Unbundling Payments To Improve Efficiency and ROI

For centuries, payments have been “bundled”. Large multinational institutions have led the way in banking, money, payments, investments, and more, becoming large financial conglomerates offering all-in-one financial services.

In 2022, Professor of Law at Cornell Law School, Dan Awrey, stated the following in the article, “Unbundling Banking, Money, and Payments”:

"For centuries, our systems of banking, money, and payments have been legally and institutionally intertwined. The fact that these three—theoretically distinct—systems have been bundled together so tightly and for so long reflects a combination of historical accident, powerful economic and political forces, path dependence, and technological capacity.”

This has caused many banks and large providers to operate in a “too big to fail” mentality. However, new technologies are attempting to break through and lead the way in an unbundling movement to make payments more friendly for merchants and consumers alike. Awrey shares:

"Against this backdrop, the recent emergence of a variety of new financial technologies, platforms, and policy tools hold out the tantalizing prospect of breaking this centuries-old stranglehold over our basic financial infrastructure. The essential policy problem, at least as conventionally understood, is that creating a level legal playing field would pose a serious threat to both monetary and financial stability."

As this “new wave” of payments continues to gain traction, this likely means some big changes and opportunities for merchants.

Payments 3.0: Custom and Distributed

Basis Theory CEO, Colin Luce, mentioned this new paradigm back in October 2023. Many all-in-one payment processors like Stripe and Adyen have built entire businesses on the promise of offering “everything” a merchant needs to accept and process payments - in what was considered payments 2.0. 

“While these modern acquiring and processing platforms make it super easy for a business to get up and running quickly with accepting payments, what the similarly modern merchant or platform really wants is the ability to run a custom payments stack that is specific to their individual business and their customer base. The dollars, attention, and focus of our industry has been on building payments solutions for software businesses when in reality we should be focusing on enabling software solutions for the future of payments architecture.”

This desire to “unbundle” elements of payments - like fraud protection, 3DS, intelligent routing, and more - gives merchants more control over their payments stack.

Unbundling Payments: Benefits for Merchants

As of March 2024, Stripe lists over a dozen distinct products available for merchants. While Stripe has delivered value to customers for over ten years now, no one company can be best-in-class for so many focuses. This is commonly the case for most all-in-one PSPs, where they have the leverage of offering many “decent” services to keep merchants locked in.

If merchants choose to decentralize and unbundle payments and instead build a custom payment stack, they can experience many benefits.

Choosing Best-Fit Solutions

Unbundling your payment stack gives you the ultimate flexibility to choose the right-fit solutions your business needs. Instead of relying on the bolt-on options of an all-in-one PSP’s product suite, you can instead shop around for the features you need, the pricing that works best for your business model, and the level of support you need for auxiliary products and services.

Avoiding Lock-In

It is no secret that solution providers offering bundled all-in-one solutions frequently build their products in such a way that lock-in is likely. Whether contractual, financial, or both, merchants may have no choice but to stick with this provider even if a better solution crosses their desk.

The best way to avoid vendor lock-in is to choose flexible, unbundled providers. From the beginning of a payment provider search, merchants should seek solutions that allow them to own their data, to work flexibly with other partners, and to leave on their own terms. 

Choosing a fully programmable vault can ensure that working with even the most rigid PSPs, merchants can have the upper hand. These vaults tie the entire payment stack together, securely and seamlessly, while also giving merchants complete control of their payment data.

Leveraging Specific Resource Expertise

If, as a merchant, you experience issues with the way a specific element of a tool works, you will likely receive better, more specialized assistance by adopting a best-in-class strategy. By contrast, when working with an all-in-one payment provider that offers 15 different “products”, likely only 1/15 of the support expertise will reside in that specific product.

Take, for instance, a solution explicitly offering fraud protection and prevention. The support team will likely be well-versed in the product, as well as in fraud protection best practices. Merchants have the ability to lean into this expertise and gain value well beyond the tooling itself.

Limiting the Stack to Needed Solutions Only

Payments bundled with many other solutions may greatly support smaller organizations. However, as merchants grow, they may begin to realize they are not using all the features available to them in their one-size-fits-all payment stack that wasn't catered to their specific needs.

Unbundling Payments to Give Merchants Ultimate Control

In an industry filled with trade secrets and complicated processes, merchants have historically had little control over how they would accept and process payments. By unbundling their payments stack, merchants can now hand-select the solutions and providers that best set them up for long-term success without the added headache of vendor lock-in, bloated tech stacks, and “decent enough” solutions.

Further, programmable payments vaults offer a great solution to tie a merchant’s payment stack together, securely and seamlessly.

Choosing a partner like Basis Theory allows merchants to:

• Create engaging e-commerce flows 
• Connect with any partner
• Effortlessly manage compliance
• Keep control of payments data

Merchants can stand up a vault in as little as 5 minutes, and begin migrating card data, connecting with partners, and controlling payment flows. And, because we strongly believe in vendor flexibility, we make it easy for merchants to migrate their data off Basis Theory.