What can ISVs gain from an embedded payments solution?

A guest editorial by Paul Clarke, chief growth officer at Cashflows

At a 2028 projected reach of $5.01 billion, the compound annual growth rate (CAGR) of the Independent Software Vendor  industry is at the highest it has been in the past five years, pegged at 11% between 2023 -2028. However, this brings about higher competition and the constant burden to provide personalised and pioneering solutions that are more customer-facing.

One key strategy for ISVs companies lies in the direct embedding of payment processing facilities onto their software.  Merchants, ISVs and end users should not consider integrated payment solutions merely as a bonus, but rather an integral feature necessary for building up value. Below, is an exploration of the benefits of embedded payment solutions for ISV stakeholders.

Defining ISVs 

ISVs are individuals or companies that specialise in producing and selling software for mass and niche industries. Through using accounting software and customer relationship management (CRM) tools, ISVs meet a varied number of organisational needs with either a single solution or a tailor-made system. By embedding payment processing capabilities, ISVs can enhance both their performance and strength.

The theory behind integrated payments  

Integrated payments refer to payment processing systems embedded within other software solutions used by businesses. Unlike traditional methods, in which users are redirected to a third-party payment processor, integrated systems handle transactions seamlessly within the software. This ensures a unified experience for users and eliminates the friction often associated with multi-step payment processes. For example, if a piece of software had purchasable extra functionality, then it could be bought and paid for within the software itself. 

Each integrated payment solution is unique, as businesses have diverse digital ecosystems. At its core, the goal of an integrated payment system is to streamline processes, enhance security, and deliver a better customer experience.

Five reasons ISVs need an embedded payments solution 

1. Amplified security for customers: Security is a top concern for businesses and their customers. Traditional payment methods, which often involve redirection to external processors, introduce vulnerabilities where sensitive financial data could be exposed. Integrated payment systems mitigate this risk by embedding security features like tokenisation and adhering to PCI DSS compliance standards. By prioritising security, ISVs can instill confidence in end users, ensuring their data is protected at every transaction stage.
2. Simplified user experience: A seamless checkout process is critical in reducing cart abandonment rates and boosting customer satisfaction. Integrated payment solutions allow users to complete transactions without leaving the software interface. This “one-page” approach eliminates unnecessary steps and distractions, creating a frictionless experience that aligns with modern customer expectations. For ISVs, this translates to higher user retention and satisfaction rates.
3. Operational efficiency for merchants: Merchants benefit significantly from the automation capabilities of integrated payment systems. Tasks like payment record entry, reconciliation, and accounting, which are often manual and time-consuming, can be automated. This not only reduces the risk of human error but also frees up valuable time for merchants to focus on growing their businesses. Moreover, integrated payments enable faster transaction processing, ensuring merchants get paid promptly and improving cash flow.
4. Additional revenue streams: By offering integrated payment capabilities, ISVs can differentiate their software in a crowded market. This added functionality not only enhances the software’s value proposition but also creates new revenue streams for ISVs through transaction fees or revenue-sharing models. Additionally, embedding payment solutions increases the overall valuation of the software, making it a more attractive offering for investors and partners.
5. Modern and personalised checkout experiences: Integrated payment systems also allow ISVs to offer businesses customisable checkout experiences that align with their brand identity. With technologies like JavaScript libraries, businesses can design payment processes that are visually appealing and intuitive. Mobile responsiveness ensures that the checkout experience is optimised across all devices, further enhancing usability. This level of personalisation strengthens brand loyalty and trust among customers.

The surge in integrated payments adoption 

The need for integrated payments solutions has surged in recent years, with 70% of Small and Medium Businesses (SMBs) rolling out embedded payment solutions. For these SMBs, embedded payments have been a game changer; studies have shown it as a growth catalyst aiding in improved client experiences Additionally, 82% merchants stated willingness to onboard payment solutions in the upcoming months. This strong move towards embedded payments results for ‘the need for speed’ rate in payment process expected by both merchants and consumers and digitalisation. 

This represents an important chance for ISVs to achieve higher conversion, meet market demand and position themselves as pioneers in the payment integration space. By integrating payment capabilities, ISVs can cater to the growing expectations of SMBs and their customers, providing solutions that not only simplify payments but also drive revenue and efficiency. Though the benefits of embedded payments are apparent, there remain obstacles for the implementation of these solutions. 41% of businesses report a lack of resources and time and 21% state difficulty in vendor selection as the top barriers. However, advancements in technology and increased support from software providers are helping to lower these barriers. Developer-friendly tools, testing platforms, and robust partner ecosystems are making it easier than ever for ISVs to embed payment solutions into their software.

The next phase of integrated payments for ISVs

As commerce continues to be digitalised, payment solutions will be increasingly essential for ISVs. These solutions will catapult growth through the provision of an unparalleled user experience and promote customer loyalty. Integrating payment systems into software solutions goes beyond simply processing transactions, transforms the way businesses and customers interact with payments. By creating a seamless, secure and visually appealing checkout experience, ISVs can set new standards in digital commerce and establish themselves as industry innovators.

Image: Cashflows

Guest Editorial This article was produced specially for Fintech Intel by an expert guest contributor.