It is not uncommon for platforms to double their company’s revenue by monetizing payments.
Who gets paid when a transaction happens on your platform?
Your customers took card payments inside your product this morning, and every one of those charges was billed by a company. Whether it was Stripe, Global Payments, or someone else, that company was paid handsomely for processing the transaction for your customer. Just how much they get paid varies but a general rule of thumb in the industry is about a 1% fee on every dollar processed (after accounting for fees paid to the card networks and associated banks).
The actual amount that that 1% represents is easy enough to figure out if you just multiply the number of merchants processing on your platform by the average amount they process in a year. Typically, it’s a pretty large number.
What that fee is actually paying for
Processors charge a fee to cover the technology used to process the transaction as well as the risk that they take on in doing so. There is always a risk of chargebacks, fraud, and other occurrences that add to the cost of moving money.
However, there is still significant profit to be made. Stripe is currently valued well above $100 billion and is one of the most valuable private companies in the world.
How much do you actually get paid?
Stripe or Global or any other processor is only able to take a fee because of transactions that your platform makes possible. However, these companies are notoriously stingy with the amount of revenue they share with platforms (if they share any at all).
For an average sized platform processing less than $1 billion per year, they might see a few basis points (maybe up to 10) of the transaction that they make possible. However, many platforms get nothing at all, their processor keeps the whole thing.
Can platforms profit on the transactions they help create?
Short answer, yes. Platforms can absolutely get paid, often significant money, for the transactions that they help create, it just depends on who they decide to partner with as their processor.
At Forward, we’ve created a calculator to help you determine exactly how much you can make compared to what you’re currently earning.
It is not uncommon for platforms to double their company’s revenue by monetizing payments.
Moreover, this revenue line is very attractive to platforms because it does not require them to make any sales, or do any significant work because they are merely monetizing a revenue stream that already exists and which they have already built.
From a feature you switched on to a line you run
Own the processing relationship and payments starts behaving like the rest of the business. You forecast it, plan against it, defend it in the same meeting where you defend everything else. Decisions that used to sit on someone else’s roadmap become yours. When a prospect needs deposits going to one bank account and fees coming out of another, you can say yes, and the volume arrives with them.
Payments stops being a feature you switched on and becomes a revenue line you run.
Every transaction that happened on your platform this morning paid somebody. Have you ever asked who, or how much?
