Dealing with Payment Partnerships in an Evolving Industry

M&A continually disrupts the payments industry. See how to minimize the impact on your SaaS company and your customers.

The decision your Software as a Service (SaaS) company makes about payments integration has a long-lasting impact on customer satisfaction and your success. A robust payments solution allows customers to accept digital payments wherever needed, in-store, off-site, or online. The right payments partnership will also enable you to offer a solution that supports a range of payment methods and meets consumer demands for fast, easy, convenient transactions.

Furthermore, most SaaS companies can easily measure the value that integrated payments bring to their businesses through increased revenues from payment revenue known as residuals and customer satisfaction, leading to lower churn.

Considering the pivotal role that a payment partnership plays in your business’s success, it’s vital to conduct due diligence to ensure the payments company will provide the necessary features, functionality, and partner support. Savvy SaaS business leaders know that this exercise requires more than finding a payments company with fast integration processes, a well-known brand, attractive rates for your customers, and a competitive revenue split for your business. Going into a payments partnership with your eyes open requires researching the company’s platform architecture and capabilities, your partner’s innovation roadmap, and its reputation.

However, in the current payment industry climate, there’s one more factor you need to consider before you formalize a partnership: how mergers and acquisitions (M&A) could affect your business.

How M&A Impacts Payment Partnerships

The hard truth is that when you establish a payment partnership, investing time and resources into integration and associating your solution with the payment company’s brand, there’s no guarantee that the relationship will continue to thrive if another company acquires or merges with your partner’s organization.

After M&A, it is common for SaaS companies to experience:

Loss of knowledge about your solution and customers.

Gallup reports that after a merger or acquisition, 47 percent of key employees leave within one year, and 75 percent leave within three years, often because mergers lead to redundant roles. If your account manager leaves the company, you may work with a new contact who has to navigate a learning curve before becoming a valuable collaborator and resource to you. Additionally, you may unfortunately find yourself without a dedicated point of contact, just a “number” dealing with different people each time you call, making it more difficult to manage the integration and the business relationship. The worst case scenario, however, may be that your customers call for payment support, and there is no longer any knowledge concerning your software and relationship.

Loss of deep market expertise.

The best payment partnerships for SaaS companies share the same market focus for their collective solutions and services. Ideally, the partnership is complementary, creating a synergy of deep knowledge of market pain points and objectives to develop solutions that will provide real value and a competitive edge.

After a merger or acquisition, a payments company’s priorities may shift away from the SaaS company’s focus, particularly if the software is designed for a niche market. As a result, the competitive edge, once established, loses its potency, leaving your solution vulnerable.

Sunset technology.

One result of M&A activity in the payment industry is technology consolidation. A SaaS company’s payment partner may acquire a company for new technology and capabilities and then sunset some of its existing tech stack, resulting in you and your customers needing to migrate to a new platform. The migration will require development time and expense, but that investment may have unclear ROI and even result in the loss of key features. Unexpected development time can also take focus away from new opportunities, stalling revenue growth.

Financial impact on you and your customers.

After M&A, a payments company may make decisions in its own best financial interests, not necessarily those of its partners. Therefore, the partnership becomes one-sided, with the payments company benefitting far more than its SaaS partners. For example, a newly formed payment partner organization can establish new terms for working with partners. This may include a decrease in the split partners receive on transactions, directly impacting your revenues.

Additionally, the new organization may increase your customers’ fees, or the company may change the fee structure. Furthermore, your new partner may have a different approach to fees that could be less clear or transparent than what you were previously accustomed to. Unfortunately, a change in fees and how the payment company charges end users can create dissatisfaction and lead to churn — not only for the payment company but also for your SaaS company.

Decrease in customer satisfaction.

Although an increase in payment processing fees will harm a relationship with end users, particularly in the current economic climate, other changes following a merger or acquisition can also negatively impact how satisfied your clients are with the solution you provide. Users may not have access to all the features they did in the past or need to pay additional fees to use them.

Furthermore, the newly formed organization may not provide options to customize a solution for a merchant’s unique needs. Merchants may also wait longer for funds to appear in their accounts, negatively impacting their cash flow. They may also find themselves contending with new policies on account holds and risk management. For example, if a merchant crosses a threshold that the payment company sets for the number of chargebacks, they could face higher reserve requirements or even lose their ability to process payments through the provider.

