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I get how payment processors like $V Visaand $MA M*sterCard make money and the hardware providers like Square, Adyen and Wirecard make money through hardware transactions but how do the software providers make money and what differentiates them from one another? Companies that provide the hardware like $SQ won’t use 3rd party provider solutions for their software if they already provide the hardware so why wouldn’t people use the integrated solution instead?
In: Economics
They do the same thing, they charge an additional % on top of what Visa/MC charges (and sometimes monthly fees). People use them because they’re much more flexible than the integrated solutions: for example with Square you must use the Square branded app and branded dongle, but what if you want to use your own custom checkout terminal, your own custom branding. Or what if you’re a developer whose employer wants you to set up a custom checkout page? Also, if I remember correctly Square only allows in-person payments.
Sometimes the differentiating factor will be which service your merchant processing bank supports: if you really want to cut out as many middlemen as possible you will open an account directly with a merchant acquiring bank that will process your transactions, and they may tell you their system only works with First Data, and so you will have to use First Data.
Or, if you want to do less work but still want a custom solution, you might choose a software vendor that comes with a merchant account: for example PayPal, if you pay extra, also let’s you set up your own custom checkout pages that are hosted on your own servers and have only your own branding.
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