Why Software (SaaS) is Being Called the ‘Future of Payments’ and How This Movement Has Put Payment Facilitation at the Forefront of Every FinTech Discussion

In late 2014 and 2015, after having spent the previous 27 years working for major processors and owning/operating ISO’s, I found myself having to start thinking about payments differently than I ever had before. The world I had grown up in from the time I was a 17-year old kid crawling under counters and installing credit card terminals to now running my own ISO, had changed right before my eyes; and it happened really fast.  

My ISO, which was called Singular Payments, was what I would consider to be a first mover in terms of going to market with flat rate pricing when everyone else was selling Interchange Plus or Tiered (Qual, Mid and Non). We had good success leveraging a Direct-to-Merchant selling model where we were acquiring customers one at a time. The markets we were targeting were largely healthcare centric and included doctors, dentists and vets. Most of our prospects and clients used practice management software to run their practice and almost all of them offered their customers the ability to leverage one of their existing gateway or processor integrations to obtain a merchant account. From 2009 to, really, mid-2015, we never had much of an issue convincing business owners to use a stand-beside (or stand-alone) solution in favor of the integrated options that were available to them through their software provider. At the end of the day, they would almost always trade better economics for simplicity and convenience all day long, but that mindset began to change as Stripe entered the space. As a result, the software community began to wake up to the reality that they were not meaningful participants in the revenue stream associated with the payments that were flowing across their platforms. The most remarkable thing I saw happen during this time was watching how the sales conversations with merchants went from price being the first topic of conversation, to the last, as the 2.90% + $.30 “flat rate” began to permeate the industry, driven in large part by the entrance of these mega PayFacs onto the scene. 

Over the last 5+ years there’s been a massive shift in merchant acquiring. We’ve watched ISO’s move away from a sales and marketing focus and commit themselves to becoming technology companies. Customer acquisition models have evolved from the traditional “door knockers” and phone rooms filled with folks “dialing for dollars”, to the more sophisticated and scale oriented partner model. Times they are a changin’, and if you’re a player in the payments sector who isn’t changing with them, well, you’re probably not long for this world. And, if you’re a Software company that has not yet started to benefit substantially from successfully executing upon a payment monetization strategy, it’s time you do

In this blog series Paymogy will tackle topics that are relevant to the whole discussion around the current state of the industry, how we got here and how things are evolving. Most importantly, we’ll look at how savvy and informed SaaS companies will continue to disrupt the payments landscape for the foreseeable future. 

Vaden Landers