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What Ownership Reveals about Your Integrated Payments Partner

In Brief: The entity that owns or invests in your payment partner is the entity that drives the policies and behavior of your payment partner. It is important for software companies with integrated payments to be aware when ownership changes or private equity investment enters the picture. Often, the larger the owner or investment level, the greater the focus on driving ROI and shareholder value. Many times, these conflict with a software provider’s goal of delivering the optimal customer experience. This article explores the impact of ownership on partner behavior and provides suggestions that software companies may want to consider when evaluating their payment partnerships.

The Privilege of Ownership

A recent headline in the Wall Street Journal was about an uproar over one of the women’s uniforms in Nike’s Olympics track and field kit. Essentially, the style of one of the designs has drawn the attention and criticism of athletes and others in the sport.

Admittedly, I’m not familiar enough with the situation or what constitutes a good or poor design, so I can’t really comment. That said, it struck me that this is as much about ownership and control as it is about design. Nike has stated it is making its largest ever investment in the 2024 Olympics. With that investment comes ownership. And one of the privileges of ownership is control. In this case, control over the look and feel of the athlete uniforms.

Impact of Private Equity on Company Behavior

What does this have to do with integrated payments? Well, a lot, actually. Like most companies, return on investment is essential. You invest a lot; you expect a lot back. Let’s take Private Equity (PE) investment in the fintech industry, for example. It’s common for PE firms to take a public company private, make changes to improve efficiency and reduce costs, then either take it public again or sell it to the highest bidder – often within a 5-7 year window. Software providers with payment partners that have recently received PE funding or been acquired by a PE firm can expect to see changes that may affect tech development, customer service, and customer pricing. Typically, ROI and shareholder value are the end goals in these types of deals. In and of themselves, these are not bad goals. Issues arise when they overshadow technology, service and support, and fair pricing for your customers.

The recent announcement that Canadian processor, Nuvei, will be brought back to private by PE firm Advent International is indicative that PE companies are still interested in the Fintech industry. If the cycle holds true, expect to see operational changes then a sale or public offering later down the road.

Alignment of Values

The entity that owns or has a controlling investment level in your payment partner is the one that calls the shots. A key question to consider is whether the values of that owner or capital investor align with the values you have established for your business. Specifically,

  1. What kind of payment experience is important to you and your customers?
  2. How will a partner emphasis on cost cutting and revenue growth impact your customers’ payment experience in terms of support and pricing?
  3. How will this payment experience affect your ability to attract and retain software customers?

It’s important to know the answers to these questions so you can understand the impact your payment partner is having on your business. It’s easy for integrated payment programs to be a “set it then forget it” type of deal. I don’t recommend that. Customers are too valuable to not pay attention to what’s going on.

Why Value Alignment is Important

Greg Swain, president of Lodgical Solution property management software, authored an article describing his strategy for choosing an integrated payments partner. He emphasized the impact of value alignment in the following statement:

“We have found that any gaps in the values and mindset of our partners make it difficult to provide our clients the level of support and service they deserve.”

He goes on to outline the top three areas of alignment he required of his payment partner:

  1. Treat our customers the way we treat them
  2. Deliver expertise and guidance for solving problems
  3. Bring the technology that enables us to deliver product innovation

Misaligned values lead to gaps and inconsistencies in the customer experience. Both can have a major impact on your ability to acquire new software customers and hang on to the ones you currently have.

What to Look for in a Payment Partner

As Greg Swain indicates in his article, a key attribute is alignment with your vision and business strategy. Strategic alignment is crucial for fostering mutual understanding and shared objectives. This ensures both parties are working together toward common goals. This enhances communication and collaboration and ultimately leads to a more successful and sustainable partnership.

For example, if you are in it for the long haul, then you must make sure your partner is in it for the long haul rather than one that plans to flip the company in a few years. Short term strategies often sacrifice customer experience in lieu of operational efficiencies and revenue growth. On the other hand, if you are working toward an acquisition or an IPO, then a long-term focused partner would be less important to you.

The only way you can know whether your partner strategically aligns with your business is through regular engagement. Does your partner reach out to initiate strategic conversations on subjects such as your overarching business goals, trends that may affect your growth, or ways to future-proof your business? Many software providers never hear from their payment partner once the deal is done. This is the quickest path to strategic misalignment.

Secondly, look for signs of stability in your payment partner. This can come in many forms including business longevity, expertise, customer growth, and technical infrastructure. We hear a lot phrases like like “rightsizing the workforce” or “path to profitability” getting thrown around by payments giants lately. These indicators of instability lead to inconsistent customer experiences.

Conversely, here are a few indicators of a stable payment partner:

  • Tenure in the industry
  • Consistent ownership
  • Customer retention rate
  • Employee retention rate
  • Transparency in pricing and policies

Lastly, consider what you need out of the relationship with your payment provider. I’m seeing more and more software companies seeking a deeper partner relationship. One that includes strategic and operational planning, knowledge sharing and a mutual investment of resources that yield incremental revenue growth, new customer acquisition, and customer loyalty for both parties.

Will a PE owner or corporate giant give you what you need to grow your business? Would you know where to start to even have those conversations? If you can’t say for sure, it may be time to consider a change.

Matt Uselman Wind River Payments
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