Gross Payment Volume (GPV) is a term we use in payments to describe the total monetary value of transactions that pass through a payments system (Merchant, Payment Facilitator, Payment Processor, etc.) within a defined period of time. We tend to focus on this number because the bulk of payment fees are percentage-based, not flat, so the number of transactions matters less than the value of those transactions. It’s also the metric by which payments businesses are measured, as it indicates relative size and growth of the company.
But what level of GPV do you need in order to make integrating payments practical and beneficial?
At Finix we originally put out a number in the ballpark of $50 million…but we’ve since rethought that number (and our approach to integrated payments infrastructure). We realized that reaching our mission to create the most accessible financial services ecosystem in history was going to be a tough go if we didn’t work with companies processing less than $50 million in GPV. Makes sense, right?
So what’s the minimum GPV you need to process in order to integrate payments into your company’s software platform?
It’s literally $0. Zilch. Zip. Nada. That means that you can take advantage of integrating with a Payment Facilitator before you’ve processed a single transaction. But why would you?
If you’re not processing a lot of volume already, you might wonder what the advantages are of integrating payments right away versus working with an ISO and dealing with higher fees, and then transitioning later when you have more volume and there is more revenue to be made off of payments. I’m here to tell you that it matters now, and here’s why.
Make Payments a Profit Center from Day 1
We’ve talked a lot about how integrating payments into your software platform provides a lot of value for both your customers (merchants) and their customers (consumers). White labeled payments infrastructure makes onboarding and management of merchants easy and the payments experience for consumers seamless.
But the benefits of integrating payments doesn’t stop at the experience. In fact, some companies would consider the improved experience purely a bonus, while the additional revenue generated from integrated payments is a benefit to your bottom line.
When you choose to get set up with a product like the base level of Stripe Connect, yes, you can get up and running through a self-service process, but there are several factors that make this a less than ideal choice. The top two of which are:
- Your merchants will be onboarded and underwritten through a Stripe branded portal, taking away from your unique brand experience. Your merchants will often have to go to Stripe for customer service as well, making for long wait times and a lack of personalized service. When the merchant experience for your customers is clunky and painful it will be harder to keep them happy, which means they’ll be less inclined to use your platform to its maximum. Customer experience matters a lot and shouldn’t be underestimated when it comes to how it fuels growth and reduces churn rate.
- Stripe Connect and other payment facilitators, at the basic level, use a flat rate fee structure starting at 2.9% + $0.30, which means that you will pay the same rate on every transaction, leaving money on the table if you are eligible for better rates on an interchange+ fee structure. Interchange are the fees charged by the payment processors and card networks. Everyone pays these, no exceptions. However, these fees can vary based on factors surrounding the Merchant Category Code (MCC) of the merchant, and other factors such as Address Verification Service (AVS) and Level 2 and 3 processing. These factors tell credit card processors that the transactions have more due diligence surrounding them and will charge a lower interchange rate as a result.
To summarize, if you are a software company integrating payments with a product like Stripe Connect, you may be leaving money on the table and providing a lackluster customer experience; no matter how small your payments volume is.
Work with a Partner that is Invested in Your Growth
Here at Finix we like to remind ourselves on a regular basis that we are a consumption-based business model. That means that our profit comes after your profit. As a result, when we take on software companies that aren’t processing any payments volume, we are taking a chance on these companies and the possibility that they will process payments in the future.
We obviously want you to be successful, because your success is our success, so we’ll work hard to make sure that our payments infrastructure enables you to reach your goals.
Avoid the Pain of Transitioning to a New Provider Later
You could start processing payments with an ISO or a provider like Stripe Connect, but the chances are more than likely that you will come to a place where that’s not cutting it anymore and the payments revenue lost will start to become painful.
If you start with one payments provider and decide later that you need to switch to another, you’ll need to migrate all of your payments data safely and securely from one to another. This can be a time consuming and painful process, so most companies won’t take the decision to switch lightly.
If you choose to integrate with a payments infrastructure company right from the beginning, you can avoid the pain of a transition later, while earning more revenue from payments right away.
Start Strong with Integrated Payments
Are we a little crazy to be putting time and resources into platforms that haven’t processed a single cent? Maybe. But we truly believe that this is one step on the path to making financial services more accessible; by lowering the barrier to entry to the profit center of payments. We also believe that software companies with the foresight to put thought and energy into integrating payments are very likely to be successful in the long run. We want to help these companies get there faster.
When more small and growing companies have access to this revenue stream they’ll be able to build their businesses faster, while taking a bigger piece of the revenue that would normally be passed on to large processors and banks.