Payment Pulse – Ep. 40

A sophisticated payments model does not automatically create a mature payments business. Learn the five stages of embedded payments maturity and how software companies can continue evolving after launch.

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Episode Transcript

Shannon: Welcome back to the Payment Pulse Podcast. I’m Shannon.

Michelle: And I’m Michelle. Thanks to all of our listeners for joining us today!

Shannon: We have a great conversation planned today because we’re going to tackle one of the biggest misconceptions we hear from software companies when they start thinking about their payment strategy.

Michelle: We hear it all the time, questions like, “Should we become a Pay Fac (payment facilitator?” “Should we stay with a referral model?” Or, “When does it make sense to change our approach?” Those are all important questions, but we’re going to talk about why they may not be actually the first questions that software companies should be asking.

Shannon: So before you decide where your payment strategy should go next, it’s worth asking something much more fundamental. How mature is your payments program today? Because your payments model and your payments maturity are two very different things.

But before we jump into today’s topic, let’s take a minute to talk about something that’s been making headlines across the payments industry. One of the biggest stories recently has been the announcement of OpenUSD.

Michelle: Yeah, it definitely caught my attention. You’ve got companies like Stripe, Visa, MasterCard, Coinbase, and many others participating in this new stablecoin initiative. At first glance, it sounds like another cryptocurrency story, but I actually think that there’s a much bigger takeaway.

Shannon: I agree. So to me, the story isn’t really about stable coins. It’s about the direction the payments industry is heading. The biggest players in payments are continuing to invest in infrastructure that’s more open, more programmable, and designed to evolve over time.

Michelle: And whether OpenUSD ends up becoming mainstream or not, it reinforces something we’ve been talking about for quite a while. Payments aren’t standing still, and the industry just keeps on evolving.

Shannon: Exactly. Because software companies don’t necessarily need a stablecoin strategy tomorrow, but they do need a payment strategy that’s flexible enough to adapt as the industry changes.

Michelle: Which actually leads perfectly into today’s discussion because as the payments industry keeps evolving, software companies need to think beyond simply choosing a payments model. They need to think about building a payments program that can evolve alongside their business.

Shannon: Yeah, so one of the questions we hear often is should we become a payment facilitator? Or maybe it’s should we move away from a referral model? Or sometimes it’s are we ready for something more advanced?

Michelle: And those are all fair questions, but what’s interesting is that every one of those questions is really about an operating model. They’re not necessarily telling you anything about the health of your payments business.

Shannon: And that’s such an important distinction because it’s easy to assume that choosing a more sophisticated payments model automatically means you’ve built a more sophisticated payments business, but that’s not always true

Michelle: That’s right. We’ve worked with software companies that have a tremendous amount of control over their payments program, but they’re still struggling with merchant adoption, or their onboarding process creates friction or payments operate separately from the rest of the business.

Shannon: On the other hand, we’ve seen companies using a much simpler operating model that have incredibly healthy payments businesses. On the other hand, we’ve seen companies using much simpler operating models that have incredibly healthy payments businesses. Their customers are engaged, adoption continues to grow, leadership pays attention to payments, and they’re creating a lot of value for both their customers and their business.

Michelle: Which tells us something really important. Your payments model and your payments maturity aren’t the same thing.

Shannon: Exactly. Your payments model is an operating decision, and your payments maturity is a business capability. And I think that’s one of the biggest misconceptions in embedded payments today.

Michelle: So instead of asking which payments model is best, we wanna explore a different question. How do you know whether your payments program is actually maturing?

Shannon: Because once you understand that, the conversation about operating models becomes much clearer.

Michelle: So I think part of the confusion comes from the fact that we naturally focus on the most visible decision. Which payments model should we choose? It feels like that’s the decision that’s going to determine success.

Shannon: And to be fair, it’s an important decision. Your operating model affects things like implementation, economics, risk, and the experience you create for your customers. But choosing a model doesn’t automatically build a successful payments business.

Michelle: That’s the part that’s easy to overlook. Launching payments creates a capability. Building the business behind payments is what creates long-term value.

Shannon: Exactly. So think about your CRM. Just because a company buys Salesforce doesn’t mean they have a great sales organization. They still have to build processes, train their teams, measure performance, and continue improving over time.

Michelle: Embedded payments really works the same way. Launching payments doesn’t make the program mature. It simply gives you the opportunity to start building one.

