How payment monetization can drive revenue growth

Would consumers pay more to get their money faster? If the growth of instant transfer solutions like Cash App is any indication, the answer is a resounding “Yes!” This groundbreaking app changed how consumers handle their finances, resulting in multiple new revenue streams for the parent company, Block, Inc.

Offering transfer solutions is a win-win for companies, as they don’t have to create their own payment gateways from scratch before offering an in-demand service to their customers. Their users love it because it helps them conduct transfers seamlessly and securely within minutes — it fits well into their busy lives. This is evidenced by the explosive growth of Cash App and how younger generations use it to send rent payments, borrow money from friends and pay bills instantly from their mobile devices.

And while it may seem that incorporating this type of instant payment monetization into your technology stack is a big ask, it’s relatively simple, thanks to payment APIs from partners like Astra. 

While Cash App has already carved out its own niche, here’s what payment monetization offers fintech and SaaS companies looking to compete in the growing payments market.  

What is payment monetization? 

Payment monetization is an approach to earning additional revenue by charging a fee for payments processed on a software platform. It’s generally done through embedded payment technology, where the fintech company integrates external banking features into its own software ecosystem. Every time a consumer makes a transfer, there’s an opportunity to charge the fee and earn revenue. (However, most fees are charged for enhanced transfer services, such as instant transfers.) 

We can credit the growth of payment monetization to a few market forces, including: 

• Competition among SaaS and fintech companies to stand out in the market through innovative, built-in functionalities
• Changing investing climate that requires businesses to capture additional revenue streams through existing infrastructure 
• Increasing customer acquisition costs that need to be recouped through new services or offerings 

Benefits of payment monetization 

Payment monetization creates a new source of revenue for software companies, and it can be just enough to keep a company afloat during difficult economic times or even fund new expansion efforts. Once set up, it’s a nearly automated way to diversify income, requiring very few resources. Every transaction you process for your customers brings in cash. Some companies even make more through transaction fees than they do through their core business offering. 

However, monetizing payments doesn’t happen without embedding payment processing into your own product. It can’t be done through third-party gateways or with standard checkout solutions. To make money from payments, you need to manage them yourself, usually through payment API technology. 

Owning your payment processing can take time to set up correctly, but it’s much easier and faster with the right partner to handle the entire process. Once implemented, you can see the following benefits: 

Better user experience 

Most people know, love and prefer certain apps and interact with them daily. If they are already engaging with yours, keeping them in your app and reducing the clicks needed to transfer cash, make payments or fund a new bank account makes sense. They won’t even have to open an external app or switch between tabs to complete common financial tasks. 

Presenting them with a seamless experience helps them get more done and boosts your reputation as a problem-solver. In the case of Cash App, the developers wanted to empower consumers to send money to anyone using just their debit card and mobile device. They created a simple experience to fund accounts within minutes and ensure money could be sent securely almost anywhere in the U.S. 

Reduced customer churn 

We already know what happens when users have a lackluster app experience. They leave — and often never come back. However, if you give them that better user experience, they will come back repeatedly because it’s so much easier to do business with you. 

Payment services are also considered “essential services,” meaning that users will transfer money somehow, somewhere. They are very likely to request funds through an app at some point in their consumer journey. If you can get them to use and love your service, you can keep them for a very long time, as customers use payment services throughout their lifetime. 

As of 2022, Cash App had capitalized on the popularity of its app by offering more services. Its premium instant transfers charged a fee, but for every $10 in acquisition costs it spent in getting new customers, it realized $60 in revenue from that same customer over the next three years.

Data insights 

While payment monetization can create healthy profits, it also builds your bank in another significant way: data. Companies that manage their own payments get to keep the data from transactions and use the insights to better understand their customers, forecast more accurately and continue improving their products over time. 

Cash App’s robust tech ecosystem granted it a lot of customer data, which it then used to create new products, including solutions for crypto and buy now, pay later (BNPL) financing. 

Competitive advantage 

Finally, you might consider managing your own payments because it’s what the market will require. As your competitors offer payment services within their own apps and products, customers will expect most companies to follow suit. If you’ll need to do it anyway, getting a jumpstart by being the first can give you a significant market advantage. 

That’s exactly what happened with Cash App, which started its instant payments product as a “rogue project.” Their experiment paid off. They became the first solution to offer instant payments to consumers through an app and became the 8th most downloaded app in 2021 — beating out competitive fintechs who later came to the table with similar offerings.

