How ISVs Make Money From Payment Processing
How software companies can turn payment acceptance into recurring revenue while improving the customer experience.
Payments can become a recurring revenue stream
Independent software vendors already sit inside the customer workflow. When payment acceptance is integrated into that workflow, the software company can create additional recurring economics tied to the transaction volume its customers process.
The exact model depends on the processor, software architecture, merchant ownership structure, underwriting approach, and commercial agreement. The important point is that payments can move from a third-party utility to a strategic part of the software company’s product and revenue model.
Common ISV monetization models
- Revenue share based on net processing revenue
- Markup or buy-rate arrangements where permitted by the program
- Referral compensation for boarded merchants
- Platform or SaaS fees tied to payment functionality
- Value-added services such as ACH, invoicing, reporting, or fraud tools
- PayFac or managed-payments economics for platforms with the scale and risk infrastructure to support them
A simple revenue-share example
Assume an ISV refers merchants to a processor and receives an agreed percentage of the net revenue generated after underlying processing costs and defined expenses. As merchant count and transaction volume increase, the ISV’s payment revenue can grow without adding a separate monthly software sale for every dollar earned.
The definition of net revenue is critical. The contract should clearly state which costs are deducted, how revenue is reported, how long the share continues, and what happens if a merchant changes pricing or processing volume.
Why integration quality matters
Payment monetization works best when the user experience is strong. Fast onboarding, reliable APIs, tokenization, reporting, support, and a clear escalation path all affect merchant adoption and retention. A high theoretical revenue share is less valuable if merchants struggle to board or the payment experience creates support problems for the ISV.
Evaluate the partnership, not just the percentage
Compare economics, underwriting fit, merchant ownership, data access, portability, support responsibilities, integration effort, and the processor’s ability to serve the ISV’s target verticals. The best payment partnership is one the software company can actually scale.
Have a payment question that is specific to your business?
Allied CardPay can help compare processing, underwriting, gateway, ACH, high-risk, and integrated payment options.
