For decades, banks and payment processors have controlled the entire payments ecosystem and captured all of the revenue associated with enabling merchants to accept credit and debit card payments. Now all of that has changed: FinTechs and other companies have developed new models that help businesses better manage their customers’ payment experience and reap the financial benefits of payment processing. Your company has the potential to add revenue by offering “Payments as a Service.”
By becoming a payment facilitator (PayFac), you no longer have to miss out on passive revenue, nor rely on banks, processors and gateways to be the interface for receiving payment from your customers.
Becoming a PayFac gives you more control over the payment experience for customers who use your software. In the past, if merchants using your software wanted to accept credit or debit card payments online or in-person they would have to go find some other 3rd-party processor and apply for a merchant service account. This would typically involve a laborious underwriting process, complex interchange pricing, contractual minimums, reserve requirements, and more. Software integrations were complicated and clunky, may or may not have been brandable, and sometimes even directed consumers to another website entirely.
Deploying a payments facilitation revenue model within your company means your vertical market SaaS business can now offer payments handling services for your customers directly. Instead of referring them out to a 3rd party payment gateway company, you can add to your value proposition by offering simplified, streamlined payment acceptance solutions right out of the box. This would extend your offering through the layers of commerce and help your merchants better connect with their customers.
Examples of companies/industries that are currently deploying a PayFac model:
In a PayFac model, you control the onboarding experience and management of your merchants’ payment processing. Any ACH payments, VISA, Mastercard, and debit card payment processing for your SaaS company would be white labeled and fully integrated into your existing solutions.
This is the cherry on top for your brand consistency. Payment gateways and processors don’t know your customers like you do. You can use the same brand voice within your onboarding and processing, and further build customer trust and loyalty.
Prior to the PayFac model, most vertical SaaS companies had subscriptions and licensing fees as the only options for revenue. Payments monetization now offers the capability to add an additional revenue stream by allowing you to tap into the processing fees that merchants already accept as a cost of doing business.
Part of the “secret sauce” of the PayFac model is that in addition to simplifying and streamlining the merchant onboarding and consumer payment processes, you can earn margin on payments while further helping your merchants by simplifying the payments pricing structure. Under the traditional pricing model, merchants pay a marked-up percentage and fee over the interchange fees charged by banks and card networks like Visa. The end result is a deliberately over-complicated monthly statement that even the most savvy merchants have trouble deciphering. As the processing fees are already deducted from their sales proceeds, most merchants have no choice but to shake their heads and accept it.
In the PayFac model, however, your company controls the pricing model and the rates paid by the merchant. You can set a fixed, easy-to-understand flat rate, set your own margins above interchange, and even control the types of cards your merchants can accept. You can control the reporting your merchants see, and build it into your solution in whatever way best suits your business. Integrating payments is an investment that not only pays for itself and benefits your profit margin, it can demystify the cost of payment acceptance for your merchants as well.
There are several ways your SaaS company could go about monetizing payments, and the truth is that becoming a traditional PayFac is a complicated process. Your company would need to undergo detailed underwriting and meet stringent guidelines. You would then need to perform several integrations with banks and gateways. To top it all off, you would have to sign plenty of agreements with covenants and other requirements. Sounds like a massive headache, right?
There are other solutions that remove some of this burden. Payment management services like Stripe Connect, WePay Express, Finix Payments, Infinicept and others can help you solve some of these challenges. However, some of these still take a majority share of the payments revenue generated from your merchants. And, while they may be convenient, each of those options has a massive, risky cost. As the software provider, you would carry a massive burden of merchant-of-record liability. Also consider that merchant portability rights don’t exist, adding to other limitations.
There is a better way.
It is possible to streamline the entire process for your customers and workforce while staying out of the merchant-of-record liability loop.
PayEngine works exclusively with SaaS companies in vertical markets. We understand the challenges that traditional payment facilitation models present.
Using PayEngine as your white label merchant payments service provider, your SaaS company can have all of the advantages of a conventional PayFac without the headaches of the traditional PayFac model, or the risks and restrictions of other payment management services.
You can earn the added passive revenue from each of your merchants’ payments transactions. You have the power to choose how you add fees and markups that are a match for your pricing strategy. You can control the payments experience for your merchants’ customers and build trust as your familiar brand voice guides them through the payment process.
PayEngine has made it easy for you to say “no, thank you” to extra merchant-of-record liability, and meet compliance requirements with ease. Our modern APIs, embeddable web-components and personalized service will cuts your integration efforts to a fraction of what they would have been in the past - an investment that will more than pay for itself as you facilitate payments for your merchants.
The future of payment processing is vertical payments. When you are ready to learn more and get started with PayEngine, our support and sales team are only a few clicks away.