Understanding 3 Types of Payment Processing Partners

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“Partners” can mean a lot of things in commerce and software. That’s certainly true of payment processing partners, and for businesses, it can get confusing exactly what a payment partnership is. What’s the difference between an ISO vs. ISV, for example?

Let’s say you want to offer ACH or credit/debit card processing to your customers, but you don’t have a payments solution of your own. You’ll likely need to enter into a partnership with a payment facilitator who does. A payment facilitator, or PayFac, is a vendor that provides the payment processing software and handles other services such as onboarding and underwriting merchants on the payment platform. The type of partnership you have with that provider, however, makes a huge difference in what you control and how it affects your revenue.

We’ll explain three main types of partnerships in payments: integrated partnerships, reseller partnerships and referral programs.

 

What Are Integrated Partnerships?

An integrated partnership is when you plug a payment processing provider’s software directly into the platform you offer merchants. This allows the merchants’ end-users to make payments within the partner’s solution without needing to leave your platform or application. This is the type of partnership we offer independent software vendors (ISVs), with CSG Forte as the embedded payment solution within their platform.

An ISV is a software company that builds a CRM (customer relationship management) platform, usually for a specific industry like property management or medical office management. When the ISV wants to enable their platform to take payments within the application, the ISV often integrates a payments platform. The ISV could select from different types of payment gateways to integrate, or it can hard-code to a payment gateway (like CSG Forte) in an exclusive partner relationship. 

Advantages of Integrated Partnerships

  • Seamless user experience: End-users enjoy a smooth, uninterrupted workflow. How they make payments feels like how they handle other tasks on your platform—they don’t have to shift to a different site, application or channel.
  • Increased revenue: Independent software vendors who offer payments through their platforms have a marked revenue advantage over those that don’t. A PYMNTs.com survey found that 83% of ISVs said they’ll see an increased revenue share from payment acceptance over the next 12 months–a sign that ISVs show a high degree of trust toward the results they can get from partnering with payment providers.
  • Strong merchant retention: When ISVs can offer integrated payments, it bolsters their platform’s value and increases its “stickiness” for vendors.

Not all integrated partnerships are created equal, and ISVs that work with them have clear ideas on what makes them successful. In a survey by the Strawhecker Group (TSG), the three payment processer attributes that ISVs most often cited as important were:

  • Competitive economic split
  • Easy merchant onboarding
  • Quality customer support

 

What Are Reseller Partnerships?

In a reseller partnership, a company (the reseller) buys payment processing services from a payments provider and resells them to its customers. The reseller usually rebrands the services as its own, providing a turnkey solution to its customer base it wouldn’t otherwise offer. The reseller is often referred to as an independent sales organization (ISO).

The ISO model is a common starting point for businesses entering the payments space. These organizations may even begin as a small group of sales reps who join to sell point-of-sale devices for brick-and-mortar stores to use (which may or may not be integrated into a checkout application). 

Advantages of Reseller Partnerships

  • Brand control: The reseller, or ISO, can market the payment services under its own brand, so it maintains direct control over the customer relationship.
  • Revenue generation: ISOs can set their own prices and margins, giving them more control over the potential profits they’d see from offering the payment services.
  • Turnkey solutions: It’s relatively quick to launch these capabilities once the business has selected the provider and then branded the solution.

With reseller partnerships, it’s important to note which aspects your business can control and which it can’t. ISOs are responsible for branding and marketing the payment services, for example. While they benefit from the payment provider’s product support, they have little to no influence over the product itself—its functionality, its user interface and other qualities of the actual payments software.

 

What Are Referral Partnership Programs?

Referral partnership programs involve referring potential customers to a payment processing provider in exchange for a commission or fee. The referring business doesn’t handle the payment processing directly. Instead, it leverages its network to bring new business to the provider.

Advantages of Referral Partnerships

  • Low overhead: Since there’s no need to manage the payment processing infrastructure, the referring partner bypasses the operational costs associated with that.
  • Commissions: Earning referral fees or commissions can be a lucrative revenue stream without the complexities of direct sales.
  • Focus on core business: Referral partners can keep focusing on their primary business while benefiting from additional income.

Entering a referral partnership program with a payments provider can be advantageous when you have a strong network of businesses that need payment solutions, but you don’t want to take on the cost and complexity of offering those solutions yourself.

 

Comparing the Payment Processing Partnerships

Another way to distinguish among partnership models is comparing how they leverage different strengths and fulfill different needs. We can look at three categories: the integration depth of the partner’s software, the revenue potential the partnership provides, and the nature of the relationship the business maintains with the end customer.

Integration Depth

  • Integrated partnerships: High degree of technical integration—embedded within the partner’s software
  • Reseller partnerships: Moderate level of integration—with rebranded services
  • Referral partnerships: Low to no integration—primarily based on lead generation

Revenue Potential

  • Integrated partnerships: High revenue potential through value-added services
  • Reseller partnerships: High revenue potential through markup on resold services
  • Referral partnerships: Moderate revenue potential through referral commissions

Customer Relationship

  • Integrated partnerships: Direct relationship with end-users, maintaining long-term engagement
  • Reseller partnerships: Direct relationship with customers, with control over branding and support
  • Referral partnerships: Indirect relationship, with the primary interaction handled by the payment provider

 

Choosing the Right Payment Processing Partner

Hopefully this clears up the (all too common) ISO vs. ISV confusion of terms. One thing to keep in mind: Businesses often start off with one type of partnership and mature into another one over time. They might begin by referring payment solutions, and then they eventually decide to offer them directly to customers in a white-label reseller model. ISVs might start off by integrating a payment provider’s software, then eventually embark on the journey toward becoming payment facilitators themselves to increase their revenue.

CSG Forte helps organizations of all kinds provide payment solutions in ways that meet their individual goals. Get a trusted vendor in your corner. Become a partner today.