A decade ago, the vast majority of platforms could be considered “SaaS 1.0,” offering tailored software services and generating recurring revenue from customer subscriptions. Today, most platforms have transitioned to “SaaS 2.0,” meaning they also facilitate online payments for their customers. Embedding online payments has made it easier for platforms to meet customers’ foundational needs and compete more effectively. By building an additional revenue stream around payment processing, platforms have been able to supplement the income earned from subscriptions.
More recently, platforms have evolved yet again to “SaaS 3.0” and started offering additional embedded financial features beyond payments, such as cards, lending, and financial accounts. Banking-as-a-service (BaaS) has broadened the suite of financial services that software platforms can offer customers while minimizing the development lift and regulatory complexity. In the future, BaaS-enabled software platforms will be better positioned to become one-stop shops for customers looking to centralize their operations with one trusted provider.
Stripe has partnered with more than 10,000 platforms and learned firsthand how platforms can build and launch embedded payments and financial services businesses. The most successful platforms recognize that building a payments business requires a different set of skills than building a software business. Many platforms intentionally build payments teams beforehand, embedding them within their larger organizations and integrating them into existing business practices. This guide outlines how your software platform can begin to shape the team that will guide and grow your new payments business.
We’ve also put together a list of the most common industry terms and their definitions, so if you’re unfamiliar with any phrases in this guide, refer to the payments glossary.
Start with these three questions
In order to build a payments offering that complements your existing business strategy and organizational structure, it’s important to answer three foundational questions:
- Why are you building a payments business?
- How will you integrate payments?
- What’s your payments strategy?
Why are you building a payments business?
Your motivations for building a payments business will depend on the unique demands facing your business and the needs of your existing and prospective customers. In general, we’ve found that platforms’ payments goals largely fall into one of three categories:
- Driving adoption: Many platforms have used payments to differentiate their software from competitors and increase adoption among potential customers. For example, Classy Pay, a payment processing solution powered by Stripe, has helped Classy increase adoption rates with nonprofits of all sizes by giving Classy customers access to easier reconciliation, increased fraud protection, and revenue optimizations.
- Improving retention: Others have added payments to deepen their relationships with existing customers and improve retention. For example, Lightspeed launched Lightspeed Payments to help bring together all the financial solutions their customers need to run their businesses.
- Increasing lifetime value: Still other platforms have created new revenue streams and increased the lifetime value of their customers by monetizing payments and financial services. For example, after partnering with Stripe to launch a payments platform for small- and medium-sized businesses, Weave’s payments customers have grown 13% month over month and its processing volume has grown at an average of 37% month over month.
Whatever your goals may be, clarifying and aligning behind the relevant key performance indicators (KPIs) can help your payments team track its progress and stay accountable.
How will you integrate payments?
To control the end-to-end payments experience, some platforms initially consider becoming a full-fledged payment facilitator. They soon discover that this path requires owning customer onboarding, underwriting, dispute management, compliance, support, customer dashboards, reporting, and much more. Because of the time, resources, and financial costs required to become a payment facilitator, many platforms work with payments providers instead, building on their infrastructure to offer payments services and solutions.
Ultimately, resourcing your payments team will depend on what integration path you choose. For example, you may decide to support multiple payment processors, allowing customers to integrate their existing processors on your platform. In this case, while the payment processor (rather than your own team) will be responsible for risk and compliance, your engineering team will need to build the integrations, your designer will need to architect the user experience, and your customer support team will need to field any integration issues.
What’s your payments strategy?
There is no one-size-fits-all payments strategy; yours will depend on your particular product offering, business model, and goals. Before hiring new teammates, it’s crucial to clarify how payments will fit into your overall value proposition and competitive positioning. You should align internal stakeholders behind the answers to a few key questions:
- What target customer segments do you serve? Does a payments offering enable you to better serve existing customers or become competitive among a new segment of customers?
- What problems do customers come to you to solve? Will payments services complement your existing offering?
- What do your competitors offer? Will payments help you differentiate?
- How will payments position you to capitalize on your product’s strengths in order to meet customers’ needs in ways that competitors can’t?
