photo of Caleb Avery

Payment facilitation options for B2B software companies

Have you ever heard of PayPal? That’s a silly question, because if you’ve been alive in the last 30 years, of course you’ve heard of PayPal. You’ve likely had an account for years, if not decades. What you might not know however, is that PayPal is often called the originator of Payment Facilitation, sparking a movement towards making credit card processing easier for everyone from Fortune 500 corporations to individual Etsy (or Ebay) sellers.

A payment facilitator, or PayFac, like PayPal, and now Stripe, Square and Braintree, have done away with the traditional hurdles associated with credit card processing. Paper applications, manual reviews and underwriting processes that could take days or weeks have been streamlined into instant approvals, with businesses able to set up accounts and start processing payments within minutes.

For modern software companies, the appeal of payment facilitation is obvious. Instant onboarding for their merchants with a streamlined and frictionless process not only fits with your ideal product experience, but also allows you to add value for your customers. And when deciding to leverage the benefits of Payment Facilitation, you effectively have three choices.

Managed Payment Facilitation Providers

Many new businesses initially start down the payment facilitation path with a managed PayFac provider like Stripe, Square or Braintree. Especially for businesses with low to zero payments volume, managed PayFac providers supply the streamless and frictionless service you are looking for, with no upfront investments or operational burdens.

And while that may sound great, it does come at a cost. For all of their benefits to your customers, managed PayFac providers offer next to no benefits to your business, taking all the margin on processing fees for their own profit. While this might work for a while, as your business grows you will quickly see that passed-through profit as a lost opportunity. When that happens, you have two options left.

PayFac-in-a-Box

In the last few years, the concept of “PayFac-in-a-Box” has emerged as a path for B2B software companies to become registered payment facilitation providers for less time and money than it would take for them to do it on their own. Where becoming a PayFac could take as long as two years and cost millions of dollars to accomplish without help, these PayFac-in-a-Box providers offer the support and tools that could help you navigate the process in as little as six months and cost a few hundred thousand dollars.

In order to accomplish this, PayFac-in-a-Box companies will offer you software and systems for underwriting management, fraud detection and settlement processing. They will also offer consulting services, guiding you through the process of registering with a bank, becoming PCI compliant and setting up your internal systems, processes, and personell.

But these services do come at a cost, with SaaS fees averaging $10,000 per Month. And while companies like Finix and Infinicept offer the infrastructure to help you become a PayFac, you’ll still be responsible for the day to day operations.

Even with a shorter timeline, you can count on at least six months of your team’s time and effort in development, negotiation and compliance in order to become a PayFac through the PayFac-in-a-Box process. You’ll need to bring payments expertise in-house and hire the experts necessary not only to get you approved, but also to run your programs and systems once you are live. As a PayFac, you’ll take on all the liabilities and risks of operations, including chargeback losses, fraud and compliance obligations.

For many companies, even just the upfront investment is hard to justify. Not only in dollars, but in time and opportunity costs as well. With your development, finance, and even sales and marketing teams distracted as you work through the process, what other features of your product or aspects of your business will be left unattended? And as you prepare and go through the months-long process, will you continue giving away all your revenue to a managed PayFac provider like Stripe? These are hard questions that need answers, and there are no good ones.

PayFac-as-a-Service

The newest option for software companies looking to leverage the benefits of Payment Facilitation for their business is PayFac-as-a-Service. With PayFac-as-a-Service, your company and customers can reap all the benefits of managed PayFac providers, including easy onboarding, instant approvals, no upfront investments of time or money and no extra overhead costs or liabilities, while still allowing you to generate substantial additional payments revenue.

Your PayFac-as-a-Service partner will manage the underwriting process, monitor for fraud, handle daily settlements and take on the liability, while also offering you a competitive revenue share that turns payments into a revenue strategy for your business.

With easy to implement APIs, PayFac-as-a-Service can quickly become a part of your business in days, not weeks or months, and requires no additional staff, consultants or attorney’s fees to get started. In fact, with certain providers, PayFac is as easy as switching just a few lines of code, and can even be turned on and off quickly if you’d like to evaluate the service before committing fully.

With PayFac-as-a-Service, there’s truly no reason not to give it a try. With no fixed fees, no contracts, and no start-up investment necessary, PayFac-as-a-Service can be a true partner in your business, growing and working with you to succeed.


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