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Which Payment Processing Fee Structure is Right for Your Software

Which Payment Processing Fee Structure is Right for Your Software?

Previously, we’ve discussed five payment integration models for your software, but that’s just the tip of the mountain when it comes to deciding your payment strategy. There are several other considerations to keep in mind when integrating payments into your software platform, but an important one revolves around which payment processing fee structure is the best fit for you and your clients. There are three main billing types to choose from, each with their own pros and cons.

Payment processors typically use one of three fee structures when charging for their services – bundled, tiered and interchange plus. Understanding each payment processing fee structure and how it relates to your situation is key to knowing where the true costs lie and widening your revenue opportunities.

  1. Bundled – The first method is referred to as bundled. This option has become a popular solution as of late due to payment processors that mass produce their product offerings for smaller merchants. A prime example of this structure is a flat rate of 2.75 percent or 2.9 percent plus $0.30. Its simplicity is its biggest advantage. On the other hand, it’s not always the most competitive pricing structure. In this method, some factors are not accounted for such as card type, transaction volume or size of transactions, all of which are used to determine pricing in other models.
  2. Tiered – The tiered model is very similar to bundled but in this case some of the transactional data is used to create different pricing tiers. From there, a merchant falls into a certain tier based on several transactional criteria. The number of tiers and how they’re priced can vary between different payment processors, and each tier price can increase over time. This method offers more flexibility than some flat rates, but in the end, there is not a lot of transparency and it’s difficult to compare rates between processors because many of the criteria are arbitrary.
  3. Interchange Plus – This model is sometimes referred to as Cost Plus and is often ideal for larger merchants. Pricing begins with the interchange rate charged by the credit card company and attaches a fixed but negotiable markup. It offers the most transparency to the customer and is recommended for platforms that serve established businesses. Many of the transactional criteria are used to determine the fees associated with each transaction, and the markups can be negotiated between the software provider and the payment processor.

Each one of these models can end up having an enormous impact on the overall revenue potential of your payment strategy. Depending on types of clients you service, determining which model to deploy should be a key part of your strategy.

If you’re interested in understanding how these fee structures impact payments on your platform, Wind River can provide a use-case to help you better see how you and your clients would be impacted.

Additionally, the payment processing fee structure you choose isn’t the only factor to keep in mind. We recently wrote a guide on how fee and revenue models affect your overall revenue potential. Feel free to read the guide for a more in-depth understanding. We’d be happy to answer any questions you may have.


Open Opportunity: Better AR Tools Drive Customer Stickiness

We’re hearing a similar tune from many ERP systems and various vertical management software companies we speak with regarding electronic payments. They are constantly looking for ways to differentiate their products, all while creating more stickiness within their client relationships. One such way that these platforms are taking an opportunity to evaluate this is through the functionality and support they provide clients around their accounts receivable tools and process.

The problem with accounts receivable workflows often begins at the supplier level or with a direct business customer of your software platform. Here we find that many legacy processes are still in place and include inadequate tools to manage these processes. This results in inefficiencies and manual work around the cash collection.

For example, issuing and sending client invoices (both electronic and paper), providing clients with an easy and on-demand method to collect payments, and establishing a process around tracking metrics within collection are all key parts of the accounts receivable process that clients struggle with. Many just don’t have the tools in place to support them around these tasks.

While many ERP platforms and management software may have one or more of the accounts receivable tools needed by their customers, most don’t have all the pieces of the puzzle. This leaves many finance and accounts receivable departments searching for additional resources to increase their efficiency.

This is evidenced by roughly 65% of B2B suppliers within our client portfolio that have decided to leverage additional accounts receivable tools beyond their core ERP/management software platform. Software platforms search for outside resources because they find that building out their own toolkits from scratch can takes years to perfect, and the ROI for such initiatives can take even longer due to the expensive nature of these projects.

Fortunately, there are ways to seamlessly leverage and integrate already established tools to solve these supplier level challenges. The benefits to your platform are as follows.

  • Enhanced Value Proposition – Solves key business problems for clients and increases their overall satisfaction
  • Increased Revenue Opportunity – Up-sells clients on additional products and services that generate additional MRR
  • Greater Stickiness – With increased client satisfaction, client retention is easier on your organization
  • Reduced Costs – Less time and overhead around maintaining a module outside your core competency

Clients of your platform also realize several benefits of integrating stronger accounts receivable tools within their processes.

  • Gained Efficiency – Automates the pieces of the AR process that are currently manual, freeing up staff time for strategic projects
  • Improved Payment Experience for their Customers – On-demand portal with vast payment options to allow payments to be made on the end-clients’ schedule
  • Increased Cash Flow – Enables your clients to collect their outstanding cash and get paid faster
  • Reporting and Analytics – Goes beyond metrics like Days Sales Outstanding and establishes key KPIs to make stronger collection decisions

Wind River Financial provides several tools to help round out your account receivable products offering within your platform. Integrating these tools will create less pain for you and your clients. We’d love to share how we’ve helped other ERP systems broaden their accounts receivable offerings and generate higher revenues. We’d also like to demo our robust accounts receivable toolkit and show you how it can be easily interfaced to any core ERP product or vertical management software.