How to staff your payments team
Once you’ve codified your payment goals, approach, and strategy, you can begin to craft your payments team’s organizational structure. Whether your payments team divides its time across other parts of the business or is focused solely on payments, the team should be organized around three discrete functions:
- Building a payments product: A group of product experts will craft the product strategy and translate that strategy into designs and code, as well as test and iterate to maintain product-market fit.
- Supporting the payments business operationally: An operations team will keep the payments business running, answering customers’ questions, managing relationships with internal stakeholders and external partners, and mitigating fraud and compliance risk.
- Launching and commercializing payments: A go-to-market team will design a compelling launch and continue to deepen market penetration with an educated sales team, a competitive monetization model, and ongoing customer feedback.
Building your payments product
Your product team will not only be responsible for building and integrating payments into your platform, but it will also scale and maintain the payments product over time. To meet customers’ needs and differentiate the platform’s core software, this team of product managers, designers, software developers, and data analysts will shape the payments product’s roadmap, implementation, and user experience.
One of your top priorities should be hiring a payments product manager to drive the payments strategy and be accountable for finding product-market fit. Given this responsibility and the deep cross-functional partnerships they’ll build, this payments product owner will need to build a broad base of knowledge:
- Technical experience with payments products: In collaboration with a solutions architect, the product manager will be responsible for designing account structures, building funds flows, and determining payout schedules. With the engineering team’s help, the product manager will also equip customers with robust APIs and SDKs, documentation, and capabilities so they can configure your payments product.
- Knowledge of payments unit economics: In order to minimize the business’s costs, the product manager should be familiar with interchange costs, dispute fees, and any geographic-specific costs. This knowledge will also help inform the pricing strategy.
- Familiarity with payments regulations and financial systems: The payments value chain involves acquiring banks, issuing banks, card networks, and payment gateways. Different countries have different rules and restrictions governing these players. A product manager will need to stay up-to-date on these players and regulations in order to partner effectively with legal, risk, and compliance teams.
- Awareness of emerging payments trends and payment methods: Keeping a pulse on new payments capabilities and payment methods makes it easier to deliver value for customers and stay ahead of their evolving needs. A product manager will use that knowledge to build a roadmap and experimentation plan that enhances the platform’s value proposition, increases adoption, and maintains product-market fit.
Product and UX designers
The design function will map out and design your customers’ payments journey. A product or UX designer’s first step will likely be the onboarding flow. Working with a UX researcher to interview potential customers and map out the end-to-end experience, they’ll design an onboarding experience that’s easy for customers to use while also balancing any regulations, legal stipulations, and risk requirements. In line with the payments product strategy, the design team will also craft the dashboards, screens, and copy that customers see after they’ve been approved. These experiences might allow your customers to dig into reports on their payments performance, track payouts, or manage disputes and refunds. The design team should also standardize the experience for your customers’ users, including the checkout experience or payment confirmation emails.
By planning, building, testing, and deploying releases, software developers drive the technical aspects of developing and maintaining a payments product. You’ll need engineers who are well versed in building integrations, crafting user experiences, and iteratively optimizing. A payments product will require integrations not only with payment gateways, but also with business systems like ERPs, CRMs, and accounting software. Payments engineers will also translate the design team’s mock-ups into an efficient customer-onboarding experience and dashboards where customers can manage their business. Like all software products, your payments product must evolve to meet the ever-changing needs and expectations of customers. Engineers will play a big part in optimizing conversion and authorization rates and updating the systems required to support new monetization models.
The data function will help meet both customers’ and businesses’ data needs. A data analyst should be charged with defining the payments data standards, including the APIs and data tables used to ingest data from customers’ payment gateways. Given the sensitive nature of payments data, the data team should also define the processes governing how payments data is managed, protected, and recovered. It’s also common for payments data analysts to monitor and analyze performance across payment gateways and to support smart routing for customers using multiple gateways.
