Advice for Software Companies
First and foremost, think about your user experience. Sometimes with referral models that can be really great, and sometimes it can be a bit clunky. But, user experience is the core of everything, right, when you’re putting your software platform hat on. So you really gotta focus there and to help guide your decision, you gotta think about two things: monetization; so like what’s your scale and what makes sense for you to own, in terms of risk: And then also, do you have the knowledge to be able to effectively do this yourself. To stand it up, to own the risk and the liability and effectively manage it. The reality is, back in 2015, there weren’t a whole lot of intermediary steps. PayFac-as-a-service didn’t exist, right? You didn’t have Payrix’s and Stripe’s that were service software platforms. So, the option was referral model, become an ISO, or become a PayFac®. You know, the economics change at every step of that process and for us we wanted to be able to monetize this efficiently. So we chose to become a PayFac® at that time. So, that’s ultimately how we made that decision. I think for people trying to make that decision today, again it all comes back to scale and knowledge and expertise, right? If you don’t have anyone at your company that truly gets payments and has background and history doing it, you may not want to jump straight to being a PayFac®. Take more of a crawl, walk, run, kind of approach. And same thing for the scale, right? If you’re not pumping a lot of money through your system for your customers and your merchants, you’re probably not going to receive much of the benefit of the economies of scale that you can get from being a PayFac® as opposed to using PayFac-as-a-service that now exists today because you really can get pretty good economics on that. You’re not going to light the world on fire by becoming a wholesale PayFac® yourself. You know, the difference there is small so you gotta have a lot of volume for it to really pencil on the math.