A Focus on Payment Gateway Extensions with Niklas Högefjord at Krokedil

A Focus on Payment Gateway Extensions with Niklas Högefjord at Krokedil
Do the Woo - A WooCommerce Podcast

 
 
00:00 / 00:37:49
 
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Finding your niche in the WooCommerce extension world may have come naturally to you from a scratch you needed to itch. But how Niklas created his business model stands out a bit from the standard product shop.

A Chat with Niklas Högefjord at Krokedil

In episode 50, Brad Williams and I chat with Niklas about:

  • Moving from agency to product and how that evolved.
  • The unique model of building profitable extensions and still offering them on WordPress.org.
  • A focus on payment gateways and where that is leading.
  • Criteria for choosing which payment processors to work with.
  • How Gutenberg plays into the future of his products

Thanks to our sponsors


Niklas’s story was very similar to those of other agencies that have moved to products. But with a focus on payment gateways, it was truly a niche approach.

He shared his business model, which is unlike most plugin shops because over time he was able to monetize his products directly through payment processors while still keeping his plugins freely available on his site and on WordPress.org.

I was curious about how he approached working with payment processors and where he established any certain criteria in that process.

Brad brought up Gutenberg and how there has been talk about integration with checkout in the future. Niklas gives us his thoughts on how this would directly affect their products.

Niklas closes out the conversation with a recent security breach they experienced with a couple of their products. He is transparent about their approach and the biggest struggle when it comes to having a plugin on WordPress.org.

I would recommend this show to anyone going into the WooCommerce product space as Niklas shared a lot of lessons learned.

Announcements & News

Where to find Niklas on the web:

You can also listen to the episode we referred to where we chatted with Darren from WooCommerce about Gutenberg.

The Conversation

Brad: Welcome back to another exciting episode of Do the Woo episode number five zero. 50 or 50. Bob?

Bob: Yep, five decades. I had to make it sound more impressive than 50 episodes.

Brad: So, I mean 50 is impressive. Honestly, when you get to two, it's impressive. So if you can get that 50, that's a milestone, it's one we should be celebrating. So we're happy everybody's joining us for the exciting number 50. And to kick off the show, we want to thank our sponsors.

As always, we have WooCommerce.com as our community sponsor, maybe you've heard of them, because that's all we talk about on the show. Thank you, WooCommerce.

We also want to thank FooEvents.com.. Sell and manage tickets for events, virtual or in person. A really great event ticketing system for WooCommerce, as well as our sponsor WP Security Audit Log, real time audit log tracking for WordPress, which is extremely important to be able to track and see what users are making changes to.

So go check out our sponsors and thank them and check out their products because more than likely, they can help you.

With that let's dig right in. Bob, how you doing over there?

Bob: I am doing well under the circumstances. You asked earlier what day is was and we always record on Tuesday so that's one of the things you can always count on.

Brad: Some of these recurring meetings and podcasts and things like that kind of help keep us grounded a little bit. I was joking with my wife that the one common ground that I have that helps me understand what day of the week it is, is trash day. It's tomorrow. So I know that's Wednesday and for some reason that helps me remember where we're at in these strange times.

But let's dig right in because we’ve got a really great guest and I'm excited to hear all about his story, how he got into Woo and even how he pronounces his last name. So Niklas, I'm not even going to try it. I'll let you tell us how to pronounce it but, welcome, Niklas, to Do the Woo.

Niklas: Thank you very much. I'm excited to be here. And it's Högefjord, that's kind of odd to pronounce.

Brad: Högefjord

Niklas: Yeah. That's good.

Brad: That wasn't bad. I'm not going try it again. That was it. I'm retired.

Bob: Yeah, really.

Brad: Awesome. Well, why don't you dig in and tell anyone listening who may not be familiar with you what you do and how you how you Do the Woo, as we like to say on the show.

Meet Niklas from Krokedil

Niklas: Yep. I'm Niklas. I'm from Sweden, and I have a company called Krokedil. We do plugins for WooCommerce, mainly payment gateways. So the way that I Do the Woo is I hang around the the WooCommerce GitHub repository, looking into that every day, trying to extend WooCommerce in different ways. In that sense, we are a plugin development shop, mainly payment gateways.