Other payments stakeholders will look to the data team for support with their workstreams. For example, the finance and accounting team will work with a data analyst to ensure their systems can ingest the payments data correctly. The payments marketer will want to track the efficacy of their adoption and monetization efforts, and the payments product manager will want reporting on the performance of the payments business. The risk team may also come to the data team for help with fraud modeling.
Supporting payments operationally
Payments can be one of the most sensitive aspects of your customer’s business. It’s important to build a deep operations bench to support your customers as they onboard, for example, and ensure compliance with risk, legal, and regulatory obligations. This operations team will keep the organization ahead of the various rules surrounding payments, including underwriting, risk scoring, and fraud mitigation standards; Know Your Customer (KYC) requirements; PCI compliance; payment facilitator compliance; and tax obligations.
A program manager’s top priority should be to drive alignment behind the payments program by actively managing stakeholders within and outside the payments organization. Given the number of financial partners required to operate in the payments space, the program manager can act as the single point of contact to manage those relationships. If your platform decides to expand internationally, for example, the program manager can drive outreach to potential issuing banks. If your platform supports multiple payment gateways, the program manager can coordinate with those gateways, quickly resolving issues and outages if they happen.
Some of their key workstreams include developing KPIs for the payments team, designing (and evolving) the team’s structure, and redesigning internal processes to increase the team’s velocity. A program manager might also support the payments product manager with research to strengthen their business cases or support the payments product marketer with stakeholder management and process optimization in preparation for launches.
Customer support team
While your platform likely already has a customer support team, dedicated resources are often required to handle payments-related issues. As customers get onboarded, they’ll look to customer support for help, and your team should be prepared to answer some of the most common questions:
- How can I add a bank account for deposits?
- Why hasn’t my first payout arrived?
- How should I handle disputes?
- How much will I be charged for payments?
- Where can I find my statements?
Whether you hire a dedicated resource or work with your platform’s existing legal function, your legal counsel will need to stay up-to-date on the relevant laws and regulations governing the financial services and payments industry in order to provide legal advice to members of the payments team. For example, legal may partner with program management to acquire a money transmitter license or review contracts with payment gateways. If you decide to brand the payments functionality as your own, your platform is assuming a larger regulatory burden, and your legal counsel should play a central role in drafting the contractual language between your platform and customers.
Fraud manager and risk and compliance manager
The risk of adding a payments product to your business isn’t negligible. Payments businesses need to not only manage fraud and credit risk but also compliance risk. While smaller platforms may be able to manage these risks with one resource, larger ones will be better served hiring a payments fraud manager and a risk and compliance manager.
Integrating payments into your platform means taking on financial liability for all transactions initiated by your customers, including both the credit risk of your customers and the fraud risk of your customers’ users. To mitigate these risks, a payments fraud manager will proactively implement risk models and processes to prevent fraud and money laundering. They’ll help design the onboarding and underwriting flow and craft the risk controls and thresholds in line with your platform’s risk tolerance. On an ongoing basis, the risk team will need to monitor transactions for any irregularities and segment customers based on their risk profile—all while accounting for the nuances and differences across customers’ industries.
Because of the risk involved with moving money, many countries have put in place regulations designed to protect their constituents, their local economies, and the global financial system. A risk and compliance manager should be charged with keeping the organization current on this evolving regulatory landscape and integrating the payments compliance obligations into your platform’s existing compliance controls and policies:
- “Know Your Customer” (KYC) obligations: When onboarding customers, you may be required to collect certain data (such as their tax ID) and run checks (such as identity verifications) to validate that their businesses are what they claim to be.
- Data residency requirements: For example, the Reserve Bank of India has mandated that payments data for transactions processed through Indian payment service providers or intermediaries must only be stored on databases and servers located within India.
- Security standards: In 2006, Visa, Mastercard, American Express, Discover, and JCB aligned on one standard policy, the PCI Data Security Standards (known as PCI DSS), to ensure a baseline level of protection for consumers and banks in the internet era.
