A Payment Facilitator or PayFac acts as a the Master Merchant. The Payment Facilitator role is to quickly and easily onboard their sub merchants or SaaS platform users to facilitate credit, debit card and in some case ACH transactions for participants in their payment ecosystem. The Payment Facilitator is responsible for regulatory compliance and has financial risk of their sub-users.
In the past the only Payment Facilitator Provider offering was to become a “True PayFac”. Becoming a true Payment Facilitator is expensive, time consuming and requires staffing to meet compliance and risk mitigation demands. In essence you become a payment business in addition to to your core SaaS offering.
Today technology and regulation changes enable a Hybrid or Managed Payment Facilitation model. In this scenario the SaaS platform looking to gain the benefits of being a Payment Facilitator [fast onboarding, revenue generation, more control of payments process] can take advantage of the PayFac benefits without incurring much of the costs or significant compliance challenges. We will use an example to illustrate what the Payment Facilitator role is and how the true versus managed roles would vary.
Let’s use an example: A SaaS offers an invoicing solution eg MyBooks. Businesses that want to leverage their invoicing solution complete a simple application and 15 minutes or so later they are approved and set up to accept customer payment. For our example let’s say the business name is “Best Landscapers”.
Note: In this application process we see one of the differences between True PayFac and Managed PayFac. Best Landscapers execute a contract that spells out responsibilities and fees. If MyBooks went the True PayFac route the customer contracts with MyBooks. If MyBooks was a Managed PayFac they are a sub PayFac of another registered PayFac. In essence they are leveraging all the compliance and tech resources the Master Payment Facilitator already has in place. If MyBooks elects the Managed Payment Facilitator route then the customer will see reference to the Master Payment Facilitator in the sign-up phase.
Let’s say they send an invoice to Suzy Jones for $100. She pays online via credit card [ACH is possible in some solutions].
- The business receives customer payment less the fees charge by the Payment Facilitator. Often this is in the 2.9% and 30 cent range so the deposit would be for $96.80
- On her credit card statement:
- If a True Payment Facilitator Suzy Jones sees MBS* Best Landscapers [MBS is abbreviation for MyBooks]
- If My Books acts as sub Payment Facilitator then Master PayFac abbreviation appears before Best landscapers.
In both True and Managed Payment Facilitator models there is a revenue stream generated for every payment transaction. Typically the True Payment Facilitator model offers greater revenue potential but is often not the case. Much depends on the SaaS offering and a-perceived risk b-overall payments volume.
If your app has a low risk high potential $ processing volume you tend to have negotiating power and the revenue generation potential tends to be about equal.
Becoming a Payment Facilitator or PSP [Payment Service Provider] is often a great fit for SaaS platforms that offer a payment processing solution.
But where do you find a Payment Facilitator Provider?
Initially Vantiv was the only choice and required that you become a true Payment Facilitator. As technology and regulations have evolved the Managed Payment Facilitator option has become available. There are now several acquiring banks that offer the ability to to leverage PayFac like capabilities without the massive time and $ investments. These include TSYS | Wells Fargo and PaySafe.
In summary Payment Facilitation isn’t for everyone but that’s not what is important. The question is “Is it right for you”?
That’s a question best answered by having a conversation with you guessed it: Agile Payments. Our strength is creating partnerships that help your business be more profitable.
Contact us today