Brad: That's great. I definitely want to dig into that a little bit more, but first I'd like to hear how you got into the product space. You know, we've had a few different people on this show, and I think the majority if not all—Bob, correct me if I’m wrong— started off in client work and services, and ultimately built some products for clients. They realize, hey, there's something to what I built here and we put it out there for sale and one thing led to another and it got very successful and the products kind of took over. So I'm curious if your story is similar or if it's different. I always love hearing how people get into the product space.

The Story of Moving from Agency to Product

Niklas: Yeah, it's exactly that way. We were a small web development agency and we had a client that needed some eCommerce functionality. At that time, I think it was during 2011 or something like that, there were not that many available options for WordPress, because we we did WordPress websites only. And so we started to look around and found one that was kind of new. It looked interesting and it actually worked. And that was the Jigoshop. I think you have talked about that in previous episodes.

Brad: Yes, Jigoshop was the foundation they forked to create WooCommerce which is completely allowed in the open-source GPL world we live in.

Niklas: Yeah so we have this client that we tested the Jigoshop with and that seemed to work, but she wanted Swedish payment gateway. I had read somewhere, probably on a blog post, that there was this possibility to extend the Jigoshops, so you could integrate your own payment gateways. I got in touch with them and there was this guy there, JameS Koster, and he said that we don't have any documentation for this but we have another guy who built the payment gateway so you can probably look into that code. He attached the zip file in the email and said, see if you can make any sense of that and integrate towards your own system. So I tested that and got it to work. In the end there was no testing or sandbox environments. I needed to make small live payments and take it step by step in the right direction and try to make this integration work.

And when we started using it for this client, they said that they were thinking of doing some kind of marketplace or selling third party developer extensions on some kind of marketplace at Jigoshop. But before we released that plug in there, he got back to me and said, “Well, if you just wait a little bit, there's stuff happening here that will change probably a couple of things. So just wait a couple of weeks.” And I did.

He got back to me after one day and we moved over to WooCommerce. Because James Koster and Mike Jolley, I think were part of a freelance team developing this Jigoshop plugin and they started working together with WooThemes and creating WooCommerce. So when WooCommerce launched, we actually had two payment gateways on WooThemes, then marketplace, which they released at the same time. So that's how it started.

But it took quite some time before we actually started making any money from this expansion. We ran this development agency and did these plugins in parallel over several years, before we moved o the product space full time.

Brad: Yeah, it's such a common story and for good reason, right? Because, it's certainly easier to dive into client work and actually start making money. Because there's a lot of websites on the internet and a lot of people who need WordPress help or want to be on WordPress and need help getting there. So there's a lot of opportunities versus one of a new company building a product for WordPress. Nobody knows who you are, you probably don't even know the space that well, and you're trying to build products. It's just tougher without some type of funding up front. It's going to be a long road before a decent amount of revenue starts coming in. Whereas doing the client work, you can start to build that revenue. It's like two birds with one stone where you're building things for clients but also looking at how this could turn into a premium business in the product space. So it's it's a win-win.

And even probably more so for your clients because you're not building a one and done custom solution for them, you're building a way that anybody could use it, that has your name attached to it, that you're going to want to make sure continues to work for years to come. So while they might help fund the initial investment, or at least the initial build of it, over time, they're gonna save a ton of money because they don't have to pay you to maintain it. I think that's why it's such a common story because it makes so much sense. It's easier to start getting revenue come in to help fund the product side of the house.

Niklas: Absolutely.

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Bob: So you did those two plugins and then moved into the product space. Was it just the comfort level with the understanding of payment gateways from those initial products that made you decide, okay, we are going to stick in the realm of payment gateways as far as creating products and extensions?

Niklas: To be honest, we we do have more plugins now. But perhaps the English version that you saw of our website is poorly updated . The absolute focus, though, is still on payment gateways. In the beginning, it was an open field. We could pick any payment method provider we wanted and start making integration, because no one had done them for WooCommerce yet in this part of the world where we live, Northern Europe. Then over time, I think that we made some kind of name for ourselves. We got a certain amount of interest from other payment method providers, and they started contacting us and asking us if we could do an integration for them as well. It took several years before that happened, but I think that in the end it started in the checkout part of WooCommerce.

At the moment, I think that we would like to explore more parts of WooCommerce. But it's keeping us busy. It has changed quite a lot over the years. I think it has to do with the popularity of WooCommerce because in the beginning we built and distributed these plugins on both themes and later on WooCommerce.com and then we sold them.

