PayFac As a Business Model: How Does It Work?

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( — September 26, 2021) —

When it comes to payments, becoming a PayFac change the game. PayFac (or Payment Facilitation) gives platforms the best of both worlds, allowing them to offer lightning-fast and smooth payments onboarding for their customers, while also letting them monetize their payment processing offerings.


Who Could Benefit From PayFac As A Business Model? 


Generally, SaaS providers veer one way or the other when it comes to their payments. In many instances, providers work with an integrated payment gateway, and either partner with a payment provider or let their customers operate a personal “merchant account” through their services. If they work with a partner, it’s this party that onboards the customer, handling payment credentials and passing them to the platform or customer. Naturally, this can be a very lengthy process, taking days at a time in some cases — and what’s even more frustrating is that there may not even be a revenue share in place between the payments provider and the platform. If there isn’t, there really should be. 


Some SaaS providers, on the other hand, integrate a well-known, “Super Payment Facilitator” like Stripe. These facilitators offer quick onboarding, and pretty flashy features and API’s. So what’re the negatives to them? Well, your revenue capabilities when it comes to payments are pretty limited, and you don’t even own the merchant account — the facilitator does. While Stripe can be an easy solution, the fact is that a lot of SaaS providers have grown enough to look elsewhere for better solutions. They just, well, don’t. 


Okay, This Sounds Familiar For My Business. What Are My Options?

If you think, as a SaaS provider, you fall into one of these two camps, you could benefit from exploring PayFac as a business model. In this model, your SaaS platform takes on many of the appearances and functionalities of a payment facilitator, without having to stump up on the exorbitant costs, or needing to deal with huge compliance concerns. 


Operating PayFac as a business model keeps your platform incorporated, and your payment solutions working from inside your platform. Your customers won’t need to be siphoned off to a third party, ruining the experience.


Even more excitingly, SaaS platforms becoming PayFacs create for themselves a brand-new, continuous revenue stream, through their leverage of PayFac as a Service. You’re able to onboard customers instantly, and payment processing can happen pretty much right away. Then, purely as an example of how the revenue stream works: let’s say you offered payments at 2,9%, with a price of $0.30 per transaction. With your Payment Facilitation partner, you have a revenue share agreement, at 60% (again, hypothetically). 


Now let’s say that your payment costs come in at 2.1% and $0.05. You then gain money through a margin share — here, it’s 60% of .8%, with $0.25/transaction. 


To put that into cold, hard cash: doing 500 transactions per month with $100,000 of transaction volume would see you earning $550 monthly — all for doing nothing. In a year, that’s well over $6,000 in passive income. 


The Bottom Line

PayFac as a business model could be a fantastic option for your SaaS platform, creating a source of continuous income and streamlining your processes for yourselves and for your customers. If you’d like to explore how you can incorporate PayFac as a business model with your organization, Agile Payments can help. With almost twenty years of experience, we have the solutions you need.