Shannon: So one of the things we’ve noticed over the years is that two software companies can look almost identical on paper. They may serve similar markets, have similar revenue, even process about the same amount of payment volume.

Michelle: But when you look a little deeper, the story can be completely different

Shannon: So one company may have payments fully integrated into the way it operates. Leadership reviews payments metrics every month. Customer success actually drives adoption. Product continues improving the experience. Payments has become part of the company’s long-term strategy.

Michelle: While another company may simply have payments available. Customers can use it, revenue comes in, but very little has changed since launch. Payments are almost operating on autopilot.

Shannon: So both companies technically offer embedded payments, but they’re operating at completely different levels of maturity.

Michelle: That’s actually one of the reasons we’ve been spending so much time thinking about what maturity really looks like because we felt like the industry was missing a framework for talking about it.

Shannon: Exactly. So most conversations in our industry are about products, features, payment models, or implementation. But we don’t spend enough time talking about how payments become a stronger part of the business over time.

Michelle: So we’ve started thinking about payments as a maturity journey, not because every company follows the exact same path, but because every successful payments program continues evolving.

Shannon: We think about that journey in five stages, which are enabled, adopted, optimized, monetized, and strategic.

Michelle: So enabled is exactly what it sounds like. Payments are integrated into the software, customers can begin using them, and it’s a huge milestone.

Shannon: Absolutely. So the launch of that deserves to be celebrated. It takes a tremendous amount of work to get there, but launch isn’t where the value is created. It’s where the opportunity begins.

Michelle: At this stage, success is often measured by implementation. Did the integration go live? Can merchants board successfully? Can transactions process? Those are all important questions.

Shannon: But eventually, leadership has to start asking different questions, such as how many customers are actually using payments? How many are still processing somewhere else? What’s preventing adoption? That’s when the conversation starts changing.

Michelle: And that’s where we move into the adopted stage. This is where payments stop being a product initiative and start becoming a commercial initiative.

Shannon: So I really like that distinction because now sales is involved, customer success is involved, marketing is involved, and leadership is paying attention to everything. Everyone is helping customers understand why accepting payments inside the platform creates more value.

Michelle: For sure. The companies that excel here don’t assume adoption happens automatically. They build repeatable processes that help customers make the switch.

Shannon: And one thing that we’ve learned over the years is that adoption rarely stalls because customers don’t want integrated payments. It usually stalls because no one owns helping customers get there.

Michelle: So as payments adoption continues growing, something interesting starts happening. The conversation starts shifting again.

Shannon: Exactly. So early on, the goal is simply getting merchants to adopt payments. But once adoption starts building, leadership begins asking a different set of questions. Um, for example, they might ask, like, “How do we make onboarding easier? Where are merchants experiencing friction?” Or, “How can we make support more efficient?”

And, “How do we continue improving the experience?”

Michelle: That’s really what we think of as the optimized stage. Payments have become an important part of the business, so now the focus shifts towards making the entire operation work better.

Shannon: And I think this is where some software companies accidentally hit a plateau. They’re still measuring success the same way they did at launch, even though the business has evolved.

Michelle: Exactly. The companies that continue growing are consistently and constantly refining the experience. They’re improving onboarding, reducing operational complexity, making reporting better, and looking for ways to create even more value for both their customers and their internal teams.

Shannon: So one thing I’ve noticed is that as software companies grow, their priorities naturally change, and honestly, they should, right?

Michelle: Yeah, absolutely. A company that’s just launching embedded payments has very different priorities than one that’s been processing payments for five years.

Shannon: Mm-hmm. Early on, the focus might simply be speed. You wanna get to market, prove customer demand, and start building adoption.

Michelle: And then a few years later, the conversation might be completely different. Leadership may be thinking about improving margins, creating a better merchant experience, expanding internationally, uh, supporting larger customers, or gaining more operational control

Shannon: And none of these goals are wrong. They’re actually signs that the business is maturing.

Michelle: And I think that’s where we sometimes see companies get stuck. They assume the payment strategy that helped them launch should also support every stage of growth that comes after

Shannon: But businesses don’t work that way. Products evolve, customer expectations evolve, and markets evolve too. So it only makes sense that your payment strategy should evolve as well.

