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Home » Blog » What Is Revenue Share and How Does It Work?

What Is Revenue Share and How Does It Work?

  • February 21, 2025

Especially in light of recent tech market turbulence, SaaS companies are leveraging everything they can think of to create extra revenue streams. Some merchant service providers offer lucrative revenue share arrangements that enable SaaS companies to do exactly that. 

If you’re an independent software vendor (ISV), these revenue share models can serve as a valuable source of additional income. In this post, we’ll be discussing the ins and outs of revenue share for ISVs — what is it, how does it work, and how can it benefit your business.

What Is Revenue Share, and What Can It Do For ISVs?

A revenue share agreement is a partnership between a payment services provider and an ISV where they split the earnings from a product or service. For ISVs, revenue share usually involves working with a payment services provider (PSP) to integrate payment capabilities into the ISV’s software. 

In a nutshell, the general arrangement typically looks something like this: 

  1. An ISV wants to expand their service offerings and generate additional revenue streams.
  2. So, they partner with a payment services provider to integrate payment capabilities into their software, allowing customers to make payments without leaving the software, app, or POS solution. The merchant account generates profit — known as “residuals” — and the partner is paid a portion of those residuals, or the “revenue share.”

This arrangement creates additional revenue streams and other opportunities for ISVs while improving the functionality of their products. 

How Does the Revenue Share Model Create Opportunities?

The revenue share model offers multiple ways for ISVs to grow their revenue beyond traditional license sales or subscriptions. These partnerships offer opportunities such as: 

Improved software products: 

By partnering with a reputable PSP, ISVs can improve their product offerings with services including mobile payment capabilities, subscription management, fraud prevention, and more.

Recurring revenue opportunities: 

For ISVs, one of the most attractive aspects of a revenue share arrangement is the ability to generate reliable ongoing revenue. 

Decreased operational expenses: 

Payment integration is becoming increasingly sought after among SaaS companies. However, it’s expensive and time-consuming to handle it in-house. Outsourcing the process to a PSP puts more money back in your pocket and allows you to focus on your core business. 

Another thing to consider is that PSPs often have large existing customer bases. This can help ISVs tap into new markets, broadening their appeal and user base. 

How Is a Revenue Share Agreement Structured?

Although revenue share ISV agreements vary widely among partnerships, there are some common elements to consider. Some important aspects to keep in mind include: 

Percentage split: 

Exact percentages will vary across different partnerships and revenue share agreements. MSG Payment Systems determines the revenue share percentage for each of our partners based on a number of factors unique to each partnership.

Revenue triggers: 

Revenue share ISV agreements typically specify revenue triggers that lead to a payout. These could include in-app purchases or subscription sign-ups, for example. 

Payment terms: 

Agreements will have payment terms stating how often funds will be sent to the ISV’s merchant account (monthly, quarterly, etc.) and how payments will be processed. 

Performance metrics: 

In some agreements, payments might increase if certain milestones are met, such as the ISV hitting an agreed upon number of subscriptions. 

Exclusivity or non-exclusivity: 

Sometimes, a revenue share agreement will involve an exclusivity clause that prohibits the ISV from partnering with a competing PSP.

Let’s take a look at why a revenue share ISV agreement can be a wise long-term investment. 

Benefits of Revenue Share for ISVs

The basic benefit of revenue share for ISVs is fairly obvious — revenue. However, there are other strategic advantages to consider.  

ISVs can enhance the customer experience. 

Third-party payment integrations can give your customers access to the convenience of mobile payments, digital wallets, and other fast and easy payment methods. Along with more traditional methods like using a credit card, of course. 

It’s a scalable strategy that keeps building on itself. 

As your customer base continues to expand, so does the revenue generated by the partnership. 

Revenue share is a low-cost way to enhance your product. 

The development costs involved when ISVs try to integrate payments into their software can add up quickly. Revenue share agreements are a relatively inexpensive way to give your customers a superior product. 

Key Factors to Consider in a Revenue Share Partnership 

By knowing what to look for in the ideal revenue share partnership, you’ll be more likely to find a successful long-term arrangement. Make sure your partner meets the following criteria: 

  • Has a clean PCI compliance record 
  • Is financially stable, and a viable long-term partner 
  • Has competitive fees and terms 
  • Is transparent about how revenue will be tracked and paid

At MSG Payment Systems, we strive to be the perfect partner to the ISVs we work with. To learn more about what a revenue share ISV agreement can do for your business in 2025, reach out to the MSG Payment Systems team today.

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