Integrated payments seem to be the feature every business wants to add and every software company wants to advertise, and it’s true that they’re becoming a more critical component of payment providers’ jobs. Yet the concept has become such a buzzword that it’s not clear whether these businesses even know what they’re asking for or how it will help them.
Rich Aberman, WePay co-founder and chief strategy officer, recently spoke with Karen Webster to help shed some light on what integrated payments actually do and where they add value for payment providers, all along the chain from the business implementing them to the end consumer.
“It’s hard to be a payment provider today without the capability to integrate payment services into software,” Aberman said. “Saying ‘integrated payments’ is no different at this point than just saying ‘payments.’ All payments eventually will be integrated into some software in some way or another.”
All Aboard the Bandwagon
Aberman said there are a few industries that have already “arrived” in the integrated payments arena. Retail is the classic example, he said: eCommerce completely depends on integrated payments. Brands with a digital presence can’t do business without embedding payments in their online stores.
Online accounting and invoicing are another area where integrated payments have already gained traction, especially among small- to medium-sized businesses (SMBs) and service providers who are now managing their books in the cloud rather than buying desktop software. These SMBs and service providers use integrated payments to slash paper invoicing and enable credit card payments online.
Aberman said marketplaces are yet another category where integrated payments form the backbone. The original marketplace was eBay, but there are many, many more now, including service marketplaces like Uber and Airbnb.
With these categories leading the charge, Aberman said that other, more traditional industries that have not historically accepted credit card payments are now seeing greater penetration.
For instance, taxi drivers didn’t accept credit cards before Uber. Now, that capability is embedded in the micro-business software. And in areas that once relied heavily on pen and paper management, such as government, education, healthcare, construction and property management, WePay and others who power integrated payments have been able to ride the coattails of a general migration toward software.
The Software Acquisition Strategy
IKEA acquired TaskRabbit. Home Depot snapped up Redbeacon. Hotelier Wyndham made room for Love Home Swap. What’s the deal with all these big enterprises acquiring or investing in small software startups? Aberman said there are two reasons for the trend.
First, he said, larger enterprises and retailers are looking for ways to more deeply engage their customer base. They know that customers are participating in certain activities outside their purchase activities and want to tap into that.
For example, IKEA’s move in regards to TaskRabbit makes total sense when one considers that a lot of TaskRabbit gigs probably involved putting together IKEA furniture anyway.
By bringing that startup into its corporate fold, said Aberman, IKEA added value for its customers, increased business for TaskRabbit and took ownership of a greater slice of the purchase experience by extending its influence into the hours and days after the transaction.
The second reason for the trend is the evolution of consumer behavior. Commerce is no longer just about purchasing something from IKEA.com or any other eCommerce site. It’s about purchasing via the Amazon Echo in the kitchen, through Facebook Marketplace and a myriad of other avenues.
In this changing landscape, Aberman said that many businesses fear irrelevance, so they make a concentrated effort to evolve. Bringing in a software platform is one way to do that.
The Bottom Line on Contextual Commerce
Aberman says context and convenience are the core value propositions for almost any software platform.
Context has to do with where the customer is at the point of engagement. Has the brand reached her only after she’s arrived at the eCommerce site, when she’s considering which dresser to buy? Or was the brand there from the beginning, when she was deciding whether she wanted to buy a dresser at all? Maybe the customer looked at Pinterest for ideas or was thinking about the purchase while driving.
Context informs the rest of the purchase decision journey, Aberman said. Consider how banks use this approach. While a customer is online paying off a credit card bill, she may notice she’s been spending a lot at Starbucks. Now is the time for the bank to hit her with an offer — say, to save by earning rewards on purchases at restaurants.
Meanwhile, convenience is purely about removing as much friction as possible between the moment the customer makes the decision to purchase and the end of the transaction.
Aberman compared contextual commerce to QuickBooks online software. Through the platform, an SMB can set up an invoice that is attached to a specific customer. Once it’s paid, receivables and accounting are updated automatically. The credit card transaction is tied to more than just a dollar amount; it’s tied to a person, a project, an item in the inventory and other data elements.
In the same way, contextual commerce connects data points beyond a simple purchase transaction. And also in the same way, the easier a platform is to use, the more valuable it will be to both the business and the customers using it.
There is a feedback loop between demand for software and integrated payments and macro forces at play in the industry.
Automation is one such macro force, said Aberman. The value proposition to SMB owners is simple: spend less time managing the mundane and more time doing what you love and perfecting your craft.
For a property manager, that might mean less time spent chasing down tenants for payments and more time growing the business. At a restaurant, it may mean more time talking to customers and less time hunching over pen and paper management.
Automation can also reduce time and money spent on fighting chargebacks. It can even generate new value by producing data that businesses can use to reward their best customers. In short, it can completely reconfigure how a company does business, and shrewd software developers are looking for ways to build platforms that can offer such a thing.
That’s the billion-dollar question. Aberman said that WePay and most of its competitors are on board with the concept that software is the best way to deliver payments. It enables instant onboarding and low and transparent pricing. It won’t be long before that’s just the new normal.
Therefore, it will be necessary for companies like WePay to go further to differentiate themselves. Aberman said the questions to ask will be twofold.
First, what other services do payments unlock that have synergy when delivered in conjunction with payments? There are opportunities in providing credit and working capital for SMBs, by way of example.
Second, how can a cycle be created in which small businesses and large software platforms meet to serve both of their needs?
Players that participate in an ecosystem with others can build such a network, Aberman said. Enabling software platforms to embed payments adds more value to partnerships by introducing the potential to add even more payments-related services built around that core payments relationship.
Aberman said that WePay is a forerunner in integrated payments for now, but as integrated payments get increasingly commoditized, it could be anyone’s game. WePay and its peers will need to find new ways to provide value or risk losing ground. What’s certain is that integrated payments are now table stakes — the winners and losers will be decided by who’s best positioned to create that virtuous circle of software platforms, SMBs and value-added solutions.