Nearly 30% of ISVs Say System Integration Issues Make It Harder to Innovate

ISVs, payments innovation

The software publishing industry is undergoing significant changes as key players seek to enhance customer engagement and tap new revenue streams through the embedded finance ecosystem. 

This ecosystem includes payment facilitators (PayFacs), independent software vendors (ISVs) and marketplaces, all of which are increasingly rolling out innovations to maintain their competitive edge. These developments are reshaping the future of eCommerce and have the potential to redefine the market stance of software industry players. 

But implementing innovation is not without its challenges, as highlighted in “The Embedded Finance Ecosystem: Software Publishing Edition,” a PYMNTS Intelligence and Carat from Fiserv collaboration. In fact, ISVs serving the software publishing sector face multiple hurdles when it comes to rolling out innovations for payments processing. 

This includes system integration issues, cited by 26% of ISVs serving the software producers and publishing industry as their primary obstacle to launching new products — double the 13% average for all ISVs. PayFacs and marketplaces have less difficulties in this area, however, with only 8% and 15%, respectively, citing these issues as their primary challenge. 

obstacles to innovation

Data availability is also a significant obstacle for ISVs. Of those that cater to the software publishing market, 26% say that a lack of data is a major hindrance to making decisions, surpassing the 10% average for all ISVs. Here, too, this issue has a smaller impact on PayFacs (17%) and marketplaces (10%), suggesting these providers are generally less impacted by data scarcity compared to ISVs.

Another major obstacle is complicated internal decision-making procedures, which are especially problematic for marketplaces. According to the report, this is the biggest challenge faced by 25% of the marketplaces catering to the software publishing sector, significantly higher than the 8.3% observed among their PayFac counterparts and nearly twice the average of 13% across all marketplaces. 

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

The report also revealed different innovation strategies among PayFacs, ISVs and marketplaces. PayFacs prioritize risk management and compliance, recognizing the importance of these factors in the software publishing industry. 

On the other hand, marketplaces emphasize operational enhancements, focusing on improving their processes to better serve their customers. ISVs weigh equally the importance of operational enhancement and strategic business growth.

Additionally, more than 70% of software industry PayFacs offer digital wallets and are highly interested in enhancing these capabilities. This is a notably higher rate compared to ISVs and marketplaces in the sector. 

In fact, PayFacs are strategically investing in the digital wallet space, recognizing its potential to redefine their market position. The study also reveals that PayFacs in the software industry process 47% more payments via digital wallets than the retail segment, indicating their strategic focus on this area.