Payment Facilitation Problems: What you should know about potential funding issues
A Payment Facilitator or PayFac takes on the role of the Master Merchant. Payment Facilitation allows this Master Merchant to quickly and simply enable their platform users to
accept credit, debit card and in some case ACH transactions for participants in their payment ecosystem.
In the past the only Payment Facilitation option was to become a “True PayFac”. This undertaking is expensive, time consuming and requires staffing to meet compliance and risk mitigation demands. In essence you become a payment business in addition to to your core SaaS offering. See below for must haves:
Today technology and regulation changes enable a Hybrid or Managed Payment Facilitation model. In this scenario the SaaS platform looking to gain the benefits of being a Payment Facilitator [fast onboarding, revenue generation, more control of payments process] can take advantage of the PayFac benefits without incurring much of the costs or significant compliance challenges.
In both True and Managed Payment Facilitator models there is a revenue stream generated for every payment transaction. Typically the True Payment Facilitator model offers greater revenue potential but is often not the case. Much depends on the SaaS offering and a-perceived risk b-overall payments volume.
One often overlooked factor in the Managed versus true PayFac comparison surrounds the funding of sub-merchants. To mitigate the risk on non-payment of fees sub merchants are funded sale amounts less processing fees. As an example take a $100 sale with payment costs of 2.9% and .30.
The sub merchant will NOT be funded $100 but $96.80, the $3.20 in fees being held back by the Master merchant or platform.
For some businesses the accounting of this variance is not that important but for others this net funding causes accounting headaches they simply do NOT want.
What does it mean? For SAAS platforms with a client base that will accept the net funding for the convenience of easy onboarding a Managed Payment Facilitation solution can be a great fit but for more mature businesses that may have more strict accounting practices a Payment Processing Partnership may offer the better fit for their SAAS and user base.
In summary your search for a Payment Facilitating Partner should start with a conversation.Our strength is creating partnerships that help your business be more profitable.
That’s a question best answered by having a conversation with you guessed it: Agile Payments. Our strength is creating partnerships that help your business be more profitable.