Exploring the Evolution of PayFac and the “As-a-Service” Approach
Discover powerful insights into the future of payments and gain a deeper understanding of payment facilitation, the future of payments, and how Tilled is revolutionizing the industry for software businesses.
During a recent episode of the PayPod podcast hosted by Jacob Hollabaugh from SoarPay, Caleb Avery, CEO and Founder of Tilled, shared valuable insights on payment facilitation and how businesses, regardless of their size, can benefit from the PayFac model to enhance their payment processing capabilities and create new revenue streams.
The conversation explored everything from the role of PayFacs in the payments chain to advancements in payment facilitation to Tilled’s unique approach as a PayFac-as-a-Service provider – and we’ve got the key takeaways recapped for you. Let’s take a look at those, plus their implications for businesses operating in the payments industry, below:
The Evolution of PayFac in the Digital Space
In today’s rapidly evolving digital landscape, the payments industry has witnessed a remarkable transformation, largely driven by the emergency of Payment Facilitators (or PayFacs for short). During the conversation with Jacob, Caleb highlighted a few distinct “waves” of evolution that have propelled the PayFac model into the limelight. During the conversation, Caleb highlighted a few key waves of evolution that propelled the PayFac model into the spotlight, first taking us back to the days when door-to-door sales and banks’ referral relationships were the primary channels for distributing payment processing services to small and medium-sized businesses (SMBs). However, the rise of major players like Stripe, Square, Braintree, and PayPal, led to a demand for smoother and more seamless transactions and thus, a surge in popularity for the PayFac model.
Yet, it was the rise of vertical-specific software ecosystems that gave the PayFac model true mainstream status. Nowadays, there’s a software solution tailored to just about every industry out there. This shift transformed how people perceived the PayFac model, leading many software companies to begin their payment journey with platforms like Stripe or Braintree for more seamless transactions. However, there are some downsides to those solutions, like lengthy implementation times and limited revenue potential. That’s why forward-thinking alternatives like Tilled have come into the picture, offering more innovative options.
Introducing Tilled: Enabling Monetization for Vertical Software Companies
Caleb’s experience in the payments ecosystem led to the birth of Tilled, driven by the realization that many software companies faced a dilemma: they had substantial payments volume but were not generating revenue from those transactions.. The initial approach involved recommending gateways and referral relationships with ISOs, but this solution often fell short of expectations. Tilled’s concept emerged when a company inquired about becoming a PayFac and subsequently abandoned the idea due to the complexities and costs involved.
So, the question arose: “What if a vertical software company could leverage the benefits of the PayFac model and launch within a week?” While competitors offered white-label solutions, they often required complex processes and large investments. Tilled emerged as a solution, allowing integration within a (now) average of just nine days, and empowering software vendors to enhance revenue streams and provide an exceptional customer experience.
- Benefits and Opportunities with Tilled
The decision to switch to Tilled opens up a world of advantages and opportunities that can significantly impact your business. One major benefit is the potential for substantial revenue growth, with businesses having the chance to double their earnings in a matter of months. However, the benefits extend beyond just financial gains. Tilled empowers businesses to foster stronger customer relationships by providing a seamless payment experience that aligns perfectly with their unique brand identity. With its wide-ranging capabilities, Tilled has become a preferred choice for both software vendors and independent software vendors (ISVs) across various industry verticals. Tilled’s expansion into the ISO ecosystem has also attracted the attention of agents and ISOs, who have been quick to seize the opportunity to directly onboard merchants. - Indicators You’re Ready for Tilled
There are several signs to watch out for that indicate you’re ready for a solution like Tilled. If you find yourself struggling to negotiate with legacy processors or if you’re seeking an improved user experience and advanced technology, considering alternatives such as Tilled becomes increasingly sensible. However, the most significant sign that you’re prepared for the PayFac model is an increase in your processing volume, as scaling payment volumes requires reliable and efficient payment processing solutions. While Tilled initially targeted companies with a minimum processing volume of $50 million, continued efforts to reduce integration time have made it accessible to startups as well. Determining the right time to become a PayFac, on the other hand, can be more complex. Although there is no fixed threshold, businesses with annual revenues exceeding $2 billion generally find it beneficial to explore the PayFac route. However, it’s important to consider factors like control, business valuation, and the willingness to handle additional liabilities and compliance complexities. Transaction volume and revenue margins also play a crucial role in the decision-making process, as they determine the feasibility of adopting a PayFac model for most businesses.
Embracing the Future of Payments
So, what does the future hold for payments? According to Caleb, it’s all about the thriving as-a-service business model. This approach is gaining momentum and is expected to continue flourishing, as it offers cost-effective solutions that empower companies to achieve remarkable things, unlocking new possibilities that were once out of reach.
For those venturing into the payments industry, Caleb stresses the importance of networking and building connections within the payment ecosystem. By establishing those relationships and staying in the loop, aspiring professionals can confidently navigate this ever-evolving landscape and pave their own path to success.
With technology evolving at lightning speed, there’s so much to be excited about when it comes to the future of payments. Stay ahead of the curve with the PayPod podcast by SoarPay. Whether you’re a business owner, payment professional, or simply curious about the future of payments, PayPod is your go-to resource for the latest news, updates, and insights on industry trends, innovations, and exciting opportunities. Join us on this thrilling journey as we explore the ever-evolving landscape of digital payments!
At Tilled, we feel there’s a lot to be excited about when it comes to the future of payments. If you’re a software business owner or know someone who is, we invite you to discover what Tilled can offer! Don’t hesitate to connect with our dedicated sales team here!