Accounting and finance manager
Depending on your monetization model, your payments business may have multiple sources of new revenue: revenue from each transaction as well as revenue from value-added services like analytics and subscriptions. When launching a payments product for the first time, an accounting and finance manager should ensure that payments revenue flows through the platform’s accounting system so that financial reporting is accurate, complete, and timely. As your payments business continues to mature, the accounting and finance team will help maintain the connections between upstream payments systems and downstream accounting systems, track the profitability of the payments program over time, and help file taxes according to different countries’ and states’ rules and rates.
Launching and commercializing payments
Once your product has been built and your operational systems are in place, a go-to-market team can monetize, launch, and scale your payments business. The makeup of your go-to-market function will depend on your particular acquisition model. If you plan to encourage customers to sign up online, you’ll likely lean more heavily on a marketing team. However, if you use a white-glove approach to identify and onboard new customers, building a knowledgeable payments sales team is crucial. By maintaining a constant feedback loop between your customers and internal teams, this go-to-market team will also help kickstart experience improvements and inspire new product innovations.
Responsibility for pricing strategy should be shared by both product marketing and product management teams. Before narrowing in on a monetization model, your payments product marketing manager will research how customers measure value and audit competitive alternatives. While taking into account the business’s costs, the product manager will help weigh whether existing internal systems are designed to support different monetization levers:
- Interchange: If you offer a card product, you may be able to keep a share of the interchange fees that are generated for every card transaction.
- Lending: You can make money by offering loans and charging origination fees and interest.
- Earn fees on funds held: If you allow customers to store funds, you can earn fees as a share of the funds held. You can capture this entire revenue, share it with the customer, or do some combination of the two.
- Subscription or service fees: Charge customers a recurring fee for subscription or membership plans in exchange for access to your offerings or services.
- Mark up money movement services: Mark up the costs of various money movement services (e.g., accelerated access to funds, wire transfers, currency exchange, etc.).
While these approaches directly monetize your new features and services, an alternative to consider is simply raising the price of your overall platform fee. After all, by offering payments and financial services, your platform is creating more value for customers.
Product marketing manager
A payments product marketing manager should be charged with creating and implementing a go-to-market strategy to drive new customer acquisition. Through customer and competitive research, marketing will define the target customer segments, brand positioning, and messaging. If your platform drives sign-ups through a self-serve approach, your marketer will build demand at the top of the funnel through paid, earned, and owned media channels. If you depend more heavily on a sales team, marketing should play a central role in building the training and collateral to enable your sales team to pitch payments effectively. After the initial payments product launch, your marketing team will announce the launch of new features, increase customer penetration with marketing promotions, and continue to experiment with its marketing and awareness strategies to see what works best.
To build a payments sales motion, some platforms train their entire sales teams, though most use an overlay sales model, training existing team members to become payments specialists and articulate the value of the payments offering. Regardless of your approach, setting up a sales team doesn’t end at hiring. Foundational pieces need to be put in place in order to set your sales team up for success:
- Set revenue targets to motivate your sales team and measure its productivity.
- Establish an incentive structure that compensates sales agents for closing payments deals.
- Create a sales enablement framework to train sellers how to pitch the combined value of payments and software.
How Stripe can help
Stripe is a fast, easy, and flexible way for software platforms to start, scale, and grow their payments and financial services business. By working with Stripe and its bank partners, platforms of all sizes—from fintech startups to established platforms—are able to collect payments, extend capital to their customers, issue virtual and physical cards, and offer many other financial services. With a single integration, Stripe makes it easy to expand your platform internationally and reach customers in new countries with no additional development work.
To accelerate speed to market and minimize the resources and investments required to build and run a payments business, Stripe offers tools to reduce the operational overhead and can even actively manage parts of your payments business for you:
- User experience: Instead of designing and building your onboarding flow and dashboard reporting experiences from scratch, you can use Stripe-hosted experiences that are localized, optimized for conversion, and regularly updated to help meet new compliance standards. Stripe offers a suite of easy-to-integrate features (such as the ability to refund a transaction, request a payout, and manage verifications) that will help your product team build faster; reduce maintenance costs; and create a cohesive, branded experience.
