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Half of Software Sector Marketplaces Cite Operational Upgrades as Top Innovation Priority

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Payment facilitators (PayFacs), independent software vendors (ISVs) and marketplaces find themselves in an era where navigating a fiercely competitive eCommerce landscape, filled with interrelated opportunities and challenges, is imperative for success. 

Thriving in their distinctive domains requires these providers to adopt different innovative solutions as failure to do so poses a significant risk of falling behind. 

In the software publishing industry, for instance, these providers differ in the innovation strategies employed, according to findings detailed in “The Embedded Finance Ecosystem: Software Publishing Edition,” a PYMNTS Intelligence and Carat from Fiserv collaboration. 

According to the research study, marketplaces prioritize operational enhancements more than other players. In fact, 50% of marketplaces focus on this area, which is almost six times higher than the rate observed among PayFacs (8.3%) and exceeds the average of 40% across all surveyed platforms. 

Prioritizing operational enhancements empowers marketplaces to streamline processes and handle large volumes of transactions efficiently, ensuring a seamless experience for their customers. Following operational upgrades, the second-highest innovation priority is strategic business growth, cited by 25%.

The study also found that 70% of marketplaces in the software industry are interested in enhancing or introducing short-term merchant credit offerings by providing customers with new options for efficient cash flow management. This move enables their business customers to swiftly access funds, enhancing overall financial efficiency.

Software sector PayFacs, on the other hand, show a strong interest in digital wallets, which enables them to provide more convenient and secure payment options for their customers. 

In fact, it’s not so surprising that over 70% of PayFacs providing such services are actively seeking to strengthen their capabilities in this domain — a percentage significantly higher than observed among ISVs and marketplaces in the sector.

Read more: Nearly 3 in 5 PayFacs Exclusively Support Digital Payments Online or Via an App

PayFacs also prioritize risk management and compliance (25%) and customer experience (29%), enabling them to adhere to regulatory requirements and maintain the highest level of security for their customers. 

When it comes to ISVs, the study found that these providers tend to focus equally on operational enhancement (26%) and strategic business growth (26%). This balanced approach appears to be ISVs’ strategic approach to staying competitive in the dynamic software publishing industry, allowing them to improve their internal processes while also focusing on expanding their business and market presence.

Meanwhile, PYMNTS reported earlier this month that Payroc has introduced a PayByCloud solution for ISVs, a solution designed to streamline omnichannel payment integrations for these providers, and providing them with increased efficiency in transaction facilitation.

Read also: 75% of ISVs and Marketplaces Plan to Enhance Existing Payment Capabilities

The report also sheds light on the challenges faced by these players. Nearly 30% of ISVs serving the software publishing industry cite both system integration issues and lack of data for decision-making as their biggest obstacle to launching innovative products. On the other hand, PayFacs and marketplaces face fewer difficulties in these areas, allowing them to focus on other aspects of innovation.

Complicated internal decision-making procedures are another key obstacle for marketplaces catering to the software publishing segment, 25% of who cite this as their most significant challenge — almost double the 13% average across all marketplaces and considerably higher than the 8.3% observed among their PayFac counterparts. 

“This calls attention to the somewhat unique and substantial barriers that ISVs and marketplaces must overcome to complete innovation life cycles,” the report noted.