, and costs. It can be difficult for companies that are not payment experts to justify taking on such a challenge.

The Challenge of Becoming an ISO

To become an ISO, a software company must navigate a complex registration process, which includes the following steps:

  1. Signing agreements with card networks like Visa and Mastercard
  2. Partnering with a sponsoring bank
  3. Paying registration fees, which can range from $5,000 to $50,000 per card network (i.e. Visa, MasterCard, American Express, Discover)
  4. Implementing stringent compliance and risk management protocols
  5. Hiring or training staff to handle payment operations, such as sales, support, marketing, risk mitigation, and development

Moreover, the revenue required to justify the costs and responsibilities of becoming an ISO is significant. For these reasons, most software companies shy away from pursuing this route.

The Solution: Find the Right Payment Partner

Fortunately, software executives can achieve control and ownership of their merchant portfolio without the typical operational burdens and costs associated with becoming an ISO. The key is to find a payment partner that not only understands the importance of control and ownership, but also builds it into their contracts.

You need to find a partner that is willing to work with you to develop a tailored strategy. The right payment partner should:

  • Provide paths to control and ownership, along with options for outsourcing payment operations and responsibilities.
  • Be a registered ISO with the necessary infrastructure in place for your company to leverage.
  • Guide you through registering as an ISO and obtaining a Bank Identification Number (BIN), which links all existing and new customers to the software company’s unique designation.

With this type of partnership, you can enjoy the benefits of control and ownership without the pressure of meeting processing minimums or taking on unwanted operational responsibilities.

Why Nexio is the Ideal Partner

Nexio specializes in helping software companies unlock the full potential of their integrated payment strategies. We are dedicated to helping our partners achieve success and maximize the value of their integrated payment strategy. By partnering with Nexio, software companies can:

  • Remove the operational burden and cost associated with becoming an ISO
  • Own their merchant portfolio while outsourcing every aspect of payment operations and infrastructure
  • Avoid processing minimums by relying on Nexio’s existing portfolio of volume

With Nexio, you can take control of your customer relationships and merchant portfolio, which results in increased revenue, profitability, and enterprise value. Don’t miss out on the opportunity to unlock the full potential of your integrated payments — partner with Nexio today.

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