Businesses that are Payment Facilitators [Payfacs] are in essence Master Merchants that process credit and debit card transactions for their sub-merchants within their payment application.
These sub merchants/clients skip the traditional merchant account application process, allowing them to enroll and begin accepting customer payments almost inst
antly. This instant onboarding is a HUGE customer acquisition tool and is how companies like Stripe and Square have been able to grow so significantly.
Becoming a true PayFac entails significant financial requirements, compliance obligations and ongoing operational demands. For a thorough overview of these risks/rewards read Payment Aggregation: Is It Right For Me?
For many companies becoming a true PayFac id simply too much: too much time, money, ongoing work and compliance.
A Managed PayFac Solution or Managed Payment Facilitator Solution is a better option
A Managed PayFac Solution offers many of the pros of true aggregation without the significant investments of time and money.
A Managed Payment Facilitator client onboarding simple, provides more ownership of the payment process, and offers a recurring revenue stream from payment fees charged to end users.
The Managed PayFac Solution model doesn’t necessarily mean that your revenue share opportunities will be reduced despite having all the benefits of being an aggregator and few of the drawbacks.
This isn’t always the case.
Many SaaS platforms have an optimal client base from a payment processing standpoint. For example, your client base is all medical offices -- that client base is very low risk, potential high volume business--this means high revenue.
Managed PayFacs are basically sub Payfacs. A true PayFac assumes all those compliance and regulatory and infrastructure costs, and creates a platform for you to leverage these tools and act as a sub PayFac. The true PayFac in this scenario will have a lot of insight into your clients and their processing. thus mitigating much of the risk that Vantiv for example faces after approving a platform to act as a true PayFac.
The question then becomes: “Why go down the true PayFac pathway?”
The The Managed PayFac model does have a downside. In the true PayFac model a client at that medical office sees “My Medical” on their credit card statement. In the hybrid model if your Master PayFac is YourPay for example you would see “YPY* My 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. As the business owner it is up to you determine how important this is to your business.