We’re hearing a lot now about Corona-Free Payments and how the virus is driving consumer behavior to contactless payments via mobile phones, electronic bill payments and ACH.. But this narrative sometimes masks the greater shift taking place in the payments industry among B2B companies.
With so many growth opportunities as B2B transactions move online, payment facilitators (PayFacs) are now competing to integrate with B2B platforms by offering revenue-sharing deals and competitive advantages like cross-border payments, seamless customer onboarding, fraud protection, marketplace payments and B2B invoicing.
If you are a B2B platform, now is the time to partner with a PayFac that meets you and your customers’ needs, allowing you to tap a new revenue stream and provide your clients a better payment product and onboarding experience. But proceed with caution: while the right partner could increase your earnings potential and improve your clients’ experience, the wrong partner could do just the opposite.
Payments and Independent Software Vendors
Over the last few years, businesses of all sizes across various industries have come to enjoy the benefits of cloud computing-enabled management platforms. From healthcare platforms and education platforms serving the largest hospitals to the yoga studio down the street, organizations have used this technology to disrupt business-as-usual by streamlining operations, customer relationship management, accounting, supply chains and more. The glaring exception in this suite of offerings? Almost none of these independent software vendors (ISVs) built platforms that handle payments.
Although payments might seem like an obvious strategic choice for these ISVs as well as B2B firms more broadly, becoming a PayFac themselves would have been an enormous undertaking. For all the revenue available via payments, there are also substantial risks and complications. Offering digital payments to a client requires an intense underwriting process that covers many bases from know-your-customer (KYC) to anti-money laundering (AML) checks. Moreover, should your client default, you as the provider are liable for any transactions. This is why B2B platforms have avoided developing their own payments technologies in the past. Instead, either the platform chose to outsource risk to several third-party payment providers and juggle multiple, often clunky, integrations, or they allowed their customers to choose their own payment solutions off the platform.
A B2B Payments Turning Point
Today, several major B2B platforms have already begun an onerous path into the payments business. Mastercard publishes a list of PayFac companies that now includes several household names, like Shopify, GoFundMe, Klarna, Wix.com and Toast, which have all made the shift to offering their own payments solutions.
What these companies have in common is massive scale, revenue and funding – all essential ingredients to launch in-house PayFac capabilities. But it just doesn’t make sense for many B2B companies to manage their own developer teams, risk managers, product experts, and legal and compliance professionals, in addition to assuming all the risk. Instead, these companies can reap the benefits of incorporating payment processing into their platform without the legal and public relations headaches of trying to do it all on their own by partnering with a payment facilitator.
Similarly, PayFacs have also come to recognize the potential of revenue-sharing partnerships with B2B platforms. The B2B company provides a distribution channel where the PayFac can reach new merchants at scale, and the PayFac provides the technology, shares a cut of processing revenue and assumes the payment risks for the company, including compliance, fraud, chargebacks and so on. Together, the partnering companