Today we continue our series on how the Game of Life board game often parallels the process of integrating payments in software platforms. In Part 1, we talked about the high cost of integrating with multiple payment partners. Part 2 focused on the high cost of poor customer experience. Today’s post is simple, to the point, and about a topic that is near and dear to the hearts of many of us – revenue.
If you look at the actual Game of Life board, you will see that players end up in one of two places – Countryside Acres (retirement village) or Millionaire Estates (a greatly desired location for retirement.)
With integrated payments, the destinations are much more polarized. Depending on the path you choose, you may enjoy steady windfalls of revenue or be forced to settle for a few sprinkles, if any at all.
It all comes down to math. If you have a preferred partner that shares revenue, simply multiply the number of basis points they share by the total transaction volume going through your platform. Depending on the number of customers running card payments, your share of revenue can get pretty large, pretty quickly. Maybe even Millionaire Estates large.
Aside from your receiving more revenue, your customers also benefit from your preferred partner relationship. Think about volume discounts. Running the transactions of all your customers through that single partner leverages their aggregate volume, which provides better processing rates for them. This approach will also have a lasting impact on customer satisfaction, which affects retention and loyalty.
On the flip side, let’s say you’re integrated with five payment partners but only one of them shares revenue with you. For simplicity and easier math, we’ll assume all transaction quantities are fairly equal across the five processors. This means you’re getting compensated on only 20% of your volume – not a very desirable or profitable outcome.
The bottom line is: If you are enabling card payments through your platform, you should be receiving compensation for every transaction, not just a handful.
Having a steady source of payment revenue gives you flexibility to fund a multitude of initiatives. Many Wind River customers use their residual income to support development projects to enhance features and functionality. One customer actually recouped all its costs for a major platform project. Others hire additional staff. And still others choose to implement internal training and education programs. It doesn’t really matter. The point is that you have extra money to do with whatever you want.
My personal favorite is reinvesting in the business through development projects as it can start a perpetual cycle of growth. Here’s what I mean:
If you find yourself venturing down a path that leads to windfalls of payment revenue, good for you. Keep going – the road is smooth and the sky is sunny.
But if your path has you supporting costly integrations with multiple processors while reaping limited payment revenue, time to take the exit ramp.
Next time: Where’s the exit ramp?