Unlocking growth: Software-led payments transform platforms and revenue

Hi, I'm Matt Downs, President Worldpay for Platforms. I'd like to thank you for tuning in. And I've got a good colleague here that I've known for quite some bit, Brad Pinneke. We're going to lead a little bit of discussion today, but Brad, you mind introducing yourself? Not at all. Yeah, Brad Penneke, I lead our BD team and Matt, I've been looking forward to this. Yeah, it's going to be, it's going to be a great session. You know, Brad, we, we're out talking to software companies every day. And historically payments was just seen as a cost of doing business.

But I can tell you what we hear out there on the market is that they're becoming one of the biggest opportunities for software companies to differentiate themselves, drive growth, where when they think about ACV, CAC, ability to really drive the economics of a business, boost customer loyalty, retention and cover new revenue streams that, you know, that at its core is really the power of software-led payments. Maybe before we get too deep into the details, Brad, how do you define software-led payments and why do you believe they're important? Yeah, happy to answer that, Matt.

I think first software-led payments, we should also note that a lot of people look at that as the term embedded payments. And that's really where companies embed payment processing capabilities directly into their software platforming and that really allows them to compete or complete the entire transaction either in a vertical specific software application or a business management tool. And this approach really streamlines the user experience for customers and creates new revenue streams and competitive advantages.

Honestly, for software providers, instead of relying on what we've seen in the past as third party processors, software companies now handle the entire payment acceptance, even the management and auth and the underwriting within their own application. Yeah, I mean, Brad—I think to date myself a little bit, I've been at this payments thing for more years and I like to admit, but when I started, it was for a small business, it was a buying decision to go I need payments then I may need a way to actually process those payments.

And this is really pre SaaS and everything else. And you know, the reality that that's all changed right now there's options for every size business across the industry. I mean, a Bainstat from 2019 was only 35% of companies were buying software and payments at the same time. Post pandemic that number jumped up to 45% and they'd estimate by 2027 70% of all payments accounts they'll be buying software at the exact same time. And I think that value add that comes with it really sets the tone for why software-led and why software-led payments has really taken off for SMBs.

Yeah, I agree, Matt, I think we've seen really an upturn in the last four or five years. And I think, you know, to your point, you know, even some of the, I think COVID drove a little bit of this and, you know, they tried to find new and better ways to monetize, but more importantly, really extend the customer experience. So I agree with you on that. I think now as, as, as you mentioned that, you know, the data they want, some of the, some of the adoption that they can work to attain this, you know, now's never really been a better time to do it.

Brad, let's dive deeper into how flexible options can positively impact platforms, you know, share a little bit. How do companies monetize payments regardless of their size or level or payment sophistication? And, you know, additionally, Brett, if you could think of maybe about a recent customer success story that you could share and bring it to life, probably redact the name, but we'd love to hear a little bit about it. Yeah, I think certainly not. So the beauty of embedded payments is you can be as small as somebody with 10 customers to somebody with 10,000 customers.

You know, the story is still the same. And I think a couple good examples of that I'd love to share is probably all of you have been to a restaurant, you know, you've ordered food and it's time to pay the bill. And the old experience was you hand your card to a waitstaff and they disappear with it, right. And now what you're seeing is an example of a company that's really done a great job monetizing payments. And they've done this through the customer experience. They have the ability to drop a device off and have you tap your card right there and also even share some survey results around what your experience is like.

And then even more importantly, they have a receipt. So you don't have to wait for the waitstaff anymore. You can just take the receipt, scan the QR code and make a payment right there. So I think that's one good example. And the second one is a much smaller client where they had a lot of their customers asking for how do we have access to more capital quickly? And so they embedded our embedded finance engine and within a week they were able to start making offers directly out of their solution and they had five loans within the following period of another week.

And good example of deeper monetization, not just embedding payments and I think, you know, maybe not beyond that you turn it back to you beyond direct revenue, there are growth impacts that are less tangible. Can you share a data point or story maybe about how branded payment flows have increased either customer trust or drive user without? Yeah, I think it gives the software company the ability to develop seamless or what I like to call sometimes invisible if you really get it right, branded payment experiences and those build software user trust, right.

Many software companies are thinking about the CAC, the lifetime value of the client, how the client feels, will they refer, will they upsell, will they cross sell other products and do it and I can tell you if you really nail the payments experience and get that adoption tackled, you can see dramatic improvement around those key KPIs that most software companies are tracking, like CAC retention, C SAT, etcetera. You know, one customer comes to mind that they had attrition run around 11%. And I think through, you know, they launched payments and we found some friction in it.

