I recently had a conversation with a software developer who was looking for a payment processing solution for his software and asked my opinion. It was not the first time I had been asked such a question and I know it won’t be the last either. So, I decided to write an article and discuss this subject.
Many software developers with excellent skills in their field of work, when it comes to payment processing in their applications get confused, and rightfully so. The world of payment processing, or in its fancy form Fintech, is a world of many new terms, jargon, dos and don’ts, vague rules and regulations, fees, and devices, and on and on.
On the other hand, such names as Stripe, PayPal, and Square are well-known and at first glance appear to be the best place to go and get quick and easy payment integration done.
Simply put it’s to choose the “wide road”!
In this article, and to be able to simplify the discussion I’m going to switch between three characters, myself (the author), the developer, and the business owner, and analyze this process:
Developer
The following would very likely be the argument which a developer puts forward:
The question is: To integrate or not to integrate, into a payment processing platform?
The answer is: We must offer an integrated payment solution in our software.
Let’s see who’s out there. Oh, look at that giant’s sign, the first research result on Google and Bing. It’s Stripe!
Nice and easy. I got the Stripe API and started testing in their sandbox. Lots of documentation and even sample codes all over the internet help me to finish the integration quickly and easily, to add a payment solution to my software, and for my customers.
Since I am a developer and logic is the cornerstone of my existence, my next logical step is to build a process for my customers to be able to use my software and its “integrated payment option”.
I would ask my customers to go ahead and sign up with Stripe. Once they have an account, I’d ask them to share some credentials from their Stripe account and add them to the software to be able to accept payments. Voila!
Business owner
As a business owner, I visit Stripe’s website to sign up for an account. I look for the fees and prices associated with processing credit cards. This is what I see there:
2.9% + 0.30 per transaction (as of the time of writing of this article)
OK, what does that mean? It simply means when I charge a credit card for $100, I will see $96.80 in my account. Is that too much? Is it too little? Or is it fair? What’s fair?
Oh, by the way, I read on their website:
“Get started quickly.”
Ok, that’s nice.
“Join millions of businesses.”
So, I am one among millions, I’ll be invisible to Stripe.
I proceed further to see whether I can process credit cards in my business and I find Stripe’s Terminal.
Well, I must contact the “Sales Team” at Stripe to get the device or maybe the software vendor can get that for me.
I contacted my software vendor and asked about their payment solution and whether it works with Stripe terminal or not!
Now, as a business owner, I must do my due diligence to see what my costs are with Stripe:
If I process $20,000/month my fees alone are going to be:
2.9% of my total volume is going to be: 20,000 x 2.9% = 580.00
I have small tickets with an average of $40.00. So, my $20,000 is the total of 500 tickets.
500 x 0.30 = $150.00
$580 + $150 = $730.00
So, my total cost is going to be $730 to process $20,000 per month. In other words, I pay an effective rate of 3.65% for credit card processing ($730 / $20,000) x 100 = 3.65)! No, thank you.
I have high hopes for my business and as my sales will go up so does the number of transactions.
This can be a significant expense for my business, particularly with tight profit margins.
Digging a little deeper and I also find out that Stripe also charges additional fees for certain features, such as its Radar fraud detection service and its subscriptions and invoicing features. While these services can be valuable for some businesses, they can also add to the overall cost of using Stripe as a payment gateway.
In conclusion, Stripe is not for me!
My turn
At the beginning of this article, I mentioned Stripe, PayPal, and Square but it seems like I only picked on Stripe alone. That’s right because I see Stripe as the most attractive option among the three. PayPal is a despicable company to work with. They close customer’s accounts at will and without warning, they take money from your bank account, and at one point they mixed politics with business to the point of total insanity (for both):
“PayPal tells users it will find them $2,500 for misinformation, then backtracks immediately.”
Stay away from PayPal.
The story of Square is different. It has its own Point of Sale software with many features.
Business owner
After I concluded that Stripe is not for me, I reached out to the software vendor and ask him whether his software supports any other “credit card processor”?