5 Payment Integration Models for Your Software

Five Payment Integration Models for Your Software

We recently hosted a webinar where we spoke with serial software entrepreneur, Mark Wilson. One particular point of interest was Mark’s process on deciding which payment model to use for his software. There are five payment integration models, each with their own pros and cons.

Mark has had an exciting career in the software space, but it was during his time as CEO and Founder of TermSync that he needed to evaluate payment integration strategies for his Accounts Receivable platform.

Mark knew that payments were rapidly becoming a key feature of their software, but the ways in which to best implement such a strategy could easily become a stumbling block if not properly evaluated. This led to his partnering with Wind River Financial, and together we reviewed five ways to integrate payments to determine the best option for his platform. You can review the webinar in its entirety to learn how Mark decided which model worked best for him.

Choosing the Right Payment Model

Above is an excerpt from the webinar where we introduce the five payment integration models for your software. These approaches vary based on several factors, the most important of which is related to user experience of the merchant as well as which roles are managed by the software provider and payment processor. The level of revenue for the software platform provider increases with each step.

  • Agnostic Model – The agnostic model is used by around half of all software platforms with payment integration. This strategy allows their clients to interface with any payment provider, however, it generates no revenue for the platform.
  • Referral Model – Within a referral model, clients can choose whichever payment provider they wish, although the software provider may refer a few preferred vendors. The software platform can generate a revenue stream but still relies on a payment processor to handle key user experiences such as sales and support.
  • Shared-Sales Model – When a software company decides to leverage an exclusive partnership with one payment provider to power payments, they can offer their clients a much more streamlined and consistent experience. This model also provides opportunity for increased revenue.
  • White Label Model – In a white label approach, a software provider has elected to control a large amount of the payment processing user experience. They are partnering with an exclusive payment processor who is strictly behind the scenes. This allows for significant control, more involvement and a higher revenue potential.
  • ISO Model – If a software platform desires to be its own payment processor, they can follow the ISO model. In this scenario, they have ultimate control over every aspect of payment processing, underwriting, compliance and fraud. This strategy offers the highest amount of potential revenue but comes with significant regulatory compliance and risk.

If you’d like some further reading on these payment integration models, we also have a white paper that breaks down each payment model in more detail. Or if you have a more specific question, feel free to contact us directly.

Rearranging the Risk/Reward Ratio for Software Providers

What comes to mind when you hear the word “risk?” Perhaps you recall the popular strategy board game, Risk, and evenings in your youth spent conquering the world and stealing territories from your friends and younger siblings with a roll of the dice. Or maybe the word suggests hazardous situations or financial gambles.

While these are obviously all natural responses to the word, if you’re an independent software vendor (ISV), the word “risk” is probably more likely to trigger a sweat than fond memories of tabletop world domination.

We get it. In today’s digital world and tech-driven economy, providing software and handling payments can be a risky proposition. As an ISV, you assume risk each day on behalf of your clients as well as your company and its bottom line.

The Gap
While technological strides have been made, providing ISVs with new and better options to process payments, a significant shortfall of these offerings has been the ability to manage the payment experience and help manage payment risk. Some new approaches in the market have emerged, but in many cases are leaving software companies with high liabilities and may require putting up huge reserves to make client approval decisions and grant expedited onboarding. Improper infrastructure to support the associated risk also presents significant challenges over the long-run.

The Answer
Wind River Financial has developed a solution to dramatically offload payment risk, while putting significantly more control for the ISVs to make underwriting decisions, streamlining their clients’ onboarding process and increase their revenue.

A few features of our “risk busting machine” include: automated approval, timely underwriting reviews, fraud monitoring, risk controls, and an integrated processing platform with data encryption and tokenization. These tools help us reduce the PA-DSS and PCI data security scope for you and your clients and ensure compliance with ever-changing payment regulations.

Learn More
Too good to be true? Nope, but we’re happy to prove it to you. Visit our website or contact one of our relationship managers or sales associates to learn more about how WRF is providing payment risk solutions to ISVs like you.


More Money, Less Problems for Software Companies

Most software companies we talk to are looking to do two things, improve profits and reduce problems. When it comes to payment processing, this is not a sentiment you’ll likely hear echoed by independent software vendors (ISVs). Why? Because many ISVs struggle to monetize payments that flow through their software or simplify the process, missing valuable opportunities to grow revenues with less problems.

The Challenges
Many ISVs are challenged with striking the right balance between understanding complex payment industry pricing, taking their fair share and remaining competitive and attractive to clients.

What’s the solution?
A lot of companies we speak with tell us they want to deliver more revenue and a better customer experience. These companies struggle to find the right mix of profit and service. Not knowing the right payment options, methods, and rates can not only be risky, but costly to you and your customers. So what is an ISV to do?

Wind River Financial recently introduced a model that can help simplify your process and dramatically increase your monthly recurring revenue (MRR), bringing meaningful impact to your bottom line.

How it works
It’s not magic, it’s about leveraging the right model and design that has you in mind. We know that in order for you to be successful, you need to be in the driver’s seat. When you work with WRF, we ensure you have the freedom to set payment processing pricing. We also offer interchange optimization and qualification review and provide you with automatic monthly payment review.

