Welcome to the Signal powered by the Leaders in Payments podcast, where we are cutting through the noise to reveal what truly matters in payments and fintech.

Greg Myers:

Hello and welcome to the Leaders in Payments podcast. I’m your host Greg Myers. Joining me today are two very special guests from NMI. Peter Galvin, the Chief Marketing Officer and Luis Pena, the Product Director of Developer Experience. So, thank you both for being here and welcome to the show.

Peter Galvin:

Thank you.

Greg Myers:

So, this episode is part of our Signal series where we are cutting through the noise to reveal what truly matters in payments and fintech. Today we’re recording part one of a two-part series focused on SaaS payments. The title of today’s episode is SaaS is Dead Long Live SaaS Plus Payments. A bold statement that we will be unpacking today as the subscription only SaaS model starts fading. Today’s winners are building integrated commerce platforms where payments drive revenue, loyalty and expansion. We will be exploring how SaaS is being redefined by payments and what it means for the next generation of software companies. So, Peter, Luis, before we dive deep into this, Peter, do you NMI ?

Peter Galvin:

Sure, I’m happy to. Thank you very much. So yeah, I started out as a product manager actually I was I was very interested in computer technology and after graduate school I decided I wanted to go and become a product manager. And very interesting at that time where you really owned all components of the product from really being figuring out the specifications to going all the way to go-to-market.

 And product management has kind of changed and expanded over that time into other areas like product marketing, for example and other disciplines and through that journey I was always interested in and love, technology, and then if you kind of fast forward and look at where I ended up, one of the big shifts that I did see was in software as a service, so going from client service to software as a service and went to work for a company called Proofpoint, which was one of the early SaaS companies for email security. And they were making that transition from being a software company that sold software to a subscription based SaaS company. 

So those changes were quite interesting and exciting. And so ever since then I was always in security and in the security marketplace as a chief marketing officer, working with a few different types of SaaS organizations mostly in the security space. And then one of the last companies I was with, a company called Talas, did a lot of work with banks, and credit card companies and provided encryption services to those types of companies which led me to NMI and to get more formalized into payment. 

So instead of being in the middle of the infrastructure for what I would consider, you know, banking and, and finding fintech, I got more into the infrastructure for providing embedded finance for SaaS companies. So, it seemed to, for me it’s a good fit for both SaaS and for the underlying technology and also something new that SaaS companies are trying to achieve.

Greg Myers:

Okay, Luis, same question for you. A little about your professional journey and how you got to NMI.

Luis Pena:

Thanks, Greg. Yeah, so I fell in love with software actually when I was 8. I wrote my first line of code way back then on an old IBM machine, no hard drives, dating myself a little bit here but I just loved software and fell in love with software way back then. So, I went to undergrad here in Orange County in California. I went to UC Irvine for computer science and then I followed up with my graduate studies there in business. While I was in Orange County I worked for 15 years in the residential construction, industry focused on low voltage construction, a lot of fire alarm, home security, and there I was able to automate a lot of our software and processes. There was a lot of manual things happening, a lot of fax machines, a lot of paperwork that was very manual. 

So, still able to build software for an industry that really needed it, but then was also exposed to a lot of SaaS recurring revenue, especially with alarm and the reseller white label branding model which is very prevalent in the home security realm as well. So, after my 15 years there I decided to double down in software. Came to NMI about 10 years ago now joined NMI via one of their gateways, and spent nine years in engineering here at NMI, building a number of our solutions and just finishing up my first year in product management.

Greg Myers:

Okay, great. So, Peter, can you give our audience just a quick overview, high level overview of what NMI does?

Peter Galvin:

NMI is a payments acceptance platform. So we help our partners and those partners could be independent sales organizations, fintechs, payment professionals and especially software and SaaS companies, provide payment infrastructure for their clients or their merchants. And so today we have over 4,000 partners that we work with and over a million merchants that use our platform to be able to take a credit card payment, either directly through some kind of point of sale system or embedded into software and so that is truly what the company is able to do. We do that as a white, white-label service which is very unique in the marketplace. We also don’t go direct to merchants. We only go through these partner channels that we’ve developed over time who basically build a solution around our product offering and then deliver that solution directly to their merchants.

Greg Myers:

Okay, so Peter, sticking with you, and we’ve talked about this. So, the subscription only SaaS model is fading and payments are becoming really a core growth engine for them. So, what’s fundamentally changing about how modern SaaS platforms create and capture value?

