Partnerships Become Strategic Reset as ISV Growth Slows

Watch more: Stax Turns People Power Into Competitive Advantage as Margins Tighten

In payments, innovation is both currency and challenge, and distinguishing oneself from the ever-growing crowd of FinTech disruptors and established giants has become more difficult than ever.

As economic headwinds continue to reshape the industry, the perennial “build, buy or partner” debate intensifies, forcing companies to reevaluate their paths to sustainable growth. In that context, Stax Payments, and Chief Transformation Officer Adam Gray, focuses on empowering software-as-a-service (SaaS) platforms, independent software vendors (ISVs) and merchants to unlock new revenue streams and streamline operations.

“As margins tighten, companies have to find new ways to stand out,” Gray said during a recent interview with PYMNTS, as his firm builds on its 2023 acquisition of processing platform APPS.

Moving Beyond the Legacy Players

“There are a lot of legacy players,” he told PYMNTS, “that have vertical integration, but there are not many players in our space [like Stax] that are small enough to innovate” with embedded finance and other offerings. The push to innovate is critical in an environment where software firms have seen revenue growth slow to mid-teen percentage points in recent years, from more than 20% previously. PYMNTS Intelligence’s own research has found that ISVs have seen both payment acceptance and embedded finance significantly increase as a percentage of their revenue streams.

Against this backdrop, the strategic decision of whether to buy, build or partner for technological expansion becomes a key question in plotting current and future strategies.

Stax applies a philosophy to this decision that it also advises its ISVs to consider: identifying one’s core competency — what Gray termed “the anchor” — and then seeking strategic partners or acquisitions that complement that expertise.

“Most successful businesses have gotten there by doing something rare or valuable,” Gray said. “They found out a pain point that they can uniquely solve.”

Gray’s own experience in private equity has informed his own approach to answering the build vs. buy debate.

“When I evaluate buying or partnering, I think about … not just evaluating the technology, but focusing the people and the ability to integrate it,” he said. “It’s really hard to integrate both the people and the technology in a way that will give a seamless experience for your business and your customers.”

Embracing Partnerships

If buying isn’t the right fit, Gray suggested considering strategic partnerships. Here, too, the evaluation extends beyond mere technical capabilities.

“Again, I would evaluate the scalability of the technology when you look out in the market, but also: Do they bring the expertise and availability of people you need to support your business’s mission?” he said. “Will they understand your vertical? Do they have the resources to help you?”

Stax ensures its service offering directly addresses key needs, particularly concerning transparency, convenience and integrated solutions. According to Gray, “It’s not just about providing APIs (application programming interfaces) anymore. It’s about being an extension of ISV that starts with white labeling,” noting that Stax has enabled partners to represent their own brand.

The human touch is essential in navigating areas such as terminal management, specialized healthcare, trust and operating accounts, and surcharging regulations at federal, card brand and state levels. “You need somebody that can help you navigate these based on your customer profile,” he said.

Stax’s “all-in-one” and “single-source” approach aims to simplify inherently complex payment operations. One of its core values, and Gray’s most important missions, is to eliminate what he terms “baton passes” and delays caused by layered escalations.

Historically, an independent sales organization might only answer certain questions before needing to escalate to a gateway, processor or sponsor bank.

“As we bring these together in a vertical world, we’re allowed to operate differently,” Gray said. The vertical integration allows for both technological consolidation of data and synchronized orchestration of functions like fraud controls and card spinning.

Looking ahead, Gray sees significant opportunities, particularly for vertical SaaS platforms and sectors still reliant on legacy payment methods. The paradigm shift toward profitable growth, coupled with the proven revenue generation from embedded payments, positions strategic partnerships as an essential pathway for future success.

As he sums up, “It’s not just about innovation, it’s about connection, not just code.”