Mark Dunn
January 26, 2023
min read

As a developer, you’ve spent a lot of time and effort in the technical craft of your job.  You’ve maintained and improved codebases, enhanced applications, and improved system quality. In addition, you’ve spent hours investigating new technologies and how they might improve your applications.  In sum, you’ve been a professional in software development.

I’m guessing, though, that you probably haven’t become an expert in the business case for payments.  Incorporating the right deal on payments can double the value of the software you’re creating.  By the integration of electronic payments, you can earn a lot of additional revenue.  But to do this the right way will require a whole separate base of information and expertise in how to secure that for your company.

Let me explain several principles I’ve learned in more than 30 years in electronic payments…

Not long after I started in electronic payments, I realized the central maxim of the payments business:
“The primary key to becoming successful is to get other people working for you.”  

A darker double corollary to this maxim was:

“Give the people working for you as little information about their role in the profits as possible.  And pay the people working for you only what you have to.”

Let’s examine how this works when processors go after developers.

First, the processor develops an API or SDK for integrating their payments engine into your software.  If they do it right, they make the integration easy, fast and convenient.  And they supply a lot of helpful reports.

Next, they promote their API as the best thing since sliced bread.

Finally, they get you to do the work of integration but don’t really explain the dollars and cents of what you get paid nor how much your share actually turns out to be.

They know how much they are making when the transactions start flowing.   And they know how much you’re earning.  

In my experience, developers are often quite happy making 20% of the total profit from the transaction processing revenue.  That’s because they don’t have the actual numbers, and they don’t know how to arrive at the total profit.  They could be making a lot more.

It certainly pays to research the cost elements that go into transaction processing. However, to do this, you have to understand how the card brands set up interchange, dues, and assessments and that these rates and fees are interbank charges, not what the merchant actually pays.

It helps to understand the difference between a payment facilitator and a registered retail ISO. In addition, it’s important to understand bankcard acquiring, compliance, risk, and underwriting.

But let’s face it, most developers don’t have time to accumulate enough information or experience to see how all the pieces of the payments puzzle fit together.  Based on my background in the industry, I would estimate it will take an average businessperson about a year to two years to learn enough about payments on their own.

So you really need to hire an expert.  Find someone with more than ten years of experience working in payments.  Your expert should be someone who is dedicated to getting you the best information available in the most straightforward format to understand.  She or he should guide you to an actionable understanding of payments.

And that expert should be able to explain why they are recommending one solution or company over all the other possible choices.  Is the expert making money off their recommendation?  How much of a cut are they taking?  Or are they a “fee for service” consultant? Unfortunately, most consultants I encounter in the industry are taking money from the processors or vendors they are recommending.

How long with the process of selecting a processor or solution take?  You should expect it to take about four to six months.  If that seems like a long time, you should consider what’s at stake.  One size does not fit all. First, you need to understand how pricing and profitability work. Additionally, you need to understand the differences between processors, their solutions, and their advantages over others. Lastly, you need to negotiate a better agreement because the first one you receive is not the one you want to sign.  The decision on who you link your clients’ payments to is one of the most important decisions you will make.  It can mean a difference of hundreds of thousands of dollars – or maybe millions of dollars.

Take your time.  Hire a credible expert to show you the ropes.  Then go crush the payments thing.

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