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Monetizing Payments 101: How to Add A Recurring Stream of Revenue to Your Software Business with Tilled

Tilled’s simple pricing structure makes it easy to envision just how much extra revenue you can generate through payment processing.

When looking for the next step in scaling your software company, finding a way to increase your revenue is bound to be at the top of the list. Although there are several ways to go about this, changing how you process payments is a frontrunner – or at least it should be.

Why? Because the right integrated payments partner can help you begin monetizing the payments accepted through your system via a revenue share. Not sure what the heck we’re talking about? We’ll break it down: 

What is a Revenue Share? 

When working with a payment processor, part of the contract includes a set of fees, often shown as percentages, that they incorporate into each transaction completed. Depending on the volume of transactions you’re processing, these fees can begin to add up to much more than you may have anticipated when initially signing the contract. To minimize the impact of these fees on your profit, you should leverage a payments partner that offers a revenue share. 

A revenue share gives you (the ISV) a portion of the profit generated by merchant accounts in your portfolio that would typically be received by the processor. For reference, Tilled offers a standard 66% percent revenue share to our partners. Depending on your annual processing volume, this can help your business generate a significant recurring stream of revenue. To give you a crystal clear picture of how this all works, consider this simple scenario: 

  • You’re a B2B software company developing solutions for the veterinary industry. Your software provides scheduling services, an intake process, integrations into pet health record systems, and you’re also processing payments using a managed PayFac provider (think Stripe, Square or Braintree). 
  • You have 700 customers around the country using your product. Let’s assume each of these customer locations process around $12,000 a month in sales through your software. This means you’re processing just over $100 million in credit card payments annually.

700 x 12,000 x 12 = 100,800,000

  • For this example, let’s round that off to an even 100 million and say that your average transaction is $50. That comes out to 2 million transactions a year total.

100,000,000 / 50 = 2,000,000

  • Your managed PayFac provider is charging you 2.9% and $.30 per transaction, which you pass straight through to your customers without another thought. Once your merchants pay this fee, any profit made on processing the payments skips right by you entirely and into the pockets of your PayFac provider (Stripe, Braintree, etc.). 


Keeping all of this in mind, let’s figure out exactly how much additional revenue you could generate with Tilled’s PayFac-as-a-Service.

Monetizing Payments With Tilled’s Payfac-as-a-Service 

With Tilled’s competitive revenue shares, a portion of the 2.9% and $.30 you pass to your merchants goes back into YOUR pockets. Here’s how it works for a $50 transaction:

Step 1: Subtract the Interchange Costs 

Interchange Costs are the direct costs paid to Visa, MC, Amex, etc. These costs are charged to merchants by credit card networks for every credit or debit card transaction. Interchange costs vary depending on the credit card, but we can assume that, on average, 2.3% and $.10 of every transaction will pass through to the credit card company. 

Tilled operates on a simple pricing model known as Interchange Plus Pricing. Interchange Plus Pricing includes base credit card interchange fees with a fixed markup, which typically consists of basis points, or one-hundredths of a percent. For clarity, this is what basis points look like formatted as decimals or percentages:

Now for some subtraction! Let’s assume that you pass the standard 2.9% and $.30 to your merchants. We would then need to subtract the interchange costs of 2.3% and $.10 from that amount. 

    2.9% + $.30 

– 2.3% and $.10 

= .6% and $.20 (60 basis points and 20 cents)

After subtracting the Interchange Costs, there’s a leftover of 60 basis points and $.20 on each transaction (.6% = .006 = 60 basis points).


Step Two: Apply Our Three Simple Fees

At Tilled, we operate on transparency and simplicity, so you’re not going to find any hidden fees with us. We charge just three easy-to-understand fees, and you’ll find a breakdown below detailing how each affects your profit. 

1. Settlement Fee/Discount Rate

What it is: A Settlement Fee, or Discount Rate, is the percentage that is charged against a sale.

How Tilled does it: At Tilled, our Settlement Fee is 7 basis points. In context, on a $50 transaction, your cost would be $.035 (or 3.5 cents), since the 7 basis points act as the percentage charged against all of the volume on the account.

.0007 x $50 = 0.035 or $.035 

What it means for you: You started with 60 basis points. After subtracting the settlement fee of 7 basis points, you’re left with the remaining 53 basis points, which are then split according to your revenue share percentage. Tilled’s standard revenue share is 66%, so on a $50 transaction, you’d be seeing a little over $.17 go back in your pocket. 

66% of 53 basis points on $50 = .66 x .0053 x $50 = $0.17

With $0.17 going in your pocket for every transaction processed, and assuming you’re processing 2 million transactions per year, you’ll end up earning nearly 350,000 in additional revenue annually.

$0.17 x 2,000,000 = $350,000

2. Transaction Fee:

What it is: A per-transaction charge that a business must pay each time it processes an electronic payment for a customer transaction.

How Tilled does it: At Tilled, we charge $.05 per transaction processed through our system. 

What it means for you: The remaining $.15 across 2 million transactions is split between you and Tilled. At the same 66% revenue share, that translates to nearly $200,000 a year going straight into your business’ bank account.

66% of $.15 = .66 x .15 = .099 x 2,000,000 = $198,000

3. Monthly Merchant Fee: 

What it is: A recurring monthly fee for each merchant you add to your platform.

How Tilled does it: According to Tilled’s Schedule A, each merchant you add to your platform costs $6 per month.

What it means for you: You can certainly pass this cost straight through to your customers, but if you decided to pay this as a service to your customers, it would cost you around $50,000 per year.

700 customer locations x $6 monthly fee = $50,400


Step 3: Total Your Profits 

Now that we’ve broken down the math behind the fees, it’s time to sum our profits using the rough totals from above:

$350,000/year in Settlement Fee/Discount Rate profit
+ $200,000/year in transaction fees profit

$50,000/year in monthly merchant charges
= $500,000 a year in revenue.

Just as a reminder, this example was for a software company with 700 customers processing $100 million/year in payments. And don’t forget this is RECURRING revenue that you generate month after month and will continue to grow with your business. 


Tilled Can Help!

A major reason that so many businesses overlook payment processing as a source of added revenue is because it can be a difficult process to understand, usually only discussed in legal fine print. But at Tilled, we make these conversations more accessible and transparent for our partners, helping them not only increase their revenue, but improve their overall understanding of how a company works to help process their payments.

Hopefully this explanation of payment processing will help you better understand just where your businesses and customers’ money is going, as well as an easy way to increase your revenue. If you think you may be missing out on a major amount of cash (hint: you probably are), feel free to contact us to discuss more about monetizing your payments. 

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