ISVs want more than payments — value-added services boost retention, revenue, and user experience.

Independent software vendors (ISVs) and software companies have long excelled at building industry-specific tools that simplify complex workflows like scheduling, billing and customer management. It makes sense. ISVs have a deep understanding of how businesses operate and what they need to run more efficiently. But the landscape is shifting.

Today, rising merchant expectations, increased competition and shrinking margins from selling software alone are forcing ISVs to rethink their value proposition. It’s no longer just about delivering great software; it’s about providing end-to-end solutions that drive growth and deepen customer relationships.

To stay competitive, many ISVs are embedding payments directly into their platforms and expanding into high-impact value-added services (VAS), such as digital disbursements, merchant cash advance programs and network tokenization. These additions can create new revenue streams, improve retention and make platforms indispensable to merchants.

 

The importance of value-added services

Today’s small businesses want a unified solution, which doesn’t involve juggling multiple systems and vendors. VAS play a crucial role in this shift, enhancing core payment processing to address evolving merchant needs. Essentially, they provide additional features and functionalities that go beyond basic payment services. For example, merchant cash advance programs enable quicker access to working capital, providing businesses with the agility they need to seize opportunities.

Alternative payment methods like ACH payments and digital wallets enhance transaction options, while digital disbursements facilitate real-time payouts to vendors and contractors, improving cash flow management. Additionally, network tokenization replaces sensitive card information with secure tokens, thereby mitigating fraud risk and improving approval rates.

When embedded into an ISV’s platform, these services can enhance the merchant experience by delivering integrated solutions that help businesses operate more efficiently and effectively.

 

The strategic shift of ISVs

As merchants seek more seamless, industry-specific all-in-one solutions, ISVs are stepping up by embedding payments directly into their platforms. The 2024 Houlihan Lokey Payments Market Update highlights this trend, indicating that today 50% of merchants already get their payment services directly from an ISV, a number that is expected to grow.

Of course, payments are not all they’re embedding into their platforms. VAS are equally essential.

“Value-added services are now at the forefront of our conversations with our ISV partners,” said Nick Aceto, SVP Technology-Merchant Solutions at Fiserv. “We believe that by embracing these services, we can empower ISVs to drive innovation and deliver even greater value to their customers.”

By embedding VAS, ISVs can transform their offerings, diversify revenue streams, and forge deeper connections with customers, fostering loyalty and gaining a competitive edge. This not only allows ISVs to create platforms that become essential to their customers’ daily operations but also empowers merchants with enhanced tools and simplified vendor management, ultimately driving their success.

 

A high-value opportunity for ISVs and software companies

Adding solutions that go beyond payments acceptance does more than just enhance functionality. These services make platforms more engaging, useful and stickier for merchants, ultimately leading to deeper customer relationships.

“Imagine purchasing a car wash membership for $30 a month. If that car wash business isn’t using a service like Card Account Updater (CAU), they’d need to contact the cardholder when their payment method on file expires, which can disrupt service and customer satisfaction,” explained Jon Halpern, Head of ISV at Fiserv. CAU, an example of a popular VAS, updates the card information with the new expiration date and/or new card number without requiring the consumer to take any action.

VAS also introduce new revenue streams for ISVs. Instead of relying solely on one-time software sales, ISVs can tap into revenue-sharing models that generate ongoing income tied to real, day-to-day financial activity. Plus, these services help simplify operations for merchants, deliver better data insights and reduce customer churn.

 

Important considerations for choosing a partner

When you’re evaluating payment partners, it’s crucial that you look beyond core processing. Look for a partner that is invested in your long- term success. The right partner doesn’t just power transactions, they help expand your platform’s value, unlock new revenue streams, and strengthen your position in your vertical.

Here are a few key things to watch out for:

• Ongoing assistance: Many ISVs benefit from sales enablement that helps identify opportunities within their existing merchant base, manage follow-ups, and close deals.

• Flexible, developer-friendly environments: Prioritize environments that offer strong APIs, easy-to-understand documentation, and helpful technical support. These features make integration smooth and ensure compliance is straightforward rather than complex.

• Scalable onboarding and security-first payment solutions: A smooth, fast onboarding experience is critical for merchant adoption. Just as important is a strong approach to risk management, PCI compliance and fraud prevention that protects both ISVs and the merchants they service.

• A full suite of monetizable services: Look for embedded VAS such as merchant financing, digital disbursements, ACH payments, CAU and tokenization. These services deepen merchant engagement and generate recurring revenue.

• Sales and marketing support: A good provider doesn’t stop at integration. They offer marketing resources, merchant acquisition support and even sales enablement tools to help ISVs drive VAS adoption and growth.

 

 

The Fiserv advantage

Partnering with a forward-thinking provider like Fiserv offers ISVs strategic advantages in an evolving landscape. An excellent example of this is the merchant cash advance program, Clover Capital, which enables ISVs to facilitate rapid access to flexible working capital for their business users based on their future credit card sales.

By seamlessly presenting cash advance offer within their software, ISVs make it even easier for merchants to secure the financing they need, demonstrating their commitment to fostering business growth.

From simplifying technical implementation to providing ongoing support, Fiserv empowers ISVs to roll out new capabilities swiftly and efficiently.

However, what truly sets this partnership apart is the go-to-market support designed to help ISVs not only launch VAS, but also effectively market and sell them. Through a dedicated cross-sales team, ISVs can identify upsell and cross-sell opportunities within their user base, driving higher adoption rates and strengthening platform loyalty.

This team also plays a vital role in closing deals. The impact of this collaboration is evident: ISVs partnering with Fiserv have experienced up to a 10% increase in monthly residuals.

 

Future-proofing via VAS

Embedding VAS is a smart way for ISVs to drive lasting growth. These services help software platforms deliver more value to merchants, strengthen customer retention and unlock new revenue opportunities. As merchant expectations rise and the competitive landscape shifts, ISVs that embed and promote these types of services will be better positioned to scale and stand out.