By: Blake Rouse at Cardknox
Becoming a full-fledged payment facilitator (PayFac) can be a long and arduous process. It often requires a lengthy underwriting process, extensive paperwork, and multi-million-dollar upfront investments to build the necessary infrastructure. While ultimately this process may pay off for larger corporations, it can still take years for them to see any ROI. For smaller companies, this task is often insurmountable.
By teaming up with a partner who can help them bypass the traditional application process, ISVs and VARs stand to gain all of the benefits that come with the traditional PayFac solution—namely, unlocking an additional revenue stream through their payment processing revenue—without the risky start-up investments. Bearing this in mind, it’s no wonder that the PayFac-as-a-Service (PFaaS) model is becoming more and more popular.
The PFaaS model, also known as a managed PayFac, is taking the payments industry by storm. But what exactly do ISVs and VARs—whether in retail, hospitality, grocery, or related verticals—stand to gain? Read on to learn about the specific benefits that PFaaS can offer these types of businesses.
Rapid Time to Market
PFaaS is a plug-and-play solution, which means that it offers the same benefits as a traditional PayFac, just with less upfront investment and a reduced burden of risk. This model equips ISVs and VARs with all the necessary infrastructure—including robust software and APIs, as well as end-to-end compliance and risk monitoring—to get up and running in a matter of months, instead of years. No need to build teams (or technology) from the ground up!
End-to-End Control Over the User Experience
When they sign up with a PFaaS provider, ISVs and VARs gain full control over the user experience. Their merchants benefit from expedited onboarding, meaning they can start processing transactions as soon as possible, without any of the usual red tape. The vendor or reseller can also enable instant account approvals (removing the need for a manual underwriting process!) and implement frictionless checkouts across in-store, online, and mobile channels.
Centralized Merchant Management
Along the same lines, the right PFaaS solution allows businesses to manage all of their merchants from a singular digital hub. Whether it’s organizing leads, generating support tickets, or handling disbursements, all merchant management should be housed in the same online portal.
At the end of the day, the decision to become a PayFac or implement a PFaaS solution is based on the desire to increase revenue potential. Since revenue share is based on the difference between costs and the platform sell rate, this means that for businesses that are behind on the transition to embedded payments, there’s always money left on the table. The good news? After integrating a PFaaS solution (or leveraging an existing integration), ISVs and VARs will enjoy a new income stream through their payment processing revenue, which can also increase their company’s valuation overall.
The right payment provider will be able to offer a PFaaS solution with hassle-free, easily customizable integrations. They’ll offer powerful APIs and SDKs, easy-to-use plugins for popular software, and emulators for third-party gateways.
Lower Operational Costs
Lower operational costs pave the way for long-term scalability. Make sure your PFaaS provider offers in-house developer support, so that you don’t have to hire or source additional technical expertise from a third party. This will help keep your overhead low and your profit margins healthy.
Mitigated Risk and Liability
One of the most notable distinctions between becoming a traditional PayFac and implementing a modern PFaaS solution is the amount of risk you have to take on. Risk management often involves an enormous amount of resources—in terms of both time and money—and is an insurmountable hurdle for some companies. Fortunately, in the PFaaS model, the payment provider shoulders a lot of the payment processing risk, mitigating this burden for the ISVs and VARs.
With its ability to optimize the user experience, PFaaS poses an incredible opportunity for those looking to start monetizing with payments. By tapping into this modern processing model, you can create brand interactions that drive loyalty and engagement—and supercharge your profits at the same time.