Payment gateway integration

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Strategically+partnering+with+SAAS+Providers+and+Developers+to+drive+more+revenue+
www.AgilePayments.com+888.729.4968+info@AgilePayments.com+
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Payment Gateway Integration: A Growth Strategy for developers and SAAS
providers
Abstract: Payment Gateways play an integral role in ecommerce and the ability to
embed payment-processing functionality inside applications. Authorize.net
founded in 1996 was the first to market.
There are now multiple providers of
gateway services and although the
technical capabilities have evolved
the role of the gateway remains the
same: to provide a secure method of
transmitting payment data from the
merchant to the back end payment
processor.
For many developers and SAAS providers choosing their payment gateway
partner[s] is not a decision driven by the potential for the partner to actually help
grow their business. Integrate with usual suspects in gateway space, hand off the
customer and hope for the best is somewhat standard. Support and funding
issues, data hostaging, customer confusion on gateway versus merchant
account, lack of payment options [specifically for recurring payments] and more
can leave clients frustrated and looking for alternatives.
This paper explores these issues and presents alternatives that may lead to
happier, more “sticky” users as well as generate additional revenue streams for
the integrating application and its stakeholders.

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History of Payment Gateways:
In 1996 Authorize.net was founded by Jeff Knowles who saw the need for secure
methods to process non face to face credit card payments. The Authorize.net
gateway allowed merchants and developers to accept credit card payments
online and in non-swipe transactions routing the transactions to the back end
processor. Common credit card back end processors include Elavon, FirstData,
Global and Vantiv among others.
Authorize.net has subsequently changed ownership multiple times and is now a
Visa owned entity.
Other well known gateway providers include PayPal [PayFlow], BrainTree [now
owned by PayPal], Chase, Paymentech and more.
With PCI compliance demands gateway
providers have had to manage sensitive data
storage and the majority accomplish this using
tokenization [exchanging full card number with
replacement “tokens’ and vaulting data]. By
doing so the merchant or developer does not
expose sensitive card data in their applications.
This can create issues for the merchant. If the merchant changes their
software/ASP application and needs to migrate full credit card data they may
experience issues in being able to get full card data from the gateway provider.
The payment gateway provider MAY have a defined process for the secure data
hand off but there are providers who either refuse to help in the process or
charge significant fees to do so. The migration process can vary from a few days
to a few months depending on the provider. For the merchant this can be
extremely frustrating and typically an issue they never expected until it became
important to them. Being aware of these eventualities allows you to make a more
informed choice in your gateway partner.

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Common reasons for integrating with a Payment Gateway
Typically the decision to integrate with a payment gateway has been motivated
by a fairly small number of factors and is not typically a strategic decision. Some
common reasons:
• The usual suspects: Integrating with well known gateways eg
Authorize.net is expected as the name is known and recognized.
• Ease of deployment: If the developer can integrate quickly and the
development tools are easy to work with that makes the gateway
attractive. In some cases ease of deployment may also come with a
payment aggregation model whereby the end user merchant does not own
their processing account and has few options if problems arise.
• Ability to process in multiple countries.
• Client demand: if a large user asks the developer to use a specific
gateway [possibly to use an existing merchant account] this can be the
motivation.
Reasons why choosing Payment Gateway partner needs to be more
strategic
The typical payment gateway operates as a separate silo from your core
business. Your customer needs to accept payment and they leave your
ecosystem and interact with the gateway silo.
Once the developer/SAAS provider has integrated, their
end user client is typically left to establish a merchant
account, connect to the payment gateway and then enter
credentials into the application. This process can be
confusing to the end user, many of whom do not
understand the distinction between a merchant account
and the gateway. There is also room for confusion in the
credentials process.
In today’s business world client acquisition costs are very high. Competition for
these clients can be fierce and with more technology options available your
potential users can see you as one of many solution providers. Handing over a
new user to a payment gateway provider without well thought out processes and
guidance can lead to frustration and confusion-certainly enough to make the
initial interaction with your product a less than stellar experience. What happens
when your users need payment related support?

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Relying on a very large company to make your clients feel like they have been
well taken care of [or helped at all] can be problematic at best.
Payment Options
Lack of payment options is also a common issue with the majority of gateway
providers. If your service offers any kind of recurring payment or subscription or
re-billing option then multiple payment options are a must. An ACH [echeck]
options can save the end user 90%+ on processing fees [compared with credit
cards]. As an example consider a company billing $100/month to 2500
customers. If all these payments are collected via credit card then the monthly
processing fees would likely be somewhere in the $6,000 range [estimating 2.5%
as total cost]. Contrast this with an ACH option-the fees are likely $600 [based on
25 cents per transaction and no %]. In this example if half of the subscription
billers were using the ACH option your client saves around $30,000 per year. The
dramatic savings can become a sales tool and product differentiator for your
application. If your application does not offer ACH and your competition does
how do you compete with the savings previously illustrated? Case studies of your
users leveraging the benefits of your payment options and the ensuing savings
make for great sales materials.
Although some providers eg Authorize.net do offer an echeck option your users
typically pay a premium [.5% to 1% or more]. Some providers may offer a US
and Canada option for ACH/echecks although this is typically very limited.