The short answer was No. It’s a bummer I really liked that software, but on the other hand, I need options to be able to find the best service for my business.
When the Software developer tried to convince me that Stripe is better than “almost all the processors out there” I had to teach him a lesson in business:
I have a small restaurant and my burgers are to die for. I cannot sell them for $2.00 or $3.00 like McDonald’s and Burger King’s of the world. My costs are much higher (and so is the quality of my burgers). It seems like I’m competing with these “food industry giants” and that’s very true, but my customers come to my restaurant for, not just the quality of my burgers, but also for the personal attention they get. At the end of the day, it’s about choice and deciding. Give me an option outside of the giants of technology.
In the words of the late Michael Jackson:
All I wanna say is that they don’t really care about us
Developer
I am back on the drawing board. We need options. We cannot just throw people at the foot of tech giants for our own convenience. As Jean-Luc Piccard says: “Options.”
My Turn
Up to this point, I have been trying to build a case against going with tech giants. It should be much easier than this, small businesses must support each other, or the giants will destroy us.
In any case, I am the guy to whom the developer presents his questions.
Here is my answer to all the developers out there:
If your software requires receiving payments, you must have the means to allow your customer to conveniently accept them from your software. Integrated payments augment your software, provide an extremely valuable feature to your customers, and prevent a lot of errors and miscalculations from happening.
Simply put it’s to choose the “wide road”!
In addition to the abovementioned benefits, it has the potential to become a very notable source of income for you! Yes, that’s right, a new revenue source.
Here is how most of the private, non-giants, technologically savvy, very well-versed in FinTech small businesses who offer integrated payments can help you with your dilemma:
They provide you with an API, SDK, or both to allow you to integrate into their payment platform. You will get a development specialist with whom you work throughout the integration. You get to work with a real person, just as real as your software is, not a faceless corporation with its “Documentation”.
Once the development is completed and tested and both you and the “service provider” are satisfied with the results, you start promoting your software with its payment integration option.
Your customers go to the processor and get the best rates possible, which are almost always considerably lower than Stripe. As your customer began processing credit cards on the software they acquired from you, the “processing company” starts making money, and here is the best part:
They share your profit from the credit card processing with you, yes you, the software developer!
The concept of Win-Win is a nonexistance in working with tech giants. Working with Big Tech is a one-way path. The win!
The profit-sharing percentages vary, but as the number of your customers grows your share grows.
Imagine how much you can do with this “passive/residual revenue”. You can offer longer free trial periods of your software, you could lower your SaaS fees for more competitive marketing, can hire more developers, or just have a nice vacation!
Alright, let’s recap:
- Instead of working with a faceless giant corporation, you work with a small business much like yours.
- You would use APIs, SDKs, etc. to build a payment infrastructure in your software.
- Your customers get a very competitive rate to process credit cards.
- The processing company shares their profit (which they make from your customers’ processing with them) with you, the independent software vendor, the developer, and the creator of the software.
- In this model, everybody wins. The only loser in this model is the “Faceless Payment/Tech giants”, such as Stripe, PayPal, Square, etc. So be it!
Most of these “Integrated Payment Processors” constantly add new devices, new features, and functions to their platform, and in many cases, you enjoyed the fruits of their efforts.
Invoicing, Virtual terminals, ACH processing, and on and on.
For example, if the Integrated Payment Processors offered only Pax devices last month, they added Dejavoo terminals to this month. Consequently, you can use a new line of payment terminals without writing even one line of code!
You can even work with two or three “Integrated Payment Processors” and offer even more options to your customers.
There are more, a whole lot more, benefits in partnering with an Integrated Payment Processors, which compels you to you discover this option.
Please explore the payment integration partnership with smaller Integrated Payment Processors. Once you are convinced that they offer what you need, build your integrated payment solutions. It’ll be more than just a mere cold and soulless payment integration; you will build a relationship with real people.
Kourosh