Peter Galvin:

Yeah, I think the challenge that SaaS platforms have always had is that they always had to pick one thing to be able to generate revenue from. So, it could be a seat model, it could be a full enterprise model. And they were really limited in the way that they could deliver value. I think also the other change that we’re seeing is we used to see a lot of very horizontal platforms that required a lot of integration for different organizations to be able to integrate those platforms into their larger enterprises. And what’s kind of exciting for us is that NMI also one of the things that we do is we really specialize and focus on small and medium sized businesses and those partners and software companies that are providing them services. 

And so, what one of the big changes that’s happened in SaaS over the last few years is you’ve really seen this move to what we call vertical SaaS or vertical SaaS platforms. So, when you think about a vertical SaaS platform you have a SaaS provider who is providing medical software, for example to a doctor’s office, or dental software, or could be a pet vet or for a hair salon or for dog boarding. So, there’s a number of different new smaller vertical software companies that are coming into the business. And really what those software companies have in common is they’re really trying to help automate all of these different processes which would be manual. So if you think of the old days of like just a plumber for example, you’d have to call, make an appointment, somebody would finally show up at your house between eight and five, they deliver you an invoice, maybe they get paid by a check or 30 days later. 

What these vertical software companies have done is do this, all this automation. And that’s something, that Luis was talking about in his earlier experiences was really automating that process. So, they’ve really digitally transformed these businesses that are needed for these small and medium sized businesses and they start usually with a subscription model that allows them to provide some set of services. 

But what they found over time is in any of those businesses, those vertical B2B services, their consumers also want to pay. And so, one of the benefits that we provide is being able to embed those services into their SaaS offering. And the other part is that by being able to provide that service for that doctor for example to take a payment through that software system, that SaaS company can also participate in the interchange and in some of the revenue that is created through that. So not only are they making money through their SaaS subscription model, but they’re also able to find additional revenue streams through interchange. 

We’re also seeing that one of the challenges with small and medium sized businesses is that their ability to access working capital. And usually if you think of this is just one example but a lot of times when they’re trying to access working capital they can either go to their bank which could take 30 or 60 days or even longer and usually will be denied or they may have to put up some serious collateral like a house for example. Or they go and they many times just use their corporate credit card and the interest rates on those can be you know, 20, 25%. 

One of the great things about this industry is because now from an infrastructure standpoint you can see all of the transactions that are occurring over the credit card. You can now provide loans that are very specific to that individual merchant and provide a much better loan. Better payment terms. Payment terms are based on the streams of revenue that they’re getting, that’s coming through the credit card payments. And so, there’s additional financial services offerings that can be offered to these clients or merchants through these SaaS companies, from companies like ourselves. And so not only is there a subscription model and an interchange model, but there’s also other fintech models that allow the SaaS company to become more of a financial expert for their merchants or their clients.

Greg Myers:

Okay, great. So, Luis, over to you. As SaaS companies shift toward this payments driven model, what are the biggest developer considerations that they need to be thinking about sort of earlier in the process?

Luis Pena: Yeah, so being that SaaS companies tend not to be payments experts, they really kind of need to understand the lay of the land from their processes. Right. They need to understand that the partner they’re choosing matches the way that they’re developing software themselves. So also they need to consider the ways that the platform will be able to integrate into that which they’ve built, and what parts of the journeys they need to maybe consume earlier, later, and then maybe like eventually there’s an amount of effort related to each piece of payments that you integrate into your software. So being able to take those independently and match them to your own product roadmap. So, for example, you need to look at whether or not you have no code components or low code components, for certain sections that maybe are not high frequency, you maybe do very infrequently. 

Maybe if you’re boarding merchants on your software, you do that one time. That’s not a feature you need to build out in its entirety right from the beginning. But if payment acceptance and actually processing recurring payments is something that is core to your software, that’s something you might want to integrate more tightly. So, finding a partner who has those options to be able to go as deep or as shallow as you want in each of the services you need to bring into your software is going to be very important. That way you can match your build timeline with your needs, as you continue in your payments journey and gain your own experience as a software developer with the way that payments can actually help bring value to your organization. 

So additionally, you’ve got to make sure that you’re picking someone who can, like I said, make software the same way that you’re developing. So if you’re using AI tools, if you’re using agents, making sure that those agents understand how to integrate that platform, and that it’s keeping up with the way that you are integrating is really important to make sure that you’re not finding hurdles or impediments that you would have been able to discover early on in the process.

Greg Myers:

Okay, Luis, sticking with you, when a SaaS platform evolves into this more full-commerce platform, what integration patterns or technical building blocks really become essential for supporting that when they want to scale their business?

