In today’s digital age, software (SaaS) businesses are constantly exploring new opportunities to expand their services and generate additional revenue streams. One such avenue is becoming a payment facilitator (Payfac), where businesses obtain a special designation in the payments industry giving them more control over their payment operations and better economics in exchange for taking on more responsibility and compliance requirements.
However, the decision to become a payment facilitator is more nuanced and deserves the appropriate context for your business. In this blog, we aim to unravel these myths, shed light on the truth behind them, and share how partnering with a reputable payment facilitator provider can help streamline the journey to becoming a payment facilitator.
Myth 1: Payment Facilitation Will Distract from the Core Business
There’s a prevalent belief that venturing into payment facilitation can divert software businesses from their core focus – and take attention away from resources and the core functions of the company. It is true becoming a Registered Payment Facilitator is indeed a significant amount of effort, and time. The decision to become a registered Payment Facilitator should be carefully weighed depending on numerous factors, however, selecting the right Payment Facilitator provider can allow you to obtain many of the benefits of becoming a PayFac under a Managed PayFac program while maintaining the optionality to graduate into a Registered PayFac when the time is right for your business.
If the context is right for a SaaS platform to become a fully registered payment facilitator, the right Payfac Enabler can make this process easier than ever before. Ultimately, with the right provider, SaaS businesses can focus on their core competencies while expanding their service and product offerings as they will provide a flexible API First Platform that makes integrating simple and can offer both a Managed and Registered program depending on the needs of the Software company.
Myth 2: Payment Facilitation Requires Extensive Resources and Infrastructure
Another misconception about becoming a payment facilitator is the belief that it requires vast resources and extensive infrastructure. It’s crucial to understand that the transition does necessitate certain capabilities, but the magnitude of these requirements largely depends on the intended path taken Managed vs Registered, and the technology provided by the PayFac Enabler.
The truth is, that the scope and complexity of your infrastructure will vary based on your specific business needs, the vertical in which you operate, the size of your customer base, and the volume of transactions you intend to process. The right provider will offer the technology needed for payment facilitation to be incorporated into your existing software platform with relative ease. Additionally, depending on the path taken whether Managed or Registered PayFac the right provider will provide the tooling and infrastructure that can reduce the overall amount of headcount and resources needed and avoid building a payment infrastructure from scratch.
Partnering with a payment facilitator can simplify the transition process. In addition to a Pay Ins gateway for transaction processing the right partner can provide comprehensive Pay Ops tools like merchant onboarding, merchant underwriting, client relationship management, risk monitoring, and a billing engine, which enables software companies to launch with payment facilitation capabilities quickly, securely, and easily. Plus, you’ll still have the ability to own and monitor your payment activities and transactions easily and efficiently all in one place. In turn, this will lessen the demand on your internal resources.
Myth 3: Becoming a Payment Facilitator is Expensive
The perception of high costs often stems from misunderstanding the process involved in becoming a payment facilitator. Becoming a payment facilitator is an investment in your SaaS business’s future growth and sustainability, not just an expense. The costs involved are the groundwork for creating an additional, scalable revenue stream through payment fees. In addition to unlocking new payment revenue, a strong payment partner adds more value for your customers in turn extending customer lifetime value and allowing the software to charge more for their core product.
Integrating with a flexible payment facilitator that can offer software businesses the option of starting with a managed payment facilitator program and grow into a registered payment facilitator program can be more cost-effective and prudent. The right provider can offer solutions tailored to your business needs, eliminating the need for a large team to build your payment infrastructure and helping you optimize your overall investment.
When it comes to your organization’s headcount and resources, partnering with a (Payfac) Enabler alleviates and supports specific areas, including:
- Payment Operations. The right payment facilitator provider can unbundle key Pay Ops capabilities and offer a-la-carte solutions for SaaS businesses such as boarding, underwriting, risk management, and billing tools. This eliminates the need to task engineering teams to build this from the ground up.
- Risk management. By partnering with a payment facilitator that offers best-in-class risk management tools, SaaS businesses are provided with the technology needed to optimize their risk management. Whether working under a managed payment facilitator where you offload risk management to the provider or pursuing a registered payment facilitator you can leverage their technology to not have to scale a large in-house risk team.
- Legal and administrative burden. Under a managed payment facilitator program with a registered payment facilitator provider, SaaS businesses can lean on their provider’s resources and do not have to assume many of the legal and administrative responsibilities that come with becoming their own payment facilitator.
- The need for additional vendors, service providers, and tools integrations. A payment facilitator provider can serve as an orchestration layer offering hundreds of different risk providers, and tools, allowing Software companies to customize their risk solution with a menu of many different back-end providers via one integration and take advantage of simplistic pricing.
While it’s fair to acknowledge that there are costs associated with this move, it’s equally important to understand the potential for a robust return on investment. The McKinsey Global Payments Report cited in their 2023 analysis that the “five-year outlook for payments revenue remains strong, with likely revenue growth anywhere from 6 to 8 percent, and that the market remains on pace to exceed $3 trillion in payments revenue by 2027.”
Bain & Company cites that “by 2026 financial services embedded into software platforms will exceed $7 trillion.”
With all this being said, payments should be seen as a strategic investment that can pave the way for sustainable growth and enhanced profitability. It’s about adopting a forward-thinking approach, balancing the initial costs against the potential for increased revenue, improved customer satisfaction, and long-term savings.
Conclusion
By unraveling these common myths, we hope to inspire software (SaaS) businesses to consider the possibilities and benefits of payment facilitation seriously. Additionally, educating themselves and exploring the option to partner with a reputable payment facilitator and orchestration provider like Payabli can offer the guidance, support, and tools they need to navigate the process more efficiently and confidently.
At Payabli, we help hundreds of software businesses navigate their payment journeys in a way that suits their needs and growth goals.
And when your software business is ready to dive head-first into payment facilitation, we are there to support and provide you with:
- The room for you and your team to focus on your core SaaS products and growth
- A comprehensive payments tech stack, with built-in tools and resources, such as risk monitoring, customer relationship management, and more.
- Cost-effective solutions tailored to your vertical focus and business needs, eliminating the need for additional headcount dedicated to your payment infrastructure.
If you’re interested in speaking with one of our payment experts to learn more about our solutions, contact us here.
Product Leader in Embedded Finance | Experienced Team Builder | Scaled Platform Creator