Agile Payments Blog

2 min read

PayFac as a Business Model

Sep 7, 2021 3:52:20 PM

PayFac or Payment Facilitation enables software platforms to both brand and monetize payment processing offerings while at the same time offering instant, hassle-free customer payments onboarding.

SaaS providers tend to fall into 2 camps:

1-They have integrated with a payment gateway and either allow their customers to "bring their own merchant account" or partner with a payment provider.  the partner typically onboards the SaaS customer and then must pass payment credentials either to the customer or the platform. This process can take days and sometimes longer and is not the ideal solution, especially for time and attention-challenged businesses. There may or may not be a revenue share between the platform and the payments provider. There most definitely should be. If you are reading this and are not happy with payment revenue contact us! There are definitely situations where this is the best fit. If instant onboarding is not seen as a must the partnership does offer benefits. For more info click payments partnerships. 

2-They have integrated Stripe or a similar "Super Payment Facilitator". Stripe underwrites and approves all merchants they onboard and can do so in minutes. In addition they offer slick API's that make things easy. Downside? 1-No easy way to make revenue from payments and 2-Stripe owns that merchant account, not the SaaS platform. Many SaaS providers have outgrown Stripe-they just aren't aware of the options.

So what is PayFac as a business model?

The SaaS platform acts like Stripe although without all of the compliance and costs associated with being a true Payment Facilitator. The benefits?

1-The platform looks like the payment provider to their client base. There is never a hand-off to a 3rd party, eg Stripe

2-A new, simple ongoing revenue stream. Here is an example: You decide to leverage Payfac as a Service.  Your customers apply on your site and are approved in minutes and able to process payments.

You decide to offer payments at 2.9% and 30 cents per transaction. You have an agreement with your Payment Facilitation partner that spells out rev share. The specifics will vary but let's say you receive 60% above true payments costs. Payment costs can only be estimated and won't be fully known until payments are actually processed. We will use 2.1% and 5 cents as an estimate.

This creates the margin you will share. In this case 60% of .8% and 25 cents per transaction.

If your base did $100,000 in monthly volume and 500 transactions, you would see about $550 per month--100000*.008*.6+500*.25*.6.

So PayFac as a business model can be a great fit for SaaS platforms. Contact us for more info.



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 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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