Luis Pena: Yeah, so as again, they’re not necessarily payment experts. They need to think about their software and how they’re incorporating the new journeys for their merchants into it. So, for example, you need to think about merchant onboarding, how they’re applying for these accounts. You need to make sure that you have a way for them to do that during your own onboarding process to be able to have this additional step that’s in there. When you’re bringing in payment acceptance to be able to have a way to securely get that card data not on your own system so that you can stay out of scope from a PCI and a compliance standpoint, and then be able to manage those merchants chargebacks and all of the different things that come with the ongoing support. 

So, these are the areas you need to make sure you have built into the process. How deep you go depends on your software. Additionally, when you’re thinking about maintaining your own brand for the software that you’ve built, you need to be able to bring in these components in a way that matches your design system. So, if you can apply your design system across that which you are consuming in a very ubiquitous way, it’ll help reduce your development time and it sets up your platform for a way to keep consuming the additional payments products that come in over time. 

To be a little bit more technical, you need to make sure that you can handle webhooks and receiving them and get the information back from statuses as to the way that the payments journey may occur. If you’re doing ACH, things may not be as real time as you might say be in a credit card world. So, you need to make sure that you’re handling all those different scenarios, and making sure that you’re not just building for the happy case but for all of the exceptions that are out there too. And that’s where having a partner that can walk through that, which you don’t know, not being a payments expert is going to be really key because we’ve seen it time and time again where people will think that payments is really straightforward and it can be with the right partner. 

But if you’re missing some essential steps, you’ll be missing a really important customer journey that’s only going to let your customers down in the end.

Greg Myers:

Okay, so Peter, back over to you. NMI works with a wide range of ISVs and vertical SaaS platforms. As we’ve been talking about, what separates the software companies that successfully embrace payments against those that maybe struggle to really embrace payments?

Peter Galvin:

Well, I think the most important thing that the ISVs or SaaS companies have to think about is really the merchant experience. So the client experience is key. And so back to kind of Luis’s point where if you’re building a product offering and payments is a just an add on piece that you’re getting somewhere that doesn’t represent your product, it doesn’t represent your brand, it doesn’t have the same user experience, that’s going to be a very different experience for a client. And actually in many cases, if you’re taking a client somewhere else versus embedding it into your software platform, those clients may be very wary of, oh, where am I going? Especially these days with so much opportunity, around fraud. 

So, I think one of the, one of the things that software companies really need to think about is the ones that are successful really think about how do you truly integrate it into their overall platforms? How do they make it part of their overall workflow? How does that workflow end up getting, a client onboarded, both, for their software, but also for being able to take payments? How does that happen? How does that workflow happen all the way through to the end, consumer making that payment and making sure that they’re working with a partner who has a really good understanding of payments. Because most of these companies, they don’t need to be payment experts. They’re experts in building SaaS software. They’re probably experts in their particular vertical industry or horizontal industry. 

But payments is very complicated, has a lot of compliance issues, has a lot of regulatory issues, and making sure that you’re working with a company that can help you make that look seamless so that the client, their end client, that end customer consumer, has an amazing experience all the way through. And basically taking a payment doesn’t feel any different than anything else that they’re doing on the platform is the way that the MO that strategically allows software companies to be the most successful.

Greg Myers: Okay, I think that’s a good segue into the next question. Sticking with you, Peter. As you know, payments creates, obviously, a stickier, more valuable relationship with their end users. How do you see embedded payments impacting their churn, them being able to expand and their overall customer loyalty?

Peter Galvin: Yeah, well, I think that it’s back to really customer experience. And I would say that is a cornerstone of any kind of product offering is that both the partner or the SaaS company in this case and the end consumer have to have a great experience. And also if you’re providing a full service type of platform, you don’t want to just, for example, as a software company provide one component. You want to provide as many components as possible because it makes it much harder for someone to switch. Right. 

If I’m a SaaS company that has to integrate with four or five different things to make everything work together. And then my end client has to go to three or four very different looking interfaces. That’s a bad experience for that particular client. So, the way that payments, by integrating and embedding payments and also integrating and embedding other fintech products provides that great consumer experience all the way through. And by having that great experience, then those SaaS partners, those that of ours aren’t want to, want to change from our platform as well as their consumers aren’t going to want to move to another platform because of the feature sets that it has, the ease of use, that it has, the consistent experience that they’re feeling and it allows those SaaS companies to be much more competitive and so when you at the end of the day embedding payments, being able to use their own brand and not having a consumer have to worry about. 

Is this going to be a fraud issue? Is this a challenge for me to actually put my payment information in there? Is going to help them win and keep more customers. And if you think about certain kind of capabilities, there are certain businesses that you want to be able to, you know, if you think about software companies that provide gym memberships, right, they really want to be able to go and be able to put my card, give them my credit card and then just take my payment every month. 

