Payment Facilitation: Finding the Perfect Fit

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Over a decades-long digital transformation, the concept of doing business has changed dramatically. The traditional retail landscape of brick-and-mortar and cash-based businesses has been impacted by the tech industry’s relentless efforts to innovate and scale. 

Since the inception of Web 2.0 in 2004, Software-as-a-Service (SaaS) providers have fueled the movement to redefine the business landscape. All signs point to its future momentum — especially with today’s market-disrupting embedded payment models like payment facilitation-as-a-service and payment infrastructure-as-a-service

Flexible technology has enabled SaaS companies to fully service and monetize the payments flowing through their software ecosystem. This technology not only unlocks a new way to generate recurring revenue, it also creates stickier customer relationships, provides deeper financial insights, and allows a software company to go-to-market with a payments solution that fuels their growth. These monetization models are what powerhouse brands like GoFundMe, AirBnB, Uber and Lyft have used to overcome roadblocks and successfully scale.

Naturally, other SaaS companies don’t want to miss out. They realize that they’re at a tipping point of harnessing the possibilities of payments, yet they must first understand the opportunities and challenges that each payment solution offers before choosing the one that’s right for them — and what moving forward with a payments partner actually looks like. This is where a partner with deep payments and technology expertise — along with a scalable, dynamic solution — can be key to their success. 

Ok, So What Is A PayFac?

One current popular solution is the idea of becoming a payfac (payment facilitator). This solution promises payments revenue and greater control of the customer experience — but what is it exactly, and is it the right fit for your unique SaaS model?

By becoming a payment facilitator, SaaS companies can offer payment processing services to their customers, also known as merchants. For example, a payment facilitator solution for a SaaS platform that caters to childcare center management serves all aspects of running and operating a childcare center — from managing parent/student information (CRM), to scheduling, payments and more. The SaaS platform operates as a master merchant so that new childcare centers can sign-up, add their banking information, and be ready to do business in a matter of minutes.

Applying to open a merchant account has historically required an in-depth and lengthy process which could take days, even weeks, to get a customer on a specific platform up and running to accept payments. With the help of embedded payments innovators like Payrix, SaaS platforms can submit new clients and gain approval for boarding almost instantly.

Fact: You Don’t Have to be a Payment Facilitator

Software providers, attracted by the promise of new revenue, often start out eager to create their own payment processes. They may not realize all of the available payment solutions, so they immediately turn to complex payment facilitation models, without understanding the heavy development, significant risk and high costs involved. This can be a slippery slope for SaaS providers — especially those with limited resources and limited payments know-how. 

Let’s take a look at a few of these challenges:

Drain on the Bottom Line

Developing and implementing an embedded payments solution requires considerable resources and labor, which can create a heavy drain on developers and the overall bottom line. Building a complete system is a lot like assembling a piece of furniture from Ikea — it’s time-consuming, takes a lot of effort and you often won’t realize you missed a step until it’s too late to recover.

Significant Risk

There’s no denying the inherent risk in becoming a payment facilitator. Complex payments combined with the ever-evolving fraudster landscape makes hiring an in-house risk team not only a best practice, but essential. Having practitioners who truly understand compliance-related issues is critical to financial and reputational risk mitigation.

High Cost

Becoming a payment facilitator is expensive — hard costs beyond headcount can start at upwards of six-figures, and in some cases even more. Staffing teams to support payments operations is a major investment on its own, considering the need for entire risk, compliance, and customer support teams. 

Solutions That Don’t Scale 

Not only are abundant resources needed to support a payment system, but there’s also a chance that the solution isn’t equipped to scale with your business. SaaS providers can beta a small segment — known as “proof of concept” clients — before investing in new products to enhance their platform. The challenge with this type of “growth” model is that it makes scaling a payments segment challenging and complex.

Most SaaS businesses start with payment platforms that cater to smaller companies, then transition to a new one when they’re ready to scale up. This transition, however, can  often duplicate efforts and cause unnecessary friction for your existing customers. Selecting a platform designed for large companies, on the other hand, demands a significant upfront investment that can cause you to overextend financially, while you’re trying to grow your business.

Payrix: Designed For Growth 

Payrix was designed with SaaS providers in mind, offering a flexible, comprehensive platform designed to cover you from start to full-scale payment facilitation with a single end-to-end solution. Our API-first platform was built in the cloud and designed for greater control and monetization. Whether you’re processing 10 or 10,000,000 transactions a month, embedding Payrix into your platform or mobile app will be a seamless experience, with little-to-no interruption in service.

Because we believe in meeting clients where they are in their payments journey, we offer tailored solutions that empower you to focus on what you do best — and stress less about payments. Our customizable platform is a simplified yet dynamic solution that provides only what you need, when you need it, allowing you to scale at your own pace — while still meeting the ever-evolving needs of your customers.

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