08/18/2022 | Press release | Distributed by Public on 08/18/2022 07:50
Payment facilitation, or "payfac," continues to grow in popularity among software providers and is designed to facilitate payment card acceptance without requiring individual merchants to go through the lengthy process of establishing traditional merchant accounts. Software users can begin accepting payments almost immediately while delivering exceptional customer experiences, and the software providers themselves can scale their business like never before.
Payfac can be attractive to ISVs as it facilitates instant merchant account approvals, also known as frictionless boarding. It eliminates the traditionally long account setup process that requires multiple steps, including a merchant application followed by a risk and underwriting assessment and supporting business documentation amongst other requirements. Additionally, the brand experience with payfac is consistent, as ISVs can white-label the entire payments experience. But traditional payment facilitation is not for everyone, as there are significant limitations and costs are high, making the path to ROI long.
That's where a managed payfac program can make all the difference. With a managed payfac program, software providers receive all the benefits that payment facilitation has to offer without the risks, costs, liabilities, and burdens of the traditional model.
Payment facilitation is designed to enable payment card acceptance without requiring each merchant to go through the process of establishing a traditional merchant account. The program has gained popularity over the past decade or so, as a way for software providers to maintain control of the customer payments experience while also monetizing it.
Software providers that act as payfacs are the established merchant of record with an acquirer and their clients are sub-merchants. They aggregate transactions under a master merchant account and process credit, debit, and other payment types on behalf of sub-merchants. Payfac eliminates the need for a merchant to work with a traditional payment company, since the software provider handles the entire payments lifecycle.
Payment facilitation, although complex, provides several benefits for software providers.
Of course, like many solutions, there are some negatives. Traditional payment facilitation is no different.
To offset these challenges, managed payment facilitation models have emerged that provide software providers with the many benefits of payment facilitation without the pain points. While program specifics vary among payment processors, in many cases, there are no requirements for upfront capital, in-house payments expertise, bank sponsorship, PCI audits, Visa and MasterCard registration, or assumed risk and liability.
Software providers get a more competitive payments program with instant, frictionless merchant onboarding, near-real-time payment acceptance, and a white label solution for a seamless customer experience. For ISVs with a business case for traditional payment facilitation, a managed model is a great place to start. Software providers can gradually take on more in-house responsibility after gathering real-life experience, rather than diving into the payment facilitation deep end, headfirst to sink or swim.
For software providers with the right merchant portfolio, the tools and expertise to support clients' needs as well as meet legal requirements, becoming a payfac may be the right next step. However, for others, a managed payfac program is a better alternative, delivering the perks without the heavy lift. Whichever model fits your business best, look to Paya to deliver a flexible payments partnership that paves the way for growth and profitability while creating exceptional commerce experiences.
Paya understands our clients' business needs in the industries they serve. Our expertise underpins our ability to build and deliver comprehensive payment solutions that enhance customer experiences and outcomes. With more than 25 years of industry experience and 2,000+ industry partners, Paya is the leader in delivering simpler, more efficient, and deeply integrated payment solutions. Learn more about our managed payfac solution and how it can benefit your organization.