How to Monetize Payment Facilitation
The Payment Facilitation model is a brilliant solution to payment processing challenges in business, especially if you are a SaaS provider. With this model, businesses can leverage the expertise of a payment facilitator (PayFac), to provide efficient and secure payment processing solutions that are tailored to their individual needs.
Payment Facilitation is becoming increasingly popular among businesses because it offers many advantages over traditional merchant accounts. With this model, businesses are not only able to reduce costs by eliminating the need to set up a merchant account. They can also increase their margins a little bit, thanks to various monetization options.
How can you monetize payment facilitation?
There are a number of practical ways to achieve this goal:
1. Through shared revenue
For this option, the PayFac will offer you a certain percentage of the total revenue that they generate from the payment facilitation. This rate will vary depending on various factors such as support requirements, customer base, the volume of payments processed, and more.
Naturally, some PayFacs will also offer lower or higher rates than others, so it’s up to you to decide what you can work with. When you work with a PayFac company like Tilled, you can expect competitive rates that will truly increase your profits.
One of the greatest benefits of working with a pre-existing PayFac is that you can white-label the processing as your own. That way, customers feel connected to your platform.
2. Through a cost-plus revenue plan
This option works based on the cost-plus-revenue approach. The PayFac will have a defined revenue percentage that is summed with the true cost of the facilitation process.
If, for example, the real cost is 2.10%, the PayFac can have a defined 0.30% revenue. Sum both values and you have a total cost of 2.40%. That’s what the PayFac will generate from each payment that they process.
Should your pricing plan surpass the 2.9% and 30 cents, you can have the remaining amount to yourself.
3. By becoming a true PayFac
For the first two options, you are basically a sub-PayFac that operates under a real PayFac. This third option requires you to establish yourself at the primary PayFac.
For this to work, you will require a certain level of technical know-how, as you will need to create your own payment processing platform, acquire licenses and certifications, hire personnel, and more.
Not only will this give you full control over the whole process but it will also bring great advantages such as increased margins and higher customer satisfaction rates.
One thing to keep in mind is that becoming a PayFac is often associated with serious compliance or risk costs. As such, it’s important that you have a sizable revenue base that can support these extra costs.
4. By becoming an independent sales organization (ISO)
If you prefer to have greater control over the customer experience, then this should be the best option for you. For it to work, you will have to team up with a merchant acquirer. This one is different from working with an established PayFac in that you have to co-brand the payment processing services.
Your processing partner will bear all the risks and responsibilities, but they will essentially have quite a large share of the profits. Nonetheless, you will have substantial passive income going into your business, especially if you deal with a huge amount of payments.
The one caveat that you need to bear in mind here is that this option does not work well if you need fast onboarding.
And there you have it!
These are the four most common options for monetizing payment facilitation. Depending on your goals and requirements, any of these can work for you.
Whatever option you choose, make sure to carefully analyze each part of the process so that you can make an educated decision that benefits your business in the long run. With the right plan in place, you can start monetizing your payment facilitation journey in no time. Good luck!