In the first episode of PayFAQ: The Embedded Payments Podcast, brought to you Payrix, host Bob Butler sits down with Eric Frazier, Chief Executive Officer of Payrix.
Eric’s background includes a long history of starting and operating payments companies. Eric discusses in detail the three different business models in the vertical SaaS space – referral, payment facilitator (payfac) and payment facilitation as a service.
1. Referral Model
According to Eric, “with the referral model, payments is really integrated into the sales or go-to-market but the ISO or traditional merchant acquirer does all the heavy lifting with regards to payment sales and servicing, and makes most of the money.”
2. Payment Facilitator
Eric describes the payment facilitator model this way, “if you’re a SaaS company, you want to become a payments company. You want to monetize payments. Or if you have been monetizing payments to a small degree, you want to optimize payments. This became popular with the advent of Square.” The appeal of this model is that you can increase revenue and market valuation, but the reality is that you have to build a payments infrastructure. In addition, it needs to be managed and you must be best-in-class when it comes to regulatory risk and compliance management.
3. Payfac as a Service
The third business model is payfac as a service that combines the best of both worlds and is really the sweet spot for most vertical software companies. According to Eric, “Not to talk about Payrix because we’re here today to educate, but the reason we have been having a lot of success in the marketplace is our out-of-the-box functionality, our portal, and all of our customer care tools that really allow our partners to control that customer experience.”
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