And there’s a lot of systems like that where I don’t want to have to be able to go through a process where I have to continually re-key in my credit card information as a consumer, but I can safely give my credit card information to that dentist, that doctor, that hair salon and whenever I go there, they just automatically take that payment and I can feel secure enough that they have my credit card data. It’s going to be protected, it’s going to be valuable and I never feel like I’ve ever had to really make a payment. And it’s much more frictionless.

Greg Myers:

Okay, so Luis, over to you. A lot of software leaders underestimate the data story behind payments. So, what new insights become possible when SaaS platforms control both the software and the commerce flow?

Luis Pena:

Yeah, that’s a great question, Greg. So yeah, once a software platform decides to be able to monetize payments as opposed to having a very like arm’s length relationship with it, there’s a lot more that becomes available to them. Obviously, they can see the basic data that comes through. They can see the volume, the trends, they can understand how their consumers are using their system but once they’re monetizing payments, there’s different bits of information that actually become more important to them than they would have otherwise. 

So, for example, being able to optimize for interchange, becomes very important and having the data to understand what types of cards are being used on your platform, which ones cost you more, which ones don’t. If you want to try to drive consumers towards the use of certain cards, to be able to actually affect your bottom line through interchange optimization, where you end up with higher rates if you’re in recurring, if you could improve those through some other additional tooling, whether it’s network tokenization or other interchange optimization products that are out there, and then additionally as Peter was referencing before, you have data to be able to offer and cross sell products to your merchant base. 

So being able to give them working capital, being able to see the volume that’s coming through and understand that you now are in a position to become that partner for your merchants. You’re not just a software that’s providing the one thing that you built which is obviously very important, but you are also now their payments partner and that you can provide them additional services that help them monetize their own use of your system in addition to ensuring that you are a full ecosystem for them. So, there’s a lot of data, a lot of cross sell that’s available. You’ll be able to get access to data feeds with a lot of partners so that you can do this yourself or you can rely on the partner to provide those insights for you and then being able to benchmark, there’s a lot of data that helps you understand the health of your business compared to others within that same type of industry or stage where you’re at, whether or not you’re pre seed or seed or series A, or if you’re a more mature company. 

There’s a lot of data out there as to how those companies can perform, especially when they’re integrating payments and how you’re benchmarking towards them to give you insight as to how you can better optimize your use of payments as well. So, it opens up a lot to be able to bring it in house and not have it be kind of like an arm’s length relationship with the third party provider. You really want a partner to get you those insights to help you make your business more efficient as well.

Greg Myers:

Okay, so Luis, sticking with you, we’ve talked about sort of the end user or customer experience. Let’s talk about the developer experience because it’s becoming or is a strategic differentiator for some payments partners. So, what ultimately makes a platform developer friendly in a way that really accelerates that adoption for these SaaS companies?

Luis Pena:

Yeah, this is my favorite topic. So, thank you for this question. There’s a lot that’s in here, it’s not just about building APIs in a software that’s kind of table stakes at this point. But as I mentioned before, it’s really understanding how developers build their software and how they would integrate payments into their stack. So, there’s a lot of things to look out for and a lot of things that are now expected when you are working with, developing or integrating any type of software vendor out there. So first is just their ability to provide their service in a multiple of different ways. 

Whether or not you integrate them in a no code. If you’re just doing a proof of concept, there’s multiple stages in software development and sometimes you just need to prove an idea out. So being able to bring in no code or maybe very low code, lightweight options to get a POC out, to test some things, to be able to maybe do some, maybe testing in a platform, it’s important that you don’t necessarily need to go all in and do a full build, while you’re developing. 

Having a sandbox available is very crucial so that you have a safe place to test, safe place to make errors, and that you have developer guides and test suites that really help you understand what all the scenarios are that you need to really deal with. I alluded to it earlier that you don’t necessarily need to always develop for the best case, happy path, but robust and very, very well-developed software that gives a good customer experience handles all of those exceptions very well. They understand where things might go wrong. 

They understand that if a transaction is taking a lot of time, it’ll give you a spinner and it’ll let you know, hey, like we’re still processing, don’t refresh or abandon this transaction. Being able to handle declines and prompt for another payment. Being able to handle all of those different exceptions and having test suites that walk you through those and a sandbox that can simulate all of those exceptions as well. So, you can test those in your own software so that you’re not just building in theory, but you have a way to go through each of those. You can trigger error responses, you can trigger declines you can trigger, transactions that may take a long time. You can simulate a lot of the bad cases so that your software is robust. 

So, having those test suites available in all of those test scenarios is also really important from a developer standpoint because that gives you confidence that you are building a robust integration to a payments provider and then additionally the systems that give you feedback, especially in that sandbox environment where you can see the calls that you’ve made to the platform and you can understand where you might have missed something, you can get guidance as to an error code that you got and what was missing so that you know how to correct it is also kind of really important so you get that live feedback from the system as you’re constantly developing and iterating. And then finally, as I mentioned, just meeting people where they are these days, making sure that your IDE that is, powered via AI is able to understand the documentation for, this software platform, and be able to properly implement what you’re trying to do. 

You know, these developers, again, they might be new to payments and they’re going to rely on the thoroughness of this documentation and how well the AI agents they’re using to help them build their own software can consume this documentation. So, you know, I can go on into details about MCP servers and all these different types of components that are out there, but it’s really just making sure that they’re keeping up and that they are really working with you and feel as cutting edge as you probably are as a software developer. 

You’re building something very important and very interesting that is serving a need. And those who you bring along into your own software need to feel like partners who are doing the same, that are on that same level with you. Iterating, building, keeping up with what’s the latest, and making sure that they’re not creating a jarring experience for your customers because that’s important for you to develop that cohesive experience for what you’re building. And the partnerships you build are very important to making sure you deliver that cohesive experience. So again, I can go on and on about, about what is, what is out there that makes a good developer experience but I’m listening to folks all the time. I’m hearing phone calls and just kind of getting all the insights and we’ll turn things around pretty quick. But, I’m excited to see where things go.

Greg Myers:

Okay, so, Peter, some SaaS founders treat payments as a feature. We’ve kind of talked about that. Others see it as a strategic growth engine. How should these SaaS founders be kind of reframing their thinking from feature to growth engine?

Peter Galvin:

Yeah, and I think that comes a lot from the lack of knowledge around payments. You know, payments is a complicated subject. It’s difficult to understand. I think there are some people that are, in the early stages, are very naive about what it really takes to take a credit card payment. As a consumer, it seems like a very easy, simple process which is designed to be. But in the background there’s hundreds of things going on to make sure, payments get accepted, there isn’t fraud. People get paid and both sides get paid and one pays the other. So, I think there has been the start that was the starting point for a lot of these, a lot of these early founders. 

But it truly is a strategic growth engine. It truly is another component that they want to have within their software stack. And they need to really think about, go back and think about what is their customer journey, how is their customer going through and using their software all the way to the end. And at some point in that journey, the customer, the consumer is going to want to make a payment. And how do they make that payment as frictionless as possible, as easy as possible, with the same experience that impacts their brand. Right. And so again, when you think about consumers and how they think, they think about brands, they think about companies they use and work with every day. 

And so having that same great consumer experience is foundational for any kind of growth for these SaaS companies because they’re the people that the companies that are figuring it out. And I think many, many more founders and many, many more SaaS, folks are understanding payments a lot better than they ever had before and they understand the strategic importance of it. They just don’t understand how to go about doing it. And so that’s where other partners like ourselves, come in to really give them the infrastructure and give them the platform to be able to make that a strategic growth driver, for them to become more successful. And so, I really think they should rethink the reframing is. This is another part of what should just be a part of your overall SaaS system that you’re developing. Because at some point someone’s going to need to take a payment and pay for something. And you as a SaaS provider want to be in the middle of that process and you want it to make sure that it feels like part of your brand and part of your experience.

Greg Myers:

Okay, so final question for both of you, and Peter will stick with you. If you had to make one prediction about where SaaS plus payments will be in five years, what’s the headline?

Peter Galvin:

I think the headline is, the best, for a SaaS company, the best payment experience for any of their consumers is the one they never, ever had. And what I mean by that is they certainly don’t know. They don’t feel like they’re having to do anything really difficult or hard or different to make that payment. It’s just as simple as pushing a button. And it just happens for them, as it does through their entire product offering and through that entire automation that they built for their customers.

Greg Myers:

Okay, Luis, same question for you. What’s the headline?

Luis Pena:

Yeah, I mean, similar to Peter, payments will become invisible, right. The SaaS companies will still, especially vertical SaaS, focus on their verticals and they’ll be at a position to be able to bring payments in where it’s not even questioned. It is invisible to the end consumer. They access their wallets as they normally would for any other merchant and it really just becomes table stakes for SaaS to include it at, any stage that they’re at.

Greg Myers:

Okay, well, I think that’s a great way to wrap up the show. So, thank you both for being here. I know your time is very valuable, so I really do appreciate you being on the show today.

Peter Galvin:

Thank you, Greg. We really appreciate the time.

Greg Myers:

Absolutely. And to all your listeners out there, I thank you for your time as well. And until the next story.