Is Your SaaS Business a Good Fit to Become a Payment Facilitator?
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 the business landscape. All signs point to continued momentum gained in the years to come - especially with new embedded payment models like payment facilitation-as-a-service and payment infrastructure-as-a-service disrupting the market. Flexible technology that enables SaaS companies to fully service and monetize the payments flowing through the software ecosystem. This not only unlocks a new outlet 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 business that propels their growth. Monetization models like these are what powerhouse brands like GoFundMe, AirBnB, Uber and Lyft have used to scale.
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 solution and partner with deep payments and technology expertise will be key to your success.
By becoming a payment facilitator, SaaS companies are able to offer payment processing services to their customer base, otherwise known as 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 embedded payment innovators like Payrix, SaaS platforms can easily submit new clients and gain approval for boarding almost instantly.
Software providers often start out wanting to create their own processes and turn to complex payment facilitation models that require heavy 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 resource limitations and a lack of payments know-how. Let’s take a look at a few of these challenges:
Resources & Labor
Developing and implementing an embedded payments solution requires a considerable amount of resources and labor, as it creates a heavy drain on 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 inherent 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 practitioners who truly understand compliance-related issues in place is critical to financial and reputational risk mitigation.
Becoming a payment facilitator 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 its own, considering you’d be hiring an entire risk and compliance team, as well as a customer support team.
Not only are abundant resources needed to support a payment system, but there’s also 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 challenging and overly complex.
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 your existing customers. Selecting a platform designed for large companies, on the other hand, demands a significant upfront investment. With this, you can easily overextend financially while trying to grow your business.
A Solution to Grow With You
The Payrix Platform was designed with SaaS providers at the top of mind, offering a comprehensive product set to cover you from start to full-scale payment facilitation with a single integration from end-to-end. The Payrix Platform was built in the cloud and designed API-first for greater control and monetization. Whether you are processing 10 transactions or over 10,000,000 transactions a month, embedding Payrix into your platform or mobile app will be seamless with little-to-no interruption in service.
At Payrix, we believe in empowering our clients to focus on what they do best. The platform is highly customizable - enable only what you need and disregard what you don’t. With a dynamic solution like ours in place, you can scale at your own pace without worrying about the ever-evolving needs of your customers.