How Cash App used payment monetization to scale to $1.29B in quarterly revenue 

Cash App is a success story for several reasons, including its ability to make financial transactions seamless and enjoyable for users. Parent company Block credits payment monetization for its incredible growth, which resulted in revenues of $1.29 billion in Q2 2024 revenue alone. The app consistently brings increasing revenues to the company and outearns its other products, including Square. 

Cash App’s premise is simple. It creates instant payments between users by linking their debit cards to their Cash App accounts. The payment technology initiates, processes, and verifies the payment within seconds, so users are more inclined to use Cash App over slower transfer services like ACH payments or checks. Cash App doesn’t charge for peer-to-peer transfers using traditional bank transfers that may take a few days. It charges for the instant payout services, and this is what generates margin.  

These convenience fees are still much lower than wire transfers or “fast cash” lending services. By giving users a range of services, Cash App ensures consumers can use it for almost any kind of payment use case and captures more overall payment business as a result. 

The GM of Cash App explained it this way at Block’s 2022 Investor Day:

“We built a similar ecosystem (to Square) around CashApp, serving consumers with a broad suite of financial and commerce services. We started monetizing CashApp in 2016 by charging for instant deposit and business accounts. These two revenue streams are highly correlated to the usage of our core peer-to-peer network. And over the past five years, the gross profit that we generate per active account has rapidly increased, as we’ve methodically expanded CashApp’s ecosystem beyond peer-to-peer payments by building and cross-selling adjacent financial services to our customer base. With each new product category that we introduce, we have additional opportunities for monetization.”

This has resulted in Cash App expanding into exciting new areas, including business services and crypto. These were things that may have been out of reach for a company that didn’t have the reliable stream of revenue coming from instant payments that Cash App had.

How to monetize payments 

If you’ve been using a third-party payment gateway to process your users’ payments, you already understand the benefit of integrating trusted technology into your existing user workflows. To monetize payments, however, you’ll need to manage them yourself through an embedded payments platform. Here are some basic steps to get started, although the process may vary slightly depending on the goal and payment partner. 

Choose a payment partner 

There is no shortage of tech companies offering seamless payment services, but not all offer access to a well-rounded suite of tools. Look for a partner that can help you onboard quickly with a pre-built payments API that integrates well with your existing tech stack (or see how they can help you build your own API). Ask questions about security, data integrity and compliance with financial rules and regulations. 

Finally, share your goals for your product and ensure they specialize in what you’re hoping to create. Can they offer instant card disbursements? Do they work through a variety of payment rails? These are details to know before you sign the contract. 

Plan your pricing structure 

Choosing to monetize payments isn’t a one-and-done decision. You’ll have to determine which payments to monetize and at what levels. We share some best practices for getting the most out of your new revenue plan in our getting started article, including not charging for every payment type and avoiding caps on transfer amounts. 

Your payment partner should be able to help you create a pricing plan that covers your cost of doing business (network fees, etc.) and generates revenue without alienating your users. 

Integrate the payments API 

Depending on your chosen partner, embedding payments can be as simple as using a software development kit (SDK). Your payments solution should have a full library of resources, including guides and documentation to help you integrate the new functionality into your existing user interface. 

This is also where you’ll check for compatibility with your app and digital security goals, making sure the final payment experience follows security standards such as encryption or tokenization. Expect to do some testing and work with your payments partner to create a “just-right” experience. 

Onboard users

Even if the new payment options don’t appear much different than what you had before, educate users on the advantages of the new features. Be upfront about the capabilities, why you offered them and what they cost. If you charge different prices for different payment types (instant vs. ACH, for example), create articles, charts or easy visual tools to help users choose the best option for each transaction. 

Be prepared for additional questions after the launch, and staff your support teams accordingly. 

Monitor and optimize 

While a payment API can seem rather plug-and-play compared to other functionalities, you’ll still want to watch carefully after the initial rollout. Take advantage of all the features available for monitoring and testing and adjust to meet your customers’ expectations. 

Astra, for example, offers webhooks to notify you in real time as each transaction is processed. You can be on alert for suspicious activity, take action against individual cardholders and watch for trends that show fraud or that your product isn’t working as planned. 

Unlock new revenue opportunities with Astra

Astra enables app developers, software providers, and fintechs to gain more market share just like Cash App did by enabling instant transfers in an app users already know and love. If you’re ready to generate more revenue by making payments easier for your users, contact us for a demo.