The Case for Modular Payments in a Cost-Conscious Market

Merchants want frictionless, convenient, all-in-one payments. But, how much are they willing to pay for them? 

In a tough economic climate, more merchants are tightening their belts to keep afloat, and many are rethinking whether the value of some “nice-to-have” payments features is actually worth the additional cost.

As a payments company, that leaves you in a tricky spot. For years, the shift has been toward offering merchants the most products possible to enable one-stop service — think fraud prevention, automatic card updates, text to pay, etc. Many merchants still want that. But with more needing simpler, low-cost options, how do you strike the right balance?

The answer is modular payments: systems that provide the breadth and convenience of an expansive all-in-one platform with flexible, à la carte customization and the low fees of a traditional merchant account.

Let’s look at the challenges merchants are currently navigating, what they mean for payments offerings and why modular payments are an ideal way for your company to serve all merchants, regardless of their needs.

Small businesses make up 99.9% of all U.S. businesses, and 81.9% of them are non-employer firms, meaning they’re owned and operated by a single person. In that sense, the average small business owner and the average consumer have a lot in common. And while stocks are at all-time highs, on the ground, day-to-day, things look very different.

In 2024, for the first time since the pandemic, more small businesses reported declining revenue than growth. And things are only getting more challenging. Over the past year, consumer confidence in the U.S. economy has been falling, and spending intent is down in dozens of discretionary categories as consumers focus their tight budgets on essentials. Now, two-thirds of small businesses selling imported goods or relying on imported inputs also have to deal with tariffs, making things even harder.

It isn’t just an American phenomenon, either. In the U.K., a different set of economic factors has resulted in almost 50,000 businesses facing critical financial distress, a 21.4% year-over-year increase. And to the north, the Canadian Small Business Health Index has fallen to near-pandemic levels, and Equifax Canada reports that more Canadian small businesses are missing payments.

Payments is a competitive space, and cost is always a factor. But for years, the general consensus was that most merchants were actually willing to pay more for convenience and one-stop service. That made building out new features and creating large all-in-one platforms a value proposition worth pursuing. 

But now, with so many small businesses reevaluating their outlook, it’s more important than ever before to manage costs, including the cost of payments. As a result, more small businesses may be looking to forgo some of the nice-to-have payments features in favor of lowering their fees.

With budgets tightening across the economy, is it better to focus on cost-sensitive merchants looking to meet only their basic payment needs or to continue driving value through feature-packed, one-stop solutions?

The good news for payments companies is that it’s completely possible to do both. Thanks to modular payments, providers can give cost-conscious customers basic, low-cost solutions while still offering broad, one-stop convenience to merchants looking for something more.

What Are Modular Payments?

Modular payments are à la carte systems designed to allow providers and their merchants to configure and reconfigure their ideal solutions, brick by brick as needed. This may include cost optimization, increased throughput, or other needs that arise.

Imagine one of the huge all-in-one payment platforms that includes everything any merchant could ever possibly need, but it charges 2.9% + $0.30 on every transaction. Now imagine that instead of being forced to buy everything as-is and pay for dozens of features they may not need, your merchant has the complete flexibility to pick and choose what to take and what to leave.

For example:

• If a merchant doesn’t sell subscriptions, why would they need subscription management? Leave it out
• If a merchant sells in business-to-business (B2B) and business-to-government (B2G) environments, then Level 3 processing is a must-have. Add it

Each feature can be easily enabled or disabled as needs or budgets change, so your merchants always have maximum choice and the ability to easily scale up or down.

In essence, modular payments provide all of the benefits of an all-in-one platform, but with the cost-effectiveness and flexibility of a traditional merchant account. By enabling your merchants to take as many or as few features as they want, you create not only a more scalable, cost-effective solution but also a more tailored one.

The need for choice and flexibility isn’t unique to your merchants. How you integrate payments systems into your tech stack plays a huge role in how you design your offerings, reduce operational friction and minimize your costs. Plus, modular payments also provide better access to the overall payments ecosystem. Just like with your merchants, the more choice and control you have, the better.

Modular payments platforms, like NMI, allow you to choose which products you integrate into your business and how. Using no-code, low-code and fully custom options, you can choose to integrate any or all aspects of the NMI ecosystem, including:

• NMI Payments: A complete, one-stop payments monetization solution for software providers and an additional processing channel for independent sales organizations (ISOs)
• NMI Merchant Central: The industry’s most powerful payments-specific customer relationship management system
• NMI ScanX and MonitorX: Automated underwriting solutions that allow risk-bearing providers to underwrite in hours or even minutes, with more accurate results
• NMI Gateway: A processor-agnostic payment gateway powering over a million merchants around the globe
• NMI Gateway Extensions: A complete menu of modular, value-added services that enable merchants to choose complete one-stop service, basic payments or anything in between.

Every part of the NMI ecosystem is designed to work natively with the greater whole, so no matter how many or how few products you integrate, or how many of NMI’s services your merchants sign up for, the experience will always be frictionless and cohesive.

To find out more about how NMI can help you serve merchants no matter how the economy or their needs change, reach out to a member of our team today.