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Managed Payment Facilitation : What is it and is it right for your SaaS?

Sep 3, 2019 7:50:06 AM

Managed Payment Facilitation : What is it and is it right for your SaaS

Payment Facilitation refers allows a platform to act as a master merchant. Typically a SaaS platform is able to board their user base instantly and with fairly basic user information.Managed Payment Facilitation

The platform has been registered with MasterCard and Visa as a Payment Facilitator (link) and has also been carefully vetted to ensure both compliance with regulatory oversight and to minimize risk exposure (LINK) to the PayFac sponsor. This sponsor offer the framework to manage the payment acceptance, reconciliation and funding.

Vantiv [now WorldPay] was the first Payment Facilitation service provider. The only way to become a true Payment Facilitator was to spend 4-6+ months integrating and go through a very extensive underwriting process to mitigate Vantiv’s risk exposure.

Although this solution worked well for many platforms the costs and demands of being a true Payment Facilitator left smaller and mid-size software providers without the Payment Facilitation option.

As is often the case the market need for platforms to onboard sub merchants instantly has led to a new version of Payment Facilitation that we have named Managed Payment Facilitation.

So what is Managed Payment Facilitation?

Managed Payment Facilitation allows a platform to leverage the two primary advantages of Payment Facilitation without spending a fortune, taking 6 months to launch or incurring the risk and compliance burdens found in true Payment Facilitation.

The primary driver and absolute must have to consider a Payment Facilitation model is:

The need for Instant Boarding

There are certain applications whose model is built on frictionless platform boarding. Property management software, invoicing, marketplace offerings all might base there offering on “sign up now and collect payments instantly”. [Image]

If this instant onboarding is not absolutely vital then Payment Facilitation is simply not the best option for you. Check out Payment Partnerships [link].

The second attractive benefit of acting as a Managed Payment Facilitator is revenue generation.

There will typically be margin between what the actual cost to process payments is eg 2.2% and what your platform will charge eg 2.9%.

Depending on your Managed Payment Facilitation partner you could receive a revenue share of the margin or a buy rate [you receive all the revenue above a certain percentage.

We speak with many platforms interested in Managed Payment Facilitation. Some of them are smaller or in start-up phase. They see Stripe charging 2.9% and believe they can do the same and make tons of money on payments.

What must be understood is that your Managed Payment Facilitation partner has invested a tremendous amount of money and time in building their product. There must be ROI for them in allowing your platform to leverage Payment Facilitation. An expectation of a very high revenue share or very low buy rate with little to no aggregate monthly volume is somewhat naive.

As your volume grows your ability to leverage more margin grows as well. With significant volume you can make similar or in some cases better margin than a true Payment Facilitator.

What is absolutely true is that it makes sense to have a conversation around your goals and needs to find a partner that best fits. That is our specialty. Contact us today.

Wayne Akey
Written by Wayne Akey

Wayne Akey works collaboratively with SAAS providers whose clients have recurring billing needs to create innovative payment solutions and new revenue streams. He has partnered with dozens of software providers to create integrated payment solutions that solve recurring billing problems and generate significant recurring revenue. He has experience in: ACH Processing | Payment Partnerships | Payment Gateway Integration | Credit Card Decline Mitigation | Payment Aggregation. Wayne is the author of “Explode SAAS Revenue by 84%: A Guide to Geometric Growth using Integrated Payment Processing”. To learn how your software application can become a billing solution for your users as well as generate additional revenue streams, contact Wayne today at wakey@agilepayments.com. We guarantee you will learn how to improve revenue per client by at least 10% or we will donate $500 to the charity of your choice.

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