Is Your SaaS Business a Good Fit to Become a Payment Facilitator?
Sergio Medeiros, Director of FinTech Sales, Payrix
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 are becoming a thing of the past, overthrown by the tech industry’s focused efforts to innovate and scale.
Since the beginning of the Web 2.0 era in 2004, Software-as-a-Service (SaaS) providers have fueled the movement to redefine business. All signs point to continued momentum gained in the years to come - especially with new business models like payment facilitation through emerging solutions like Payrix Payments Technology Cloud. Technology that offers software companies the complete infrastructure to control the payments going through their system. This control not only creates a new outlet to generate revenue, it also offers greater control of the user experience, access to data insights and allows a software company to create a payments brand where FinTech innovation can grow.
Developers who specialize in these SaaS models are now at a tipping point to identify the laundry list of issues roadblocking growth, finding payments at the top. Before solving for this, SaaS companies need to understand the options, what challenges to consider, and what the process for moving forward with a partner looks like.
So...WTH is a Payment Facilitator?
Stepping up to the plate and gaining popularity is the idea of becoming a payment facilitator. Sure, this promises payments revenue and greater control of the user experience, but what is payment facilitation and is it a fit for your SaaS model? Great questions indeed - this is where a dynamic payment technology cloud will be key to your strategic growth and the overall success of your business.
In becoming a payment facilitator, SaaS companies are able to offer payment services to their client base, otherwise known as their sub-merchants. As an example, think of a SaaS platform catering to childcare center management. The solution serves all aspects of running and operating a childcare center - from managing parent/student information (CRM), to scheduling, payments and more. A payment facilitator 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 payment facilitation innovators like Payrix, SaaS platforms can easily submit new clients and gain approval for boarding almost instantly. This model is what powerhouse brands like GoFundMe, AirBnB, Uber and Lyft have used to scale.
Software developers often start out wanting to create their own processes and turn to complex payment facilitation models that require heavy app development, come with significant risk and at a high cost. This can be a slippery slope for SaaS providers, who stumble on countless hurdles like resources limitations and a lack of payments expertise. Let me address the top challenges developers face when becoming a payment facilitator:
Resources & Labor
Developing and implementing a payment platform requires a considerable amount of resources and labor, as it creates a heavy drain on the software developers and the company’s overall bottom line. Building a complete system is a lot like assembling a piece of furniture from Ikea - it is time consuming, takes a lot of effort and you often won't realize you missed a step until it’s too late to recover.
There’s no denying the risk that comes with becoming a payment facilitator. The complex payments arena combined with the ever-evolving fraudster landscape makes hiring an in-house risk team not only a best practice, but a requirement. Having people who truly understand compliance-related issues in place is imperative to financial and reputational risk mitigation.
As I’ve hinted, it is a costly undertaking - 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 it’s own, considering you’d be hiring an entire risk and compliance team, as well as customer support team.
Not only are abundant resources needed to support a payment system, there’s a chance the solution isn’t equipped to scale along 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 inherently difficult.
Most SaaS businesses start with payment platforms that cater to smaller companies, then transition to a new one when they're in a position to scale up. This will often duplicate efforts and cause unnecessary friction for existing customers. Selecting a platform that caters to large companies on the other hand, demands a significant upfront investment. With this, you can easily overextend financially while trying to grow the business.
A Solution to Grow With You
The Payrix platform was designed with SaaS at the top of mind, offering 3 different models to cover providers no matter where you are in your payment facilitation journey. Whether processing 10 transactions or over 10,000,000 transactions a month, integrating your web application or mobile app to the robust Payrix API set, the process is simple and seamless with little-to-no service interruption for your clients. The Payrix models span from a fully customizable and low risk, turnkey solution all the way to a full developer portal and code blocks, which alleviate the need for extensive resources needed to enhance your existing SaaS platform.
Payrix believes in letting SaaS businesses focus on what they know best. The platform is fully customizable - enable only what you need and disregard what you don’t. With a dynamic solution in place, you can scale at your own pace without worrying about the ever-changing payments landscape.