A Unique Plugin Business Model

But over the time, when WooCommerce gained more and more traction, the payment methods and PSP's realized that this was a platform that was interesting to have an integration towards. Then we started to have more direct agreements with them and removing them from WooCommerce.com or releasing them for free on WooCommerce.com or WordPress.org. So that's our main income is these collaborations with the PSPs directly.

Brad: Interesting. Yeah, I was gonna ask about that because I see the plugins and it looks like they're all available on WordPress.org. Freely available on WordPress.org. So I was curious about the business model.

Niklas: Yeah. It differs a little bit from partner-to-partner, how they want to do it. The most common one is probably some kind of retainer or something that is more hourly tied to the amount of hours work that we do. And in some agreements, we have more like a kickback model that might be tied to the amount of customers or transactions. But the most widely used is with hours and we do maintenance, development and support.

Brad: That's interesting. So you're partnering with the payment processors themselves, which by giving users easy tools to use their payment gateways, it makes that an option and ultimately they'll make money from more people using the gateways. So, yeah, that's unique model. Certainly a little different than what we've heard on the show anyways, right, Bob?

Bob: Right. And I'm wondering, how does that extend to the support of the extension?

Niklas: That's a bit tricky. The type of support is quite different because of questions we get. Some of them we just forward the customer or the merchant directly to the PSP itself because it might be an account-related question. But we do quite a lot of support ourselves. And since we have plugins for several of these companies, we have good, direct communications with them, such as shared slack channels and stuff like that. So we hopefully are able to ping them directly and ask about the account, is it turned on in a specific way or is something lacking? But we get a lot of questions that might not be support-related to the plugin itself.

Also, as a part of this structure, or under support, that the majority of these plugins or these payment gateways are called embedded checkouts or iframe base checkouts. That's kind of popular in the Nordics or Scandinavia. It's not only the payment method itself that is available within this iframe, it's also the place where you enter your address as the customer. So we need to partially replace the standard WooCommerce checkout with this iframe-based checkout. And that causes a lot of extra support as well because there are other plugins that extend WooCommerce checkout and want to hook into it and work a certain way. We try to be compatible and follow the WooCommerce checkout flow as much as possible, but we can't do it to 100%. So we end up with compatibility support questions.

Growing the Biz Towards More Payment Processors

Brad: Are you actively engaging with other processors to roll out additional products or are you currently booked up and happy to support the ones you have and and not continue to grow on that side? Or is there always room for growth with kind of the way you've structured your company and your team?

Niklas: We are interested in doing more partnerships land growing. What we're looking into now and have done over the last year are more shipping and delivery options: TMS systems and stuff like that to integrate with. Also a couple of MRP systems behind the scenes when it comes to orders and products in stock. That is what we're doing.

I started the company in 2010 and I have been the only owner up until last year, when we took on a Norwegian partner, a company called Maksimir AS. They are a WooCommerce development agency in Norway. They build WooCommerce stores and have done that for many years now and have a lot of plugins they built during client projects. Some of the these plugins are used again and again on different projects. So that is part of our collaboration. Now we are taking some of these plugins and refactoring them and trying to release them as well. We have started now and will probably release them on WooCommerce.com.

How Do You Choose Which Payment Processors to Work With?

Bob: I'm thinking this is a pretty complicated piece of WooCommerce, payment gateways. Do you have any criteria when a payment gateway approaches you and what their expectations are nd you determine, this is a go, or not a go?

Niklas: Historically, I have always said yes to whoever has asked us if we could work with them. But I'm getting more cautious about that. And what we take into consideration before agreeing to collaboration are things like a closer investigation in how the API looks. What type of API is it? What is it that we need to work against?

Also, there have been situations where a PSP that has grown or been bought by another company. Then we have to look underneath the structure of their technical setup and see if there are several different products involved. That gets a bit trickier to integrate towards because it's different in different countries with how you are supposed to send and receive data. I don't have a clear answer for how we do that, but I'm getting more cautious about agreeing to work together because we have run into issues in previous projects that we have built.

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Gutenberg and the Checkout Process

Brad: I'd like to get your thoughts on Gutenberg, and especially around some of the areas that you focus on, like the checkout process. Back on episode 30 we had Darren on, a core developer on the WooCommerce team. One of the things they are experimenting with, and it sounds like it's in the early stages, is the idea of a Gutenberg- powered checkout process and shopping cart experience. I'm curious if you've heard about that discussed and do you have any initial thoughts on what that could potentially mean for the type of work that you're doing?