- Risk: Stripe provides platforms with a variety of solutions to help manage both transaction and merchant risk. Stripe Radar provides platforms and connected accounts with configurable tooling to manage transaction fraud risk. And Stripe-managed risk provides platforms with an end-to-end merchant risk management solution that includes ongoing monitoring and mitigation for merchant credit and fraud risk as well as protection against risk of loss in the event of unrecoverable negative balances attributed to merchant risk across a platform’s portfolio of merchant accounts.
- Legal: Stripe stays current with global regulations and card network rules, so your legal team has a partner in monitoring the changing landscape. Stripe also offers data tokenization to help with PCI compliance and helps create safer payments businesses with our risk-based financial crimes screening program, including Know Your Customer (KYC) and anti-money laundering (AML) checks for individuals and businesses. You can also benefit from Stripe’s money licenses around the world, instead of getting your own in every market.
- Customer support: Stripe can provide phone, email, and chat support to your customers.
- Monetization: Rather than relying on engineers to build a custom pricing tool, you can use Stripe to easily set and dynamically control pricing: configure application fees, offer discounts, and support various pricing models.
- Data: Stripe offers robust revenue reporting to streamline reconciliation with your finance and accounting teams’ reports.
- Go-to-market: When you join the Stripe Partner Ecosystem, you gain access to a toolkit designed to accelerate your marketing and sales efforts, including training for your internal teams, resources to announce your Stripe integration, videos covering popular Stripe features and setup questions, as well as brand guidelines and assets.
If you’re considering building your payments business with Stripe, our professional services team can help you navigate the best path to launch. To build a foundation for your payments program, we can co-develop a product strategy and business plan, defining your resourcing needs, functionality requirements, and monetization approach. Through regular reviews, our consultants will work with your team to integrate payments, covering everything from experience mapping and customer migration to data ingestion and financial reporting. To bring your new payments product to market, we’ll help you craft your marketing strategy, plan a phased rollout, and equip your internal teams with the necessary resources and processes to support the launch.
Get in touch with our team to learn more about how your platform can partner with Stripe to build a payments and financial services business.
This glossary defines some of the most commonly used payments terms in this guide:
- Acquirer: Also referred to as an acquiring bank, an acquirer is a bank or financial institution that processes credit or debit card payments on behalf of the merchant and routes them through the card networks to the issuing bank.
- Card networks: Card networks process transactions between merchants and issuers and control where credit cards can be accepted. They also control the network costs. Examples include Visa, Mastercard, Discover, and American Express.
- Chargeback: Also referred to as a dispute, a chargeback occurs when cardholders question a payment with their card issuer. During the chargeback process, the burden is on the merchant to prove that the person who made the purchase owns the card and authorized the transaction.
- Credit risk: This is the risk that a platform’s customer is unable to fulfill its goods or services orders. If a chargeback is requested, generally speaking, the platform facilitating the transaction would be liable for the money owed.
- Disputes: See definition for “Chargeback.”
- Fraud risk: This is the risk from false or illegal transactions. Fraud typically occurs when someone steals a card number or checking account data to make an unauthorized transaction. Fraud can also happen when a business deceives a customer into giving them money, when the business has no intention of delivering the good or service.
- Interchange: This is a fee paid to the issuing bank for processing a card payment.
- Issuing banks: These are the banks that issue credit and debit cards to consumers.
- Payment facilitator: Generally, adding certain payments functionality required a platform or marketplace to register and maintain status as a payment facilitator (or payfac) with the card networks. Using Stripe, a platform or marketplace can make payments functionality available without necessarily having to register as a payfac and take on a wide range of burdensome requirements imposed on payfacs.
- Payment gateway: A payment gateway is a piece of software that encrypts credit card information on a merchant’s server and sends it to the acquirer. Gateway services and acquirers are often the same entity.
- Payment method: This is the way a consumer chooses to pay for goods or services. Payment methods include bank transfers, credit or debit cards, and digital wallets.
- PCI Data Security Standards (PCI DSS): This is an information security standard that applies to all entities involved in storing, processing, or transmitting cardholder data and sensitive authentication data.