What does all of this mean for you? It means increased profitability with additional payment revenue and the ability to secure and maintain the lowest interchange rates for your margin maximization.

Let’s talk
Contact us today to setup a call with a member of our team. Fifteen minutes is all we’ll need to explain how WRF’s model can simplify your processes and increase revenue.


The Esker Story: An Innovative Solution that Puts Customers First

When Esker started looking to add payments to its cloud-based TermSync platform, the company needed a trusted partner that would treat its customers fairly and deliver an innovative solution. Esker chose Wind River Financial, and here’s why.

About Esker
First things first, a little background on Esker. Esker is a leader in cloud-based document process automation. The company’s cloud-based TermSync platform is a product developed to help improve customer communication and payment experience around accounts receivable (AR) and collections management processes.

The need
Esker found that many business-to-business (B2B) suppliers were looking to get paid faster (i.e., reduce their DSO) and enable their customers to make payments more efficiently and without expensive custom development projects.

With the growing prevalence of B2B credit card payments, Esker knew the business case for adding payments to their TermSync platform was compelling.

The challenges
In the company’s search for the right partner to lead them through the process of adding payment to TermSync, a few challenges emerged:

Minimizing risk for loss of card data – Software vendors have increasingly become a high-profile target for credit card breaches and theft. Loss of payment information would severely impact both Esker’s bottom line and its brand reputation.
Avoiding confusion around rules, regulations and compliance – Esker was looking for a hands-on approach. Many providers offered APIs and various integration methods with little guidance as to how to effectively utilize the technology. Unfamiliarity with the credit card industry and nuances associated with integrating B2B credit card payments led to confusion and frustration.
Enabling clients with a solution to manage costs – Many B2B credit card-accepting suppliers were looking for a way to manage their ongoing credit card fees.

Wind River’s solution
Wind River Financial’s solution started with a custom integration project plan specific to Esker’s objectives. Wind River and Esker worked together to outline the scope and then develop a plan to address each challenge. The final result represented a unique and innovative solution, the likes of which had never been seen before in the B2B payment world.

WRF created a hosted page, which eliminated payment information from being transmitted on Esker’s TermSync platform or their customers’ networks. Tokenization was utilized for secure card storage to ensure safety and adherence to best practices.

WRF also implemented key B2B features to manage costs, including:

Surcharge Strategy – Key rule changes in 2013 enabled B2B merchants to pass on the full amount of the fees charged to the cardholder.
Level 3 Qualification Program – Automated passing of key elements to ensure the lowest interchange rate from the card associations.
Ongoing program reviews to ensure satisfaction and program growth – Ongoing reviews are a place to discuss key ongoing service questions, identify potential resolutions and provide marketing support. By engaging in regular joint calls, WRF could consult and relay emerging payment topics and introduce new best practices.

Don’t take our word for it
Here’s what Steve Smith, Esker’s US Chief Operating Officer, had to say:

“Wind River has been a fantastic partner that we have built our AR and collections management product with. We leaned on their expertise in the world of B2B payments to create several payment features that gave our platform a leading edge over some of our competitors. Their approach to treating customers and delivering value aligns exactly with what we were looking for in a strategic partner.”

Read the full story
To learn more about the Esker-WRF partnership and read the full case study, click here.

Learn more
We’d love to add your success story to our file of satisfied customers. Contact us today to learn how WRF can provide your company with solutions that are both innovative and customer-centered.

Software developers and payments: One size doesn’t fit all

Prefer a Custom Fit?

Offering Payments via your software should be tailored to your specific needs
BUYER BEWARE: A “one size fits all” or “out of the box” approach to providing payments through your software is nice in theory, but in practice these programs are often taking on higher expense, reduced control, risk, and complexity that is not necessary. .

Independent Software Vendors (ISVs) face a variety of unique considerations and industry complexities. You have specific requirements to get the job done, so you need a specific solution that will ensure no stone is left unturned and no factor is overlooked.

The benefits of a tailored model for ISVs
Boutique payment integration is powerful for ISVs – below are a few of the benefits you can expect from a custom payment integration solution:
• Management of complex funding requirements and movement
• Payment architecture design
• Navigation of recurring payment environments
• Data security and compliance programs
• EMV certifications
• Custom reporting projects

What the custom solution should look like
Begin with the end in mind” is the second habit of highly effective people according to the late, renowned author and businessman, Stephen Covey. This should be your mantra when searching for a custom integration partner. An effective solution is one that is tailored to your goals and expected outcomes, and develops all components and strategies pursuant to those measurements.

Other key components of custom integration include:
• The partnership agreement – should clearly outline the steps that take your company from A to Z to achieve your goals
• A seamless and efficient solution – if the plan appears “clunky,” the outcomes likely will be too
• Address key factors – elements such as workflow are critical and must be included in any plan for success

Learn more
Wind River Financial is creating successful partnerships with ISVs through customized, boutique payment integration. Our knowledgeable team can serve as your guide through the rapids of potential data loss and exposure so you can have tighter control over your payment environment and stay compliant – learn more.