Niklas: Yeah. I have not looked into it in detail. The Gutenberg projects so far on WooCommerce have been related to products. But I think that a Gutenberg-based or

-driven checkout page sounds extremely interesting. I think that we as a company need to put more time and thought into the possibilities of developing or doing something around this, even though it's not a polished product idea from WooCommerce yet because I think that this will also create some possibilities when it comes to headless eCommerce from WooCommerce as well. And that is something that is interesting because now there are limitations to that.

Brad: We talk about it on the show, but I think that what really intrigues me about it is, like you mentioned, it's been focused on products and content, which makes sense because at its core the rollout was for posts on your blog. And you could certainly extend it to other types of content. So that makes a lot of sense. But the idea of using Gutenberg with your shopping cart and the checkout process, that kind of user flow of payment takes it away from just being a content editor and starts going towards that bigger vision that I think Matt's laid out of Gutenberg really powering all components of the website, not just content.

I know the vision is to turn it into more of a page builder where you can go in and modify your header, your footer, your sidebars, the more static elements versus just the content. And that speaks directly to the checkout process. So I think any kind of early- on examples of people who are talking about or even potentially working on, such as proof of concepts, I think it's super interesting because it's the next big step in the evolution of Gutenberg in WordPress. So, it's interesting, and I think it would clearly, in this instance, have a big impact on what you're doing. To make sure that what you are building is going to work in that Gutenberg way. I think that's pretty far down the road. I don't think we're talking about this year. Maybe, who knows, but I still think it's pretty far out, but an interesting concept nonetheless,

Niklas: Absolutely. And I think that it will result in a more modular checkout, as well, where we can rearrange, add and remove stuff easier than you can do today.

Brad: It could make for some interesting A/B testing because anyone who owns a store knows that the data and the analytics with just little tweaks and adjustments can have a big impact. But you have to have some way to track that and gauge that and being able to do it in a drag-and-drop Gutenberg style I could see that really ramping up those efforts of A/B testing and data and just trying different things. I know even some of your products are trying to simplify the checkout process, because you wanna make it as easy as possible for someone to give you money. You don't want to have a 15-page checkout process that has all the stuff they don't need, right? Just the bare minimum and pay now. Interesting concept for sure.

Bob: So I'm thinking this would be a great segue into news and announcements because I know that Niklas has something he wanted to bring up, although he probably always dreads bringing up these things. But as I listened to everything he was talking about, in all our experience with payment gateways, I know that security's huge and a big factor. So what's up there, a little bump in the road?

Security Challenges

Niklas: Yeah, exactly. We had a security vulnerability in two of our plugins at Klarna which is our main partner and where we spend most of our time. We had a security breach there in two of the those plugins. We weren't aware or contacted about this until more a week or so ago. And it has been a week of patching this and updating that, releasing new updates so that people can update to new and secure versions. We have been trying to reach out to these store owners to get them to actually update and that's a pretty tricky thing to do when you have your plugins on WordPress.org.

In this case, the vulnerability was not reported to WordPress.org in the beginning but it came in via other channels. I mean it makes it a bit more tricky to try to update first and announce it later. All of the users who are actively using the plugin are actually customers of this company. So they use customer data so they can reach out to them. That is what we have been doing: monitoring closely and looking into getting people to update. It's something we need to improve on and make sure that it doesn't happen again. So it's been quite a stressful week.

Bob: Yeah, I can't imagine trying to reach out to everybody. I know that when this happens, everybody's stressing out and focusing on the vulnerability where what really needs to be done is getting it updated and being done with that.

Brad: Keep it current. Software will never be bug-free, right? There will always be updates, there always has been, there always will be. That's why it's important to have a strategy to keep your plugins, WordPress, and WooCommerce current. There's so many great tools out there to help with that. So you're not just updating on production and crossing your fingers that everything works. Doing it in a dev and staging environment, one click environments, is something a lot of hosts offer now. So there are a lot of ways to do that and test and give yourself that peace of mind especially for eCommerce because, as we all know, just one little bug can stop online orders and you might miss out on a whole weekend or a whole day’s sales before you realize that something’s broke. So make sure you do proper testing. But keeping things updated is so critical, especially for reasons like this.

