As a SaaS company, you are consistently looking for ways to drive revenue. One tried and true path is to become a payment facilitator, processing payments on behalf of your clients. While this creates a powerful opportunity for you, you need to know what you are getting into before you start. Learn more below about what to expect when you follow this route.
1. What Exactly Is a Payfac?
A payment facilitator, or payfac, aggregates merchant accounts to process payments on sub-merchant platforms. For a SaaS provider, this means you would approve merchants to whom you sell your software service and provide a payment processing solution on that platform.
2. Up Front Investment
Becoming a payment facilitator is not a simple plug and play operation. You need to invest capital into developing a payment solution into your software offerings. Before you start generating revenue, you must put in the resources to make the processing solution work within your software platform.
3. You Will Take on Risk
When a sub-merchant under you suffers losses through chargebacks or fraud, those losses fall on you. Before you take steps to become a payfac, you need to be ready to not only assume that risk but spread it among enough sub-merchants to keep it under control.
4. Volume Matters
Risk is only one reason you need to have many clients. For you to make your investment worth it, you need a high volume of clients processing payments regularly. The more you can aggregate, the greater your ability to generate profit from this revenue stream.
5. Security Is Critical
When you build your payment solution into your software, you need to ensure you maintain data security. Your sub-merchant, and its customers, depend on a solution that protects their financial information. The payment industry has its own standards that you must be able to meet as a payfac.
6. You Have Much to Learn
Operating as a payfac requires more than coding knowledge. The payment processing industry operates in a rapidly changing regulatory landscape. No matter how much you know about your software solution, you should be prepared to play catch-up on payment knowledge.
7. Partnerships Make All the Difference
With everything you need to be ready to do, working with the right payments partner can give you a tremendous boost. Instead of reinventing the wheel, you can work with someone who has been there and can help you get up and running.
Becoming a payment facilitator requires time, investment, and learning. Prepare yourself for what comes, and work with the right partner to deliver a powerful new revenue stream.