A Payment Facilitator can be thought of as a Master Merchant that facilitates and processes credit and debit card transactions for their platform users.
Becoming a Hybrid Payment Facilitator or aggregator or payment service provider (PSP) can be particularly attractive to SaaS business service providers.
The road to becoming a True Payment Facilitator is expensive, time consuming and creates financial risk for the platform.Here’s a thorough overview of those risks and rewards.
These prerequisites of true Payment Facilitation or aggregation often weeds out the SaaS provider that does not have the financial resources or isn’t comfortable with the high level of risk exposure. This especially applies to SaaS startups that count on instant customer onboarding and need to remove friction that may discourage Payfac adoption.
Fortunately there are now SaaS Hybrid Payment Facilitation solutions that offer the many benefits of true aggregation without significant investments of time and money.
This means the platform can integrate quickly, offload financial risk and compliance burdens and generate a new payment based revenue stream.
Does that mean there’s no downside?
With the Hybrid model you might think your revenue share opportunities would be reduced-after all you have all the benefits of being an aggregator and few of the drawbacks.
In the Hybrid PayFac model you are in essence a sub Payfac. There is a true PayFac or Payment Facilitator that assumes all those compliance and regulatory and infrastructure costs. They create a platform for you to leverage these tools and act as a sub PayFac. They have a lot of insight into your clients and their processing. This level of insight mitigates much of the risk that Vantiv, for example, faces after approving a platform to act as a true PayFac.
The reality is that many SaaS platforms have a desirable client base from payment processing standpoint. If for example your client base is all medical offices or restaurants that client base is very low risk, potential high volume business-VERY attractive as everyone involved in the payments process makes revenue from those payments.
So if the business opportunity is viewed as very desirable your cost basis may be equal to or better than a true PayFac.
The Hybrid PayFac model does have a downside. When acting as a sub PayFac your end customer might be “ABC Medical”. In the true PayFac model a patient at that medical office sees “ABC Medical” on their credit card statement. In the hybrid model if your Master PayFac is YourPay for example you would see “YPY* ABC Medical” on their statement [descriptor] where YPY* indicates YourPay as master PayFac. This may not be an issue or it may depending on your business model.
Another reason to act as the true PayFac is you own the payment process and that customer. There is no one in between or involved. Certain business may value that especially if there is an exit.
So is Hybrid Payment Facilitation the right fit for you? Why don’t we start with a conversation around your needs. From there we can help you by working together or if we are not the best fit provide some alternatives.
Contact us and let’s explore your options