The payments industry has never been larger—or more commoditized. As transaction fees compress, processors consolidate, and software platforms steadily absorb more of the payment stack, traditional PayTech firms face an existential challenge: how do you escape a race to the bottom when your core product has become indistinguishable from everyone else’s?
Winning firms aren’t trying to out-discount competitors or squeeze another basis point of margin from aging processor rails. Instead, they are fundamentally redefining their value proposition and repositioning themselves as indispensable, software-driven partners embedded in the workflows of their customers.
This article explores why commoditization is accelerating, how leading PayTechs are breaking free, and what every payments executive must do to thrive in the next decade.
Three converging forces are driving pricing pressure and margin erosion across the industry:
The Processor Layer Has Become Ubiquitous
Most providers run on the same underlying rails. Whether using Fiserv, FIS, Global Payments, Stripe’s underlying infrastructure, or BaaS providers, the core transaction looks identical. This leaves little room for pricing power unless firms differentiate elsewhere.
Software Platforms Are Owning the Merchant Relationship
ISVs, vertical SaaS platforms, marketplaces, and subscription-based business systems now dictate buying decisions. For these software-led players, payments are simply one feature among many—resulting in lower willingness to pay, higher expectations, and limited loyalty to underlying PayTech partners.
The Rise of No-Code and API-Native Competitors
Modern entrants can spin up payment acceptance in weeks, supported by developer-centric APIs, prebuilt integrations, risk-as-a-service tools, and white-label KYB/KYC workflows. This makes onboarding easier but also accelerates commoditization.
The firms commanding premium valuations today aren’t processors—they’re platforms. They use a layered strategy to move up the value chain, differentiate meaningfully, and build defensibility.
Here are the winning plays:
Owning More of merchant Workflow
The most valuable PayTechs integrate into or manage the operational workflows that surround a transaction:
By controlling upstream workflows, PayTechs create stickiness, reduce churn, and capture software margins, not just payment margins.
Key metric: Companies earning 30–60% of revenue from software or platform fees consistently trade at higher revenue multiples.
Developing Proprietary Technology That Replaces Legacy Rails
Some leading firms are rebuilding foundational parts of the stack:
Modern facilitated PayFac models replacing ISO structures
These tools shift the firm from aggregator to infrastructure owner, dramatically improving both economics and differentiation.
Key metric: Owning the risk & underwriting layer can increase net revenue per merchant by 2–4x compared to ISO models.
Building Embedded Finanical Services
Top PayTechs are bundling broader financial services that extend beyond the transaction:
By integrating fintech services into the daily operations of merchants, PayTechs create deeper relationships and multi-channel revenue.
Key metric: Firms with 2+ ancillary financial products typically achieve 40–70% higher lifetime value per merchant.
Becoming Indispensable Through Data
Top PayTechs are bundling broader financial services that extend beyond the transaction:
By integrating fintech services into the daily operations of merchants, PayTechs create deeper relationships and multi-channel revenue.
Key metric: Firms with 2+ ancillary financial products typically achieve 40–70% higher lifetime value per merchant.
Productizing Compliance & Risk Management
With regulatory scrutiny rising, leading providers are treating compliance as a product, not a cost:
This not only reduces internal burden, but becomes a differentiated feature set for software partners and merchants.
Key metric: Firms with 2+ ancillary financial products typically achieve 40–70% higher lifetime value per merchant.
The most successful PayTechs reposition themselves as:
A software-led operating system that powers financial and operational workflows—not a payments vendor.
This is the model that earns 10–20x revenue multiples, compared to the 3–6x typical of pure ISOs and MSPs.
Executives looking to escape commoditization can follow a structured roadmap: