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As payments technology and business models continue to advance and change at a rapid pace, Independent Software Vendors (ISVs) have new opportunities to monetize their services and provide valuable tools for their customers. The concept of Embedded Finance, the integration of financial services such as credit card processing, ACH, Banking-as-a-Service (BaaS), lending, and financing into software and platforms is gaining traction as ISVs see significant benefits. In fact, financial services embedded into e-commerce and other software platforms accounted for $2.6 trillion, or 5% of total U.S. financial transactions in 2021, and will exceed $7 trillion by 20261.
Not only do ISVs see substantial increases in Monthly Recurring Revenue (MRR), but their solution becomes a more attractive investment for venture capital and private equity firms. As an ISV, it’s crucial to not only provide the capability for credit and debit card acceptance, but to also identify potential value-added services to enhance the payment experience and provide additional revenue streams. Such services include:
Businesses are increasingly looking for a wide range of financial services through a single provider, which is an opportunity for ISVs. The BaaS model is a more holistic solution that offers a variety of banking functionality through APIs. This enables ISVs to provide their customers financial services such as creating bank accounts, account management, and fraud detection without having to build and maintain their own banking infrastructure. Additionally, BaaS providers can help ISVs comply with financial regulations, reducing the risk of penalties for non-compliance.
Lending and financing services are another key aspect of Embedded Finance that can help ISVs further monetize their services. ISVs that support retailers, the services industry, and B2B merchants can benefit from offering lending and finance to their customers in several ways:
It's important to note that adding lending and financing can bring additional operational and regulatory complexity. ISVs should take that into consideration when they align themselves with a partner that handles the regulatory and compliance intricacies on a day-to-day basis.
Elavon, backed by the strength and stability of U.S. Bank, offers a comprehensive and diverse range of global financial services, including credit card, ACH, BaaS, lending, and financing solutions, along with advanced APIs for developers. Additionally, our Partner Journey Program gives ISVs the opportunity to progress from being “new to payments” with a simple partner model to growing into a Payment Facilitator with a more complex business structure. Payment Facilitation provides ISVs ultimate control over their customers' lifecycle and will help to further establish themselves as a dominant player in the marketplace.
To learn more about how Elavon can help ISVs achieve these goals, visit https://www.elavon.com/partners.html