Michelle: So that’s actually one of the reasons we developed the Flex Framework. We kept seeing software companies approach payments as a one-time decision. They felt like they had to choose one model and commit to it forever.

Shannon: But we don’t think that’s how the strongest software companies operate. The best operators continually align their payment strategy with where the business is today and where they want it to go next.

Michelle: And that’s really the philosophy behind the Flex Framework. It’s not about pushing every software company towards the same destination. It’s about giving them the flexibility to align their payment strategy with their business strategy as both continue evolving.

Shannon: Exactly. So sometimes the priority is launching quickly, sometimes it’s driving adoption, it could be increasing operational control or maximizing the long-term economics of the payments business. These priorities naturally change as companies grow.

Michelle: Which is why we think flexibility is such an important part of a successful payment strategy. The goal isn’t to reach one final payments model. The goal is to make sure your payment strategy continues supporting the business you’re becoming

Shannon: And that naturally brings us to the fourth stage of the maturity model, which is monetized. And I think this is another stage that’s often misunderstood.

Michelle: I agree. Some people hear monetized and immediately think we’re talking about making more money from payments. Revenue is certainly part of it, but that’s not the whole story.

Shannon: Right. So mature companies understand how they’re creating value through payments. They understand the economics, they understand which customer segments create the most opportunity, and they make intentional decisions instead of simply accepting whatever economics happen to come with their current model.

Michelle: That’s a great point. Payments has become something they’re actively managing, not simply something that’s happening in the background.

Shannon: And that’s a very different mindset than simply looking at monthly processing volume.

Michelle: So that brings us to the fifth and final stage, which is strategic. And this is where I think payments starts becoming something much bigger than payment processing.

Shannon: Mm-hmm. I agree. So at this point, payments isn’t just generating revenue, it’s helping shape business decisions. Leadership is asking how payments can improve the customer experience, strengthen retention, influence the product roadmap, and even create new opportunities for growth.

Michelle: Exactly. Payments become part of the overall business strategy instead of operating alongside it. It’s no longer viewed as a feature, it’s viewed as a strategic capability.

Shannon: And I think that’s an important distinction because the companies operating at this stage aren’t asking, “How is our payments program doing?” They’re asking, “How can payments help us build a stronger software company?”

Michelle: So one thing I do wanna point out here is that we don’t really see this as a finish line.

Shannon: Yeah, that’s a great point because businesses aren’t static. They launch new products, they enter new markets, they acquire companies, customer expectations change, technology changes. So maturity isn’t something you achieve once and then check it off the list.

Michelle: It’s really about continuing to evolve. Every stage creates new opportunities and questions for leadership to answer.

Shannon: Which brings us back to where we started. Payments models and payments maturity, and those are not the same thing.

Michelle: Exactly. So referral, hybrid, payment facilitation, those are operating models. They help determine how a payments program is structured.

Shannon: And maturity is something completely different. It’s about how effectively your organization builds, operates, grows, and continuously improves the payments business over time.

Michelle: I actually think that that’s one of the biggest shifts software companies can make. Stop asking, you know, “Which payments model is best?”, and start asking, “What’s the next capability our payments business needs to develop?”

Shannon: Because once you understand that, the conversation about operating models becomes much clearer.

Michelle: So before we wrap up, Shannon, what’s one thing you’d want every software leader listening today to take away from this conversation?

Shannon: I’d say this. Your payments model is an operating decision, but your payments maturity is a business capability. Don’t confuse the two because the best software companies don’t stop evolving once payments goes live. They continue strengthening the business behind it.

Michelle: Yep, you got it. Launching embedded payments is a milestone. Building a mature payments business is an ongoing process, and that’s where the biggest opportunities are created.

Shannon: When we started today’s conversation, we talked about how quickly the payments industry is evolving. That’s one of the reasons we believe software companies need to think beyond implementation.

The goal isn’t simply to launch embedded payments. It’s to build a payment strategy that can continue evolving as your business grows.

Michelle: And the companies that create the most long-term value aren’t necessarily the ones with the most sophisticated payments model. They’re the ones that continue building stronger capabilities year after year.

Shannon: So we’ll leave you with one final question. If you looked at your payments program today, which stage of maturity are you really operating in?

Michelle: And more importantly, what’s the next capability your business needs to build?

Shannon: Thanks for joining us today. We’ll see you next time on Payment Pulse.

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