Payments Move From Checkbox to Strategic Differentiator for ISVs

To paraphrase a saying attributed to Charles Darwin, it’s those most responsive to change that ultimately survive.

And from the 19th century Galapagos to the 21st-century global payments landscape, those words continue to ring true.

With the demand for seamless payment solutions growing at an unprecedented pace, driven by the accelerating shift toward digital payments and reinforced by changing consumer and business behaviors, independent software vendors (ISVs) are finding themselves in a high-stakes balancing act as they navigate the evolving landscape.

“Software companies are under a lot of pressure from their investors to find new revenue streams and find that growth, but still meet the needs of their customers and keep that front and center,” Adam Gray, chief transformation officer at Stax, told PYMNTS, adding that ISVs have been exploring embedded payments as a viable solution to generate new income while enhancing customer experience.

But embedding payments is not just a technical integration. It involves managing complex relationships with multiple stakeholders, including banks, FinTechs and regulatory bodies. This complexity requires ISVs to maintain a delicate balance between offering flexibility and maintaining control over their payment solutions.

When it comes to payment integration, ISVs have traditionally leaned on the payment facilitator (PayFac) model. However, Gray noted that this approach may not always align with the specialized needs of certain industries.

“Some of the complexities that come with that come with trust and operating account … If you go full PayFac or just embedded payments, it might not meet the needs of your customers,” he said.

Driving business growth while maintaining customer satisfaction also requires ISVs to adopt a strategic mindset toward scaling. Many are finding success by building modular solutions that can adapt to the varying needs of different client segments. This flexibility not only enhances customer satisfaction but also opens opportunities for cross-selling and upselling.

Gray advocates for a more tailored approach, emphasizing the importance of choosing payment solutions that align with specific vertical requirements.

“Finding a payments provider that can offer the niches of software services you need, it’s really critical in today’s world,” he said. “We’re seeing a lot of verticalizations where ISVs specialize … payments are a key part of that.”

Collaboration between ISVs and payment providers is crucial to delivering value to small and medium-sized businesses (SMBs). Gray believes that understanding the unique needs of each merchant is key to success.

“The key is not to just tell them how to do payments, but to understand what their needs are,” he said.

A robust partnership can provide ISVs with the compliance, security and fraud protection expertise needed to thrive.

“Payments is a complicated space with a lot of compliance … This is where finding a partner in payments that can bring those expertise and come alongside you while you focus on what your customer and industry needs,” Gray said.

As market demands evolve, ISVs looking to win competitive positioning can consider adopting flexible strategies at every stage of the payment journey. Against this operational backdrop, Gray stressed the importance of blending technological innovation with human expertise.

“You can have the best technology in the world, but if you don’t have the people to come answer your questions, help design it and drive that expertise, then you’re not going to get there,” he said, stressing the need for a high-tech, high-touch approach.

Gray underscored the importance of meeting customers where they are, both in terms of technology and pricing models. For field services, for example, mobile payment technology can significantly improve customer experience and operational efficiency.

He pointed to the rising popularity of omnichannel solutions and digital wallets as examples of how consumer expectations are shifting.

“There was an HST report that 62% of millennials book all of their travel via their phone … there’s a demand from all consumers for flexible, digital solutions that is just propagating to all industries as they move into management roles for B2B,” Gray said.

One area of innovation that excites Gray is interchange analysis. He described it as one of the “Easter eggs” of the payments industry — hidden opportunities that can optimize revenue and reduce costs for ISVs and their merchants.

“If you slow down and find these hidden gems, that’s where the innovation’s happening,” Gray said.

He said Stax is investing heavily in its own technology stack to offer end-to-end solutions that can adapt to evolving industry needs. By choosing the right partners, embracing a flexible approach and leveraging both technology and human expertise, ISVs can not only meet diverse merchant needs but also unlock new avenues for growth.

As Gray put it, the future of payments innovation lies in finding those “hidden gems” and turning them into tangible value for businesses and consumers alike.

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