For the majority of human history, cash transactions were the predominant way to pay for things. And in a sense, that’s still the case — even the primarily digital world of today sees a third of all transactions done in cash.
However, the payments space has been evolving at a rapid pace for the past century — starting with the appearance of credit cards back in the 1950s. And the stellar rise of the Internet in the 1990s has ushered in even bigger changes. The appearance of e-commerce space has resulted in the need for online payment capabilities.
That’s when the first payment facilitation solutions for marketplace payments appeared; as a way to assist small and medium enterprises with the processing of payments from their customers. Before that, the onboarding requirements of banks were made to fit bigger companies — who had the budget, manpower, and logistics to handle the costly and complex setup processes.
But the PayFac model made it easy for businesses that specialized in payments to simplify the process of online payments and provide their services to a wider range of businesses — who, in turn, could focus more intently on the core of their business, and leave the payment processing to the PayFac businesses. In time, these would be known as the first iteration of FinTech companies.
While online payment facilitators have proven to be immensely useful, the current trend (that some people are calling FinTech 2.0) seems to indicate that plenty of vertical SaaS companies are looking to bring payments in-house — forgoing external FinTech companies and handling marketplace payments themselves.
And there are certainly many reasons for doing so — after all, plenty of business owners strive to bring design, marketing, and engineering in-house to create a true vertical environment. So, why would payments be any different?
This is a trend driven by consumers as well, who are appreciating seamless payment experiences more than ever. As a result, providing payments as a service is something that more and more Vertical SaaS are trying to do; with consumers expecting immediate access, same-day disbursements, and an assortment of other customer-oriented benefits.
But the question remains — is this the best course of action? The majority of current market solutions seem to think so, providing the PayFac model adapted to vertical software companies. However, in reality — a large portion of vertical software companies operate on B2B2C models, which is why taking on all of the responsibilities of payment facilitation might be a mistake.
Becoming the merchant-of-record for a huge number of submerchants is the primary thing that a PayFac company does. And doing that as a vertical software company also means dealing with a huge level of risk as the merchant-on-record. Clearly, a hybrid solution that specifically caters to vertical SaaS companies is needed.
That’s exactly what platforms like PayEngine are there for — allowing SaaS companies to provide all of the various payment solutions to their end-users, without having to deal with the expenses, risks, and liabilities of handling the entire PayFac role.
Using a payment gateway akin to PayEngine allows you to get easily integrated payment forms, payment links, and widgets to your own SaaS solution — without having the complexity and liability of being the merchant-of-record or handling disputes, PCI compliance, and an assortment of similar difficulties.
Still, you can own the entire customer payment experience, with flexible API integration and a fully customizable UI — the entire payment process can be as seamlessly blended into your software as you want.