The Rise of API-Driven Payments: Empowering Independent Software Vendors (ISVs)

For decades, payments infrastructure was dominated by major financial institutions and legacy processors, limiting flexibility and customization. However, the advent of open banking, cloud computing, and API-first development has transformed the landscape. Payment platforms now embrace API-first products and developer-friendly architectures, enabling independent software vendors (ISVs) to build bespoke payment experiences atop powerful infrastructures.

A New Era of Payments: Empowering Software Vendors

“Payments have eaten software,” says Bryan Long, director of product management at North. “Anything you can think of, there’s an app for it, and payment functionalities are deeply embedded within these apps. In the past 15 years, ISVs have discovered a significant new revenue stream thanks to embedded payments.”

This shift towards API-driven payments is reshaping competitive dynamics. Traditional payment processors are now contending with FinTech startups prioritizing user-friendly, developer-friendly integrations.

Long emphasizes, “A flood of technology enables innovation. Anyone with a creative idea can now swiftly develop prototypes using AI-powered no-code tools.”

Exposing Modular Payment Components

By breaking down the payment stack into modular components such as merchant onboarding, transaction processing, fraud detection, and reconciliation, payment providers are facilitating seamless integrations tailored to unique business models. APIs allow developers to innovate without having to build core payment functionalities from scratch. Solutions range from embedded checkout experiences to subscription billing and marketplace payouts.

The Transformation of ISVs in Payments

The shift in the payments sphere for ISVs began decades ago but reached a critical juncture with the payment facilitator (PayFac) model, first introduced by Square in 2009. This model enabled software companies to onboard merchants under a single master merchant account, streamlining user experiences. However, it simultaneously increased risk exposure.

This paradigm shift fostered heightened competition. Businesses could no longer rely on monolithic payment processors. Instead, they mixed and matched services from various providers. This dynamic elevated ISVs to critical intermediary roles, bridging the gap between merchants and digital payments.

Long explains, “Software companies we work with desire to own the payment experience in their user interface and the merchant onboarding process within their user interface. However, they generally prefer not to handle merchant underwriting, manage chargebacks or address fraud issues.”

North assists ISVs in integrating payments while offloading regulatory and risk responsibilities. A standout feature of North’s North Developer portal is the Merchant Boarding API. This solution significantly shortens the merchant onboarding process, often reducing the time from weeks to minutes.

For example, First Mile, an automotive services ISV, utilized North’s API to digitize its onboarding process. “Previously, their sales agents manually collected merchant applications on paper and faxed them in. With our API, the entire process is now digital, reducing errors and expediting onboarding,” Long elaborated.

North’s Developer portal offers a range of APIs for every use case. From in-person payments to online solutions and omnichannel payment setups, North’s PAX and Ingenico card readers facilitate in-person card transactions.

The Business Case for Empowering ISVs

While creating enterprise-grade software remains challenging, the barriers to entry for payment innovation have lowered. This trend compels traditional providers to reevaluate their strategies, embracing open APIs and flexible partnerships to stay competitive.

Digital payments are increasingly incorporating alternative payment methods (APMs). North’s portfolio includes support for popular APMs like Apple Pay and BNPL solutions, along with groundbreaking innovations like Tap to Pay on iPhone, which transforms iPhones into payment devices.

“Tap to Pay on iPhone is a game changer,” Long opines, noting that the feature allows merchants to accept payments using iPhones and compatible payment provider apps, such as North’s Payanywhere.

Beyond payments, ISVs are increasingly offering integrated business management tools. North partners with Davo to automate sales tax filing, aiding merchants in navigating complex tax regulations.

Critical value-added services include accounting, financial management, QuickBooks integrations, loyalty programs, reputation management tools, and customer engagement solutions.

Long concludes, “Empowering software vendors with the right tools allows them to focus on building innovative solutions while North handles the complexities of payments.”

Conclusion

The evolution of payments infrastructure driven by open banking, cloud computing, and API-first development has empowered ISVs to build customized payment solutions. This shift has democratized payment innovation, reducing barriers to entry and fostering competition among traditional payment processors and FinTech startups.

North’s commitment to empowering ISVs through seamless integrations and developer-friendly tools highlights the future of payments. By bridging the gap between merchants and digital payments, these partnerships accelerate innovation and enhance user experiences.

Explore the possibilities of integrating advanced payment technologies into your software solutions. Visit North’s Developer portal to discover the tools and resources necessary to empower your innovation.