You're going through some solution, other things and thinking about how do we knock the friction out and provide a better experience. They are actually able to see their merchant attrition on the core software, not just on payments got down by two full percent in this particular client kind of attested to nail in the payments portion of the experience right. And they were able to see that 3C sat and other measurement vehicles with their customers. Brad, you've got a deep software background when I first hired you and met here. We won't tell the audience how long ago that was.

It was a while ago. We both had a little bit more hair. You know, you're out talking to hundreds of software companies on an annual basis, You know, share a little bit about where the sophistication on the sophistication level and what those software companies need. How can Worldpay what should they be thinking about and how could Worldpay potentially be able to meet them where they're, we call it meet them and their journey. Share a little bit about how you think about that and what some of those conversations are like.

Yeah, I think that is super critical, especially the part about meet them in the journey. We don't want to impose where we think they should be. We want them to drive where they want to be. And I think Matt, that starts with really integrated payments where they can passover the customer to us and let us do most of the work. Then we have a step off from that called managed PayFac® where they really begin to take on controls, brand the payment opportunities around their name and take on more of the envelope supporting support and analytics.

And then Matt, of course, top of the food chain is PayFac® we've been doing that since the early days when no one really even knew what it was. Yeah, no, we actually own that trademark. I always love to plug that too. Yeah, Matt, I think those are incredibly useful talking points and touch points for how we interact with the customers. And speaking of that, like, you know, let's go back in that you mentioned a lot of things that are critical to success. How important is it to have the right payments provider for embedded payments as we think back to those touch points?

Oh, it's pretty important. And look, the payments industry has pivoted and changed in the 2 1/2 decades I've been in. I guess I just gave it away, Brad. But you know, the reality is I think picking the right partner is super important because you're not just buying the technology that they might put in front of you. You have to think about the professional services. You have to think about what intrinsics can they bring the relationship from a scale, right? Payments can be complex and having someone that's got the expertise is very, very important.

You know, the business that I happen to be part of, right? So we'll be in a little self endorsing, you know, Worldpay has over 12,000 employees, but specifically in the division that I'm responsible for, we have over 600 dedicated experts across all functions, sales, marketing, yourself and business development, solution implementation. I can go on and on and on. Technology delivery. The reality is they wake up with one mission and that's to help software companies provide great experiences and that level of expertise and sophistication comes through for the clients where someone like some of our, we'll say, competitors take generic payment tech and try to adapt it to the software business.

I think that's a huge differentiator. In addition to that, one of the things that we're able to do, and we kind of alluded to it earlier, is we can help a software company across the continuum. Meaning if payments is not strategic or they don't want to make the investment, they don't have the expertise. We've got a whole soup to nuts turnkey product to get them up and running with minimal lift all the way through to we're helping some of the most sophisticated software companies that candidly may have 1,000 to 2,000 employees that look just as much like a payments company as they do a software company.

And I think one of the benefits of doing business with Worldpay is we can help a client stair step through and fit them into it versus kind of peg them into here's how you do it, etcetera. And that level of consultation and ability to adapt to their business, their needs and their growth at different times is I think should be really important if your software company getting into it because I know thousands of software companies in the space and many don't start out in one spot and stay there. Overtime, their needs and their customers change and having that adaptability is really important.

So, Brad, we've seen our platforms and we've talked a little bit about how they can differentiate the experience and monetize payments and our Worldpay platforms helps make that journey possible. Are there any key points that you'd want to recap for the audience listening today? Yeah, I think, Matt, for me that the three key points are just monetization strategy. Focus not only in your core product, but how to use embedded payments and how to use the downstream services around embedded payments to create another revenue stream.

The second one, which is probably first, honestly, is enhanced user experience. Going embedded provides such a seamless experience for both the merchant and the end consumer that this is really probably critical and key for most people. And I lump that in with extending your customer brand. And then lastly, and but still as important as increased control, by embedding payments, you have so much more control over how your users and customers interact with your software that that's inherently a key and critical component. Awesome. Hey, Brad, thanks for hanging out with me today. For those of you listening who want to learn more, we've put together additional insights and you can check those out in our software-led payments ebook, The complete guide to embedded finance. Thanks for tuning in today.