The Next Billion-Dollar Payments Company Won't Look Like What You Might Expect

October 01, 2019 by Forbes

What do Stripe, Airbnb and Uber have in common?


Today, the most successful companies in the world are becoming payments companies. Why? Because payments are the backbone of business and commerce, and recent advances in technology are making it easy for companies to turn their payments into a profit center.

When you own the payments experience, you control the future of your business. Bringing payment processing in-house not only offers greater control over the user experience — it also opens up major new revenue opportunities. Uber is the latest example, with its S-1 filing demonstrating the significant role payments are playing in its larger revenue strategy. “Because we integrated payments into our technology stack, we can continuously innovate to meet the needs of platform users,” Uber stated.

The company is now able to improve the user experience with seamless payments across its many offerings, including bike and scooter rentals and Uber eats. What’s more, the company is no longer giving away basis points on every transaction to third-party payment service providers. As transaction volumes grow, this enables Uber to capture and keep more revenue, which is more important than ever now that it is publicly listed and has a fiduciary duty to maximize shareholder returns. In 2017, credit card processing fees cost the company $749 million.

Becoming A Payments Facilitator

Becoming a payments facilitator is one of the most impactful ways to take control of payments. Most companies, however, assume it’s far too expensive and time-consuming. Traditionally, becoming your own payment facilitator on average costs upwards of $ 3 million to $5 million and takes two to three years to complete — and that’s before factoring in operations and ongoing maintenance, which can add another $2 million in costs annually. It also consumes precious engineering resources that could go toward other value-added projects that are more closely aligned with the company’s core competencies.

But advances in technology are now redefining the economics of payments by making it easier for businesses to own, manage and monetize their entire payments stack. Today, there is no need to hire an army of in-house payments engineers or rely on third-party ISOs. Most importantly, companies that take control of their payments no longer have to give away basis points to third-party payment service providers.

The Future

Looking ahead, the next wave of billion-dollar payments companies will not emerge from the finance industry. Companies that serve specific markets in novel ways — all while integrating payments as a core part of the customer experience — are the ones to watch. That’s because customers increasingly want "special experiences" from the companies they do business with. For example, Airbnb users can book vacation experiences and multiday “adventures” in addition to their accommodation; and MindBody customers are able to turn to the company for virtually every aspect of running a wellness business, from payments to marketing.

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