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Data Hostaging
A scenario that is becoming very common is that of
data hostaging. If your merchant needs their client’s
card information and your payment gateway provider
either refuses or charges them exorbitant fees your
company by extension is going to suffer a)
reputationally and b) via added support burdens [they
will be looking at you for help]. Your company must
know these procedures and policies before they pop up
and cause you issues.
Payment aggregators [eg Stripe and PayPal] set up sub merchant accounts for
your users. This means the merchant account is not owned by your application
user but by the aggregator. Although they can be very easy to integrate with and
both easy and fast for your end users to get started they can also be problematic.
The aggregator funds your users [many times as long as a week from transaction
processing] and controls both your client’s user base data and the monies due
them. If they perceive risk they can and do hold funds. Obviously if this happens
your hard earned client is going to be extremely upset and you will be hearing
about it.
In addition the aggregator or payment facilitator OWNS the payment data. If your
client decides to change payment providers they have no way to bill their client
base as the aggregator controls all the payment related data. We have first hand
experience with a merchant who sold their business for a great deal of money.
The deal almost fell apart at the very end due to payment data migration issues.
It is imperative you are aware of these potential issues before it becomes a
nightmare for your client.
Payment related support should be on your gateway
partner and that support should be provided in a way
that recognizes how valuable every client is to you. If
your end users are not getting the support they need
[this is their money we are talking about] your support
burdens escalate. In todays world the customer has
massive power to spread news of their bad experience.

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Payment Gateway as Growth Strategy?
Handing off your most valuable asset [your
client base] to a gateway and kind of hoping
for the best has been the way most software
and SAAS providers have gone about
handling their payment gateway needs.
There are options and if implemented
strategically can help grow your client base and revenues. How?
• Ensure your payment gateway partner provides an easy, defined process
for onboarding and continued support. Creating good will at the time of
purchase offers your company the best chance of getting great
feedback/testimonials and hopefully referrals. A happy customer is the
best referral generation strategy.
• If your payment gateway partner also provides the merchant account[s]
negotiate great deals for your users [you have the power]. Hopefully just
by using your product the business will save time and money. If you can
in turn save them money on processing fees you are again creating good
will. This also creates the opportunity to generate referrals for your
business. There is never a better time to ask [yes you must ask] for
referrals then after you have delivered for your clients. Leverage that good
will and generate referrals and referral marketing materials.
• Offer payment options like ACH. Especially for recurring payments
multiple payment options with cost savings are a competitive
differentiator. If you can offer a single platform that supports US and
Canada processing you are providing a tool that expands your user base
to Canada-a whole new market that typically has been tremendously
under served with payment processing options.
• Revenue share model: Your payment gateway provider [especially if they
can also set up merchant accounts] should offer you a transaction
revenue share model. If every client you have now generates an ancillary
income stream you have a much more profitable company. If done
properly your clients get better service and more payment options. Your
company gets a more loyal client and a new revenue source.
• More value for your users: There is a huge gap or disconnect that your
gateway partner can possibly help with. If your service or product also
offers a recurring billing solution you have an opportunity to help your end
users [and you] generate more value. So often a product is “announced”

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• eg “we also offer recurring billing” and then left to your user to make the
best of. It’s then up to your user to get the most from this great tool. So
they start implementing and maybe get 20% of the potential base to use
recurring payment auto billing. What if they had a step-by-step plan to
implement and get maximum participation rates? That 20% can become
60% or more and their billing/payment collection becomes automated.
They have reliable cash flow and much more time to work on revenue
generating business tasks. You have delivered an invaluable tool they just
can’t possibly live without. Not to mention that if you are getting a
transaction revenue share you are tripling your income stream.
• Improved client retention rates: By delivering value beyond expectations
you generate more loyal clients. This increases lifetime client value and
your ability to cross sell, upsell and leverage potential referrals.
You should also examine recurring payment exception handling as reducing
decline rates in billing can also be a significant revenue lift plus a reduction in
time spent on rebilling. Merchants in the recurring/subscription billing model often
see credit card decline rates close to 10%. If your gateway partner can offer
strategic handling and representment of these transactions and significantly
reduce decline rates you again have a competitive advantage. As an example
let’s say a merchant bills 1000 customers $49 per month and your offering
reduces declines from 10% to 7%. You have produced a $1500/month revenue
lift and cut in half time [=money] spent rebilling-now that’s ROI.

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Summary: Your Payment Gateway choices must be considered strategically. A
true partnership provides you and most importantly your end users more options
and value. Rather than handing off your hard won client to a payment gateway
provider and hoping for the best you can use the gateway partnership to help
cement your client relationship. You can use your payment gateway/processing
partnership as a lead gen tool. The right partnership can help grow your business
and get your application in front of more clients.
If your company was able to bump revenue buy 10% via a gateway partnership,
grow customer base by 10% through your differentiated payment solution and
another 10% by leveraging referrals from your very satisfied clients [that you help
save time and money] your revenues and business valuation grow by 33%.
Bump each area by 20% and you see 73% revenue increase. Get to 25% bumps
and you just about double your business. Not to mention that your client retention
rate significantly improves.
So give careful thought to your gateway partner. It can without question become
a growth catalyst for your business.
About Agile Payments: Agile Payments [www.AgilePayments.com] has been
strategically partnering with SAAS and software companies for over 15 years.
Agile has helped these same partners add millions to their bottom line. The ability
to deliver value for the SAAS provider and just as importantly their client base is
their competitive differentiator. For more information and how your company can
take advantage visit AgilePayments.com, call 888.729.4968 or email
info@AgilePayments.com.

Payment gateway integration

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