Episode 105 - The Independent Gateway's Enabling Role - Nick Starai, NMI

Take a listen as George and Nick Starai, Chief Strategy Officer of NMI discuss the role of the independent payments gateway and its evolution as a technology and business enabler for today's providers of payment acceptance: ISOs, ISVs, and merchants.   A key technology and business partner for merchants and the first-line providers of payment services (think ISVs and ISOs) is the payment gateway. At their simplest, gateways provide a single interface to their users that, once built, lets the party using it switch between acquirers with relative ease in order to get better performance, service levels, and/or pricing. For independent software vendors (ISVs) selling line of business software this flexibility allows their customers to choose their acquirer of choice from the range of acquirers supported by the gateway. Many such relationships are in place long before the ISV relationship is established. ISVs can't insist that their potential customers change acquiring banks in order to use their software. That's one use case for a gateway. Another is the Independent Sales Organizations (ISOs) that also realizes the necessity of using gateway technology in order to reach their increasingly demanding merchant customers. Placing stand-beside payment terminals next to a cash register is no longer nearly enough. Integration of payments into the overall business process of even a smaller merchant is now table stakes. Gateways can help make integration of more advanced capabilities happen. Independence Means Acquirer Neutrality Many formerly independent gateways have been acquired by processors. What processor wouldn't want to move all the transactions managed by the gateway onto its own systems? It's all about volume, after all. But for independent software vendors, independent sales organizations selling to ISVs and merchants, and for many merchants themselves, an important virtue of the gateway function is its processor and acquirer independence. Value-added Services Gateway operators generally charge flat fees for each transaction handled so they have every incentive to expand the volume of transactions they manage as well as to provide value-added services that increase revenue on each transaction handled. To increase volume, gateways make it as easy as possible for a customer to integrate to the gateway. They make their APIs simple and robust so it's easy to add new services. The gateway provider builds software developer kits (SDK) to support in-app payments and makes sure their code runs on every important operating system. Gateways often specialize on a particular payment domain such as large ecommerce merchants or in-store systems. Others offer a broader set of services. NMI, the subject of this Payments on Fire® podcast, supports both EMV terminals and the card not present environment. Payment Facilitation The payment facilitation business model has broadened card payment acceptance to the wide base of small merchants who would otherwise not qualify for a traditional merchant account. The greatest impact of this payfac model is how it streamlines the onboarding process. Instead of the days-long underwriting process traditionally needed, sellers working through a payment facilitator (PayPal, Square, and Stripe all employ that model) can start to take payments within minutes of creating an account. Because of that swift onboarding, the payment facilitation model reduces sales friction for ISVs. Their customers can install the ISVs line of business software and start taking payments at the same time. For the ISV, there's also the opportunity to earn revenue from their customer's payment transaction flow. We've seen multiple merchant companies selling software services earn substantial revenue from the payments side of their business. NMI provides essential infrastructure services for the payfac business model including onboarding, sub-merchant account creation, KYC, and other reporting services. The NMI Story Nick relates NMI's growth and service expansion. It's a cool story that speaks to the industry's evolution as well as the company's own growth. By the end of the podcast, you'll understand how enabling technology and new business models have shifted, yet again, the payments ecosystem. The gateway and payment facilitation services offered by NMI help move ISVs and tech-forward ISOs into a first position over traditional providers of merchant services.