SaaS companies must remember that customers associate the total solution with their brand. So, any negative impact from changes to payment operations will also negatively impact your SaaS solution. To maintain customer satisfaction and a growing business, you must partner with a company that values your customers’ business as much as you do.

New Organization after M&A, New Attitude Toward Partners

With new business leadership, goals, and objectives, a newly organized payments company may view SaaS company partnerships differently. Strategic partnerships are a balance that strives to achieve mutual benefits, mutual respect, and business growth for both parties. Your position on a payment partnership to enable your customers to accept payments with your solutions may not have changed after M&A. You may be willing to maintain the integration with your partner’s solution and continue to encourage and assist with onboarding your customers to use the solution.

However, a payment organization that results from a merger or acquisition may see SaaS companies as little more than a revenue line item rather than strategic partners.

Red flags that indicate it’s time to rethink your payment partnership include:

Poor customer service:

Before your payment partnership was disrupted by M&A, you knew what to expect from your partner. Now that new entities are involved, you need to understand their commitment to customer service and how it might change your relationship. Research the company that merged with your partner to understand its track record and service levels. Look for customer reviews online, Net Promoter Scores, and other ratings that help you understand the quality of customer service you can expect. Also, insist that your payments partner provide quarterly business reviews (QBRs) that show how they’re supporting customers, the progress they’ve made in the past few months, and forward-looking statements that will show what they do to enhance customer service in the near future.

Poor sales enablement:

Payment companies should provide all the information, documentation, and tools to successfully provide solutions and services, not let you fend for yourself.

Unwillingness to share business intelligence:

Your partner should share insights about your customers and the direction the payment industry is taking, consumer payment trends, and innovations on the horizon. Those insights will help you offer relevant solutions today and anticipate how the industry is evolving so you can stay on the leading edge.

No comarketing opportunities:

A key benefit of a payment partnership is expanding marketing reach and getting your brand and solutions in front of your partner’s audience. Your payment partner should be open to comarketing opportunities, including trade show participation and co-branded marketing. Your partner should be willing to help you sell more software and value-added services, not just sell another merchant account.

Complex merchant onboarding:

Comprehensive merchant onboarding processes are essential to complying with regulations, such as Know Your Customer (KYC) and Anti-Money Laundering (AML) laws, and mitigating risk for all parties involved in transactions. However, overly time-consuming and complex onboarding processes can lead to churn. Payment companies should streamline onboarding, leveraging technology and automation to provide the best customer experiences.

Solutions that hurt your competitiveness:

You and your customers may have been accustomed to processor- and hardware-agnostic solutions, but you may have lost that flexibility after a merger or acquisition. Limiting your customers’ options can hurt your ability to bring competitive solutions to market. Your payment partnership should allow you to meet all of your customers’ needs. That includes everything from a robust omnichannel payments solution that allows them to enhance transactions wherever consumers engage to supporting surcharging or cash discounting/dual pricing that helps merchants offset payment processing fees.

Bare-bones PCI compliance support:

Your partner must offer a PCI-approved solution. It’s non-negotiable, yet something that often adds friction with your customers. Your partner should go beyond checking that box to help you ensure you comply with all aspects of PCI compliance while focusing on removing PCI friction from your customers’ experience. It’s not only the technology to help reduce PCI scope with semi-integrated solutions, encryption, tokenization, or other compliant strategies that matters, but also the support and streamlining of the PCI customer process.

No investment in your success:

M&A shouldn’t decrease the payments integration support, resources, or tools available to you. Rather, you should work with a partner that helps you successfully monetize payments so that they become a part of your growth strategy. You can even find payment companies that will literally invest in your company with capital infusions that you can use to cover development costs or new customer incentives that fuel your growth.

Research the Company, Not Just the Solution

Regardless of what captures your interest in a potential payment solution, make sure you know the team, not just the technology or how easy payment integration will be. Although there’s no predicting what the future will hold, the best move is to look into a company’s history, including the average tenure of the team you’re working with.

The more you know about your payments partner’s company, its business model, corporate practices, and customer and partner support structure, the better you’ll position your company in the long run.

If you’re ready for a partnership designed for your success now and in the future, contact us.