Payments are an essential element in any business, regardless of size, industry or vertical. Likewise, providing payment capabilities is essential for the software-as-a-service (SaaS) providers, platform businesses and ISVs that enable core business functions.
Historically, businesses had two options: Go the payments route alone or outsource the functionality to a third-party payment company.
In a recent interview with PYMNTS’ Karen Webster, Rich Aberman, co-founder and chief strategy officer at online payment service provider WePay, spoke to the recent emergence of white-label payments solutions, the market opportunities they can provide businesses and what the future holds for this way of enabling payments.
Historically, platforms have shied away from payments, staying on the side of software. But Aberman noted that the two are often so fundamentally intertwined that there’s breakage in decoupling them.
“At a high level, we look at payment processing and services as a feature, not a standalone product,” Aberman said, acknowledging that this point of view is somewhat contrarian, if not full-on disruptive, in the payments industry.
However, this is the view that many businesses take when it comes to payments, especially small and micro businesses that are using software solutions for the first time to enable growth. Payment functionality is another tool to manage their businesses.
“If you’re a plumber and you’ve gone to the bank to open a merchant account — where do you go from there?” Aberman queried. “How are you enabled? Is it a brick they give you to run cards? Do you then have to connect that merchant account to some ISV?”
These questions are outstanding for traditional merchant services providers — and they extend to the digital platform space as well.
A large part of the value comes from getting paid through software, especially as an eCommerce platform. It enables digital providers to automate front-office operations, Aberman said, to get money faster and sync data across various business functions.
If that’s the case, then it doesn’t necessarily make sense for a platform to require users to establish and maintain a separate relationship with a third-party, standalone payment company.
“If you’re a small business that’s intentionally using a SaaS solution to run your business more effectively, you already made the decision on how you want to run your business,” Aberman said. “Any decision above that is just unnecessary overhead.”
In these cases, businesses are looking for turnkey solutions in the cloud — more often than not, this search includes payments.
The industry has started to catch on to this notion of integrated payments in some spaces, largely in the realm of point-of-sale and brick-and-mortar merchants. Following this evolution to its natural conclusion, however, leads to fully integrated, or embedded, payments — where the hardware and certainly the software are all under one brand, one relationship and a single point of contact for support.
“We believe that embedded, branded payments is the new gold standard,” Aberman said, noting that market-leading platforms like Shopify and FreshBooks have already gone in that direction.
The trend looks to accelerate as companies jump on the white-label bandwagon, allowing software platforms to get the benefit of coupling payments together without having to take on the breadth of responsibilities that they’d need to by being in the payments business.
Webster noted how this could be disruptive within the broader payments ecosystem and that the last thing payment providers want is to be reduced to a utility. As a result, they have started to position themselves in different ways outside providing their core functionalities.
What the platforms are realizing likewise is that they’re the ones differentiating the offering — localizing it, verticalizing it for specific merchant categories, sitting in the forefront of customer support and doing the legwork to acquire businesses.
“They feel increasingly entitled to a greater piece of the pie,” Aberman said. “We’ve taken a different approach and acknowledged the role that these ISVs and platforms play in the ecosystem — that they do have a lot of leverage in the conversation.”
But doing everything comes with additional costs. Aberman pointed to risk management as an example. Wanting to own the end-to-end user experience has required platforms to manage risk in-house, as Shopify and MINDBODY have done.
For upstart ISVs and SMB platform companies, it’s a great deal of additional responsibility and effort to take on. Aberman said that leveraging white-label solutions such as that offered by WePay offloads the additional operational responsibility.
“You can own payments as a core competency, as a revenue driver for your business,” Aberman said. “But that doesn’t mean that you need to hire all of these risks and regulatory, operational and technical resources.”
The benefit of offloading that white-label payment solution extends beyond just risk management. Aberman pointed to adapting to new innovations, regulations and compliance, as well as the benefit of tailoring payments to the specific transaction and commerce goals of the platform.
“The beauty of white label is that you really optimize the functionality, either as a subset or by prioritizing certain features over others, for your specific portfolio and customer base,” Aberman said.
From WePay’s perspective, where white-label payments solutions currently resonate the most are in situations where upmarket ISVs are looking to revisit their payments strategies or when SMB SaaS platforms graduate from being gateway agnostic to making strategic investments in their own payments businesses.
Additionally, the opportunities that white label affords resonate when a partnering ISV has already tried to go at payments alone and is beginning to feel the operational load of being a payment facilitator or has suffered an acute risk-based or regulatory event.
In closing, Aberman reiterated that the customization element that white-label payment solutions afford is key: “Eighty percent of payments is reinventing the wheel when you’re building it in-house,” he said, “and 20 percent of it is differentiating your vertical. White label lets us give that 80 percent to you as a service with as much visibility and control as you want and need while optimizing for and capturing that 20 percent that’s portfolio- and use-case–specific.”