Bob: So Brad, I know I shared something with you that I'd to have you talk about a little bit.

Google Announces You Can See for Free on Google Shop

Brad: Yeah, Google announced this today. It was breaking news, although this will be a couple days old by the time you hear this. But it's now free to sell or list your products on Google Shopping, which is great. If you go to Google and do the shopping tab and you're not on there, you should get on there, right? You should always try to have the maximum exposure and now they have eliminated their fees, which it sounds like they're rolling out now, and will be fully rolled out in the U.S. this month, and will roll out globally by the end of the year.

But it essentially allows you to list your products on there without any cost. So why wouldn't you? If you're not already on there, maybe it was the fee. Or maybe it wasn’t; maybe you just didn't prioritize it. You should definitely get your products on Google. Their aim is to help small businesses because it’s the only option right now for a lot of companies is to sell their products online, because their stores are closed. So this gives people a little bit more incentive, and hopefully a little bit more help to get their products out there to get some sales rolling in to help keep them through this hard time right now. So kudos to Google. That's a cool move.

WP Feedback Virtual Event

Bob: Cool, all right. I have three quick things. I wanted to mention that there's a WP Feedback Virtual Summit next week online. I'm announcing this one because I'm on it, but also, even though it's not Woo-centric, I think it would be something helpful for any freelancer or agency. You may find something in there that will help you with your own business.

FooEvents’ New Integration with Zoom

Also, one of our sponsors, FooEvents.com, just recently announced a new Zoom integration. I think that was very timely because now if you want to charge for these events you're doing via Zoom, it seamlessly integrates Zoom and WooCommerce so that you can sell tickets. I'll put the link in the show notes but you can also go to FooEvents.com and look on their blog for their announcement as.

New Podcast Do the Woo News

And lastly, yes, I am starting another podcast. Because I'm a sick, demented person and I don't have enough things in my life. It's called Do the Woo News. Every Friday, I write a Woo roundup of news and I'm delivering it in podcast format, too. So it's going to be just another avenue that you can use to get the news. So if you do Woo services and products, when you have a new product or a new service, or something going on Woo related at your business, that's the kind of stuff I put in my post. And that's the kind of stuff that's going to be on the podcast. So essentially, you'll get some free exposure. I'll announce your new product and your service if it's Woo-related. So that's it. That's my announcements.

Brad: You're diversifying the podcast to try to get away from me, Bob.

Bob: Yeah, yeah.

Brad: And diluting me in your podcast network, I see.

Bob: We will still do news here but sometimes I do more smaller things like new products or I'll talk a little bit beyond Woo in the eCommerce space if I come across something. So it'll be a short podcast. There's no room for Brad in it. Although I may have him come in occasionally. And maybe I'll just sometimes say, Hey, I just don't feel like doing it. Brad, you can do the news this week.

Brad: I'll just randomly show up. I'll just call myself Bob and see if anybody notices.

Bob: But will you know the time?

Anyway, so that’s it. I knew this would be interesting talking to Niklas about his unique story of how he has the extension model set up with his business. And like Brad said, we never talked to anybody about that particular model— and the challenges that come with it.

So. Niklas, where can people connect? Where's the best place for them to find you?

Where to Connect with Niklas

Niklas: Yeah, if you can spell my name out I'm on Twitter at @NiklasHogefjord or via our site Krokedil.com.

Bob: Well, I’d like to thank our sponsors again, FooEvents.com., check them out. Like I said, they have a new integration for Zoom you'll definitely want to check into if you're selling tickets online and you're using Zoom and WooCommerce.

And WooCommerce.com, our community sponsor.

Also, WP Security Audit Log. Helping you get those logs in place and know what the heck is going on with your team and your WooCommerce shop.

You can always subscribe to us in your favorite pod app. You can sign up for the Woo News or become a friend. And tune in this Friday for our new podcast if you're interested in little bits and pieces of news in the Woo space.

Thanks, Brad, as always, for joining me and I'll have a special Do the Woo new with Brad just because I know how many people will miss Brad.

And Niklas, thank you for taking the time.

Brad: Yeah, it was great. Thank you.

Niklas: Thank you for having me. It was great to be part of the show.

Bob: Okay, till next week. Do the Woo.