Five considerations when selecting a payments partner: building your long-term growth strategy

As payments technology innovation continues to evolve exponentially, today’s consumers expect a seamless, connected, and personalized buying experience. Customers don’t care about payments per se, but the overall shopping experience. Independent Sales Organizations (ISOs), Payment Service Providers (PSPs), and Independent Software Vendors (ISVs) that understand this are well-positioned for success in an increasingly competitive marketplace.

When selecting a payments partner, it’s crucial to identify a partner that can offer strategic value beyond the payment transaction and can optimize the full customer lifecycle. Embedding additional financial services, such as lending and treasury management, provides a more holistic solution that means more revenue for you and your merchants and better end-customer experience. Why payments? The anticipated expansion of the global payments market* is substantial, projected to increase from USD 2.57 trillion in 2023 to USD 4.31 trillion in 2028, reflecting a 10.88% company annual growth rate (CAGR).

So, what should you look for in a long-term payments partner? Let’s take a closer look at five considerations that are critical when selecting a payments partner.

Flexible partner programs that grow with you

Whether you are looking for a market entry point or planning your exit strategy, establishing a long-term payments strategy is essential for success. Your strategy should include thoughtful selection of a partnership model with a payment processor that fits your business goals and customer needs. The path is no longer linear – companies often evolve through different partnership types as they grow and may choose to embed payments into their existing offerings to provide seamless customer experiences.

The partner lifecycle is a dynamic journey and can involve more than one of the below partner types depending on your business goals.

• Referral – With a low barrier to entry, this model provides the least amount of risk. Most referral relationships work on a fee basis (per referral) or a revenue-sharing agreement.

• Agent – Choosing a reseller agreement with a payment processor increases revenue potential. This partner model uses a revenue-share structure, with more responsibility on the agent to sign new merchants, provide education/onboarding and facilitate customer service. Agents are not required to register with card brands like Visa and Mastercard.

• ISO – Independent sales organizations act as the “face” of payments to their merchants but are still resellers for the payment processor. This model offers more residual revenue than agent or referral. ISOs must register with card brands and establish the support and sales infrastructure.

• ISV – Independent software vendors partner with payments processors by embedding or integrating payments into their existing solution. This model can generate more revenue streams, provide a better customer experience, and increase company valuation – especially since ISV offerings tend to be highly verticalized and specialized. In addition to this integrated relationship, ISVs can also add on any of the other partner models to create new growth opportunities (referral, agent, etc.).

• Payment facilitator – This partner type manages the relationship from start to finish with the payment processor in the background. It eliminates the need for a traditional merchant account by establishing sub-merchants. Payment facilitators leverage more of their own brand value and “own” much of the customer experience.

Beyond payments – embedding more value into the customer lifecycle

Regardless of your business model, driving increased customer loyalty and long-term relationships with your users is critical for success. Payment services providers can accomplish this through offering value-added services beyond the core payments experience – often, through integrations with other features your merchants need to manage their operations. In particular, adding financial services APIs to your product lineup allows payment services providers to offer “traditional” banking solutions – like lending and faster funding – to your merchants through a single solution.

A few examples:

• Healthcare payments software that streamlines revenue-cycle management can also facilitate insurance claim reimbursements via an FBO-account API.
• Home improvement contractors with higher average transaction values can increase sales and overall profitability by integrating point-of-sale lending at checkout.
• A legal services ISV that integrates payment functionality allows attorneys to generate invoices directly within their platform, enabling clients to pay instantly using cards, ACH or digital wallets.

It’s a win-win for merchants and their customers. Businesses are able to improve their liquidity and customer service while offering consumers more payment choices to manage the cost of larger expenses. Whether in-person or online, consumers expect this option. Case in point: By 2031, the embedded lending market* is projected to grow to $23.3 billion (U.S.) at a compound annual growth rate of 20.4%.

Discover growth opportunities – expanding your partner ecosystem

The advantage of integrating payments with an established partner means access to a vast network of gateways and software solutions that provide additional functionality. Whether it’s a vertical-specific solution such as practice management systems or feature-based functionality like text-to-pay, your partner can provide you with new ways to monetize payments and meet changing market demands.

Be sure to ask your partner if they have an online ecosystem that can help you find various independent software vendor and value-added reseller integrations to create a holistic solution. In fact, it can be critical to winning new business; according to a Visa survey*, 87% of merchants choose a payments provider at the same time or after selecting their business software.

It’s important to note that with those added connection points, data security is paramount to your bottom line and reputation. An acquirer has the domain knowledge and expertise to keep cardholder data safe and mitigate the risk of data breaches. From point-to-point encryption (P2PE) to tokenization, safeguarding against fraudulent activity should be part of any payments strategy.

Meeting consumer demand and future-proofing your business

Discerning, and increasingly sophisticated, shoppers expect businesses to offer their preferred payment method. The 2023 PYMNTS Global Digital Shopping Index* indicates that 48% of shoppers consider payments choice an important feature for merchants to provide. It’s no surprise that e-commerce sales have skyrocketed, but merchants must address both the online and in-store experience.

Case in point: digital wallets. With the global mobile wallet market* expected to reach USD 51.53 billion by 2030, it’s apparent that seamless, secure, and convenient payment experiences are driving customer expectations – especially ecommerce checkouts that do not require the customer to enter their card details manually. ISVs that incorporate fraud prevention through encryption and tokenization technology can provide their customers with more peace of mind when accepting payments through their platform.

However, digital wallet use cases* will go beyond payments as consumer desire for convenience extends to other situations requiring personal identification and data authentication – including driver’s licenses, passports, and “Know Your Customer” (KYC) data points. In fact, more than 29% of global users say they would use their digital wallet for verifying identity or age in the next three years.

Setting the stage for your payments success 

It is critical to choose a payments partner that offers a customizable incubation program – that both meets your current needs and helps you prepare for future growth. The foundation of your success is built on thoughtfully tailored resources and support.

For example, software providers will need implementation support for integrated payments solutions. Your payments partner should provide a project manager to guide you through completing your pilot phase, integration, agreements, and certification. Further, regardless of the type of partner model you have chosen, your payments partner should provide you with a dedicated partner incubation manager for the first 1 – 2 years of your program to foster your success. No matter your size, experience, or tenure with your processor, you should feel confident you are not just another number, but a valued partner building a long-term strategy.

Often, payments providers take a “one and done” approach to the onboarding and training process. This can lead to partners never realizing their full potential, experiencing high attrition levels, and feeling a general lack of engagement in the partner program. Conversely, fully engaged partners demonstrate more areas of growth whether it’s increased profits or graduating to new partner levels. To this end, ask your processor to provide success metrics from other partners that are similar to your business and specific objectives.

Why partner with U.S. Bank | Elavon?

It’s paramount to find the right payments partner that can develop the framework for your success. Backed by the strength and stability of U.S. Bank, we can help you optimize your payments and financial services strategy to accelerate your speed to market, maximize your revenue, and scale your business for future growth.  Whether you’re new to the industry or a seasoned ISO, we’ll help you build your long-term strategy.

Decades of experience working with partners has driven us to develop an exceptional implementation, training, and incubation experience that enables you to achieve your maximum potential as a partner with us. It's why more than 1,000 integrated partners, 1,700 financial institutions and 350 ISOs/MSPs trust us to grow their business. Discover what’s possible with our award-winning APIs, comprehensive integrated software solutions ecosystem, and point-of-sale lending solution.