Most software companies rely heavily on subscription revenue. It’s predictable and straightforward, but it has limitations – there’s only so much you can charge before customers push back. There’s another revenue model worth considering: payment monetization. Done well, this becomes a genuine revenue stream that scales naturally with your customers’ success. 

What Payment Monetization Actually Means

Simply put, payment monetization means earning revenue from the payments that customers are processing through your platform. There are several ways to structure this.

Interchange sharing

Card networks charge an interchange fee on every transaction. When your platform facilitates payments, you can negotiate to share in this interchange revenue with your payment processor. Instead of passing payment processing through to your users at cost, you earn a small percentage of every transaction.

Value-added services

Beyond basic processing, you can monetize by offering premium payment features like faster payouts, advanced fraud protection, international payments, or financing options. Customers are willing to pay extra because these features solve real problems, like improving cash flow or reducing chargebacks, that basic processing doesn’t address.

White-label and embedded billing

Rather than sending users to a third-party processor, embedding payments directly into your software creates a seamless experience. White-labeled payment solutions let you own the customer relationship and earn more revenue from each transaction.

Revenue Models for Monetized Payments

The right model for monetized payments depends on your customer base, transaction patterns, and competitive positioning. Here are some options.

Flat-rate vs. interchange-plus

Flat-rate pricing charges customers a single percentage on all transactions, like 2.9% + $0.30. This is simple and transparent, ideal for small businesses or platforms just starting with payment monetization.

Interchange-plus pricing charges customers the actual interchange cost plus your markup. High-volume customers prefer interchange-plus pricing because they can audit the pricing and negotiate better terms. 

Subscription pricing

Some platforms charge a monthly fee for access to embedded payment features. This works when payments are packaged as part of a premium tier or when you’re offering significant value beyond basic processing. For example, a childcare management platform might charge $75/month for payment features that include automated weekly tuition billing or split payments between parents.

Usage-based fees

Usage-based monetization charges customers based on transaction volume or specific features accessed. This model aligns costs directly with value received and is easier to justify since customers only pay when they use the service.

Key Technical Considerations

Monetizing payments requires solid technical infrastructure. Below are some considerations for building your payment solution.

API access and documentation

Your payment API needs to be developer-friendly, well-documented, and reliable. Invest in comprehensive documentation, sandbox environments, and example code to make integration easier. The smoother your integration experience, the faster platforms will adopt your payment solution – and the more revenue you’ll generate.

Reporting and analytics

Customers expect detailed reporting on transaction volumes, processing fees, settlement timelines, and revenue breakdowns. Without it, they can’t reconcile their books, understand their true costs, identify trends or problems, or trust that you’re charging them correctly. Having robust reporting tools in place helps build customer trust and drive retention.

Settlement and payout timelines

How quickly can your customers access their funds? Settlement timing impacts cash flow and customer satisfaction. Work with your payment partner to offer competitive payout schedules and be transparent about when funds will be available.

Risk and Compliance Responsibilities

When you monetize payments, you take on responsibilities around risk management and regulatory compliance. There are really two main areas you need to address.

KYC & onboarding

Know Your Customer (KYC) requirements mean you need to verify merchant identities on your platform. This includes collecting business information and screening for fraud. Choose a payment partner that handles much of this while keeping the experience smooth for your customers.

PCI compliance and tokenization

Payment Card Industry (PCI) compliance is non-negotiable when handling card data. By using tokenization and working with a PCI-compliant payment processor, you can reduce your compliance burden while keeping customer data secure.

Real-World Examples of ISV Monetization

Consider a property management software provider. A platform for landlords automates rent collection, late fees, and security deposits. They charge 2% of every rent payment processed. A landlord with 50 units collecting $100,000/month generates $2,000 in monthly payment revenue for the platform.

Or look at appointment booking software for nail salons. A salon management platform processes payments for services and product sales. They earn $0.50 per transaction plus 0.3% of volume. With hundreds of salons processing thousands of appointments weekly, this adds up to significant recurring revenue.

How to Get Started

Start by analyzing your current payment flows. Where are your customers processing payments today? What friction points exist? How much volume flows through your platform? Then, build a business case. Model out potential revenue based on transaction volume, pricing structure, and take rates.

Finally, choose a payment partner that aligns with your vision. Here are a few important questions to ask when evaluating payment processors.

• Do you offer revenue sharing or interchange-plus pricing?
• What APIs and developer tools do you provide?
• How do you handle merchant onboarding, KYC, and compliance?
• What reporting tools are available?
• What is your settlement timeline?
• Do you provide sandbox environments for testing?

With the right strategy and payment partner, your platform can turn payments into a fundamental part of your business model. Ready to explore payment monetization for your platform? Aurora Payments specializes in helping ISVs and SaaS companies embed payments and build new revenue streams. Contact us today.