3 options for integrating payments, for SaaS platforms
You’ve likely heard, or been told, that payments are the number one future growth opportunity for SaaS companies. They make your customers stick, you get a competitive edge, and you can even use it to drive a whole new revenue stream.
It’s no secret that customers, like yours, are looking for a better way to accept payments, and as their software provider, you’re an ideal candidate to provide one.
So how do you do it?
You’ve likely come across a plethora of forum posts, articles, guides, and endless legislation around becoming your own payment facilitator, and you may be thinking, oh dear.
But it’s important to remember that there’s more than one way to incorporate payment processing into your business. This hasn’t always been the case, but recent developments around incorporating payments are generating great new opportunities for SaaS companies selling to vertical markets. No doubt that’s why you’re reading this.
Thanks to continuous innovation, there are a growing number of options that can enable you to offer (and benefit from) integrated payments. Choosing the right model comes down to your goals and how much you want to take on as a business.
First, let’s define what integrated payments are. Simply put, integrated payments refer to a payments solution that is built (or integrated) into your software. Integrated payments is often the final piece in creating an all-in-one business management solution for your customers, and (bonus!) also adds a new revenue stream to your bottom line.
Which payment processing business model is right for you?
Offering payments as part of your software solution isn’t just reserved for the big guys anymore. Neither is being able to monetise them. Nowadays, there are three primary business models a software company can use to generate revenue from payments.
- Offer integrated payment solutions with full support
- Set up payment facilitation (payfac) as a service
- Become a payfac (a.k.a. payment facilitator)
Here’s more about each model
Integrated solutions work with your existing software, simplifying the payment process by allowing you to accept payments quickly and securely from your customers via BPAY, Visa, Mastercard, American Express, Direct Debit and more. The solutions allow you to have full control of the customer experience, including customisable portals, customer onboarding, underwriting, and comprehensive portfolio management services. The solutions also offer greater peace of mind with full support: from fully managed customer underwriting and risk assessment to billing and funding protection for you and your partners.
This is a newer model that maximises the benefits of both an integrated solution and becoming a payfac. The ability to customise your solution and access a team of in-house experts mean you also mitigate many of the drawbacks of being a registered payfac when you’re not ready.
Payfac as a Service provides the infrastructure and support you need to offer payments to your customers in the form of a fully integrated solution. To your customers, accepting payments is a seamless experience and accessible from within your SaaS platform. It looks like you’re processing their payments, but your partner is absorbing the risks, build-out costs, and complexity of managing payments in-house. Plus, they’re decreasing your time to market.
This model is also inherently flexible, so you can have as much control over onboarding and customer service as you want. Plus, it offers more recurring revenue from a share of payment processing fees compared to integrated solutions.
Ultimately, the right partner will offer a solution that works to your strengths and can be flexible as you scale and grow.
Payfacs are at the opposite end of the spectrum from integrated solutions. Often these are software companies who aspire to become payments companies and want to reap the maximum benefits of embedded payments.
With the payfac business model, your SaaS company establishes a master merchant account through an acquiring bank to process or facilitate payments. Your customers can then set up a sub-merchant account under your master account, making it much easier for them because you’ve done all the heavy lifting with the bank.
You’ve monetised your payments by collecting processing fees, but you’ve also taken on all the risks of becoming a processor, such as underwriting, compliance, investment in new technology, disruptions to your strategic plan, distraction from your core business, and managing the full payments experience.
As of today, software businesses typically become a payfac in one of two ways:
Build it – Requires engineering resources that are experts in payment software development
Buy it – Requires a partner that provides expert guidance on operating a payments business and a complete payment infrastructure as-a-service.
|Integrated Solutions||Payfac as a Service||The Payfac Model|
|Instant account-servicing solution for you and your customers||Path to becoming a full payfac||You become the processor|
|Revenue with full support||Revenue from customisable pricing/processing fees||Maximized revenue potential|
|Fully managed customer underwriting and risk assessment||Partner assumes all of the risk and build-costs associated with processing the payments||Increased risks and costs|
Faster onboarding with full control of customer experience
|Choose your level of control||Responsible for technology infrastructure, underwriting, onboarding, and customer service|
|Customisable portals, customer onboarding, and underwriting||Seamless integration with your SaaS platform|
|Full-suite of payment capabilities||Fast and efficient onboarding|
|Billing and funding protection for you and your partners||Customisable as you grow and scale|
|Decreased time to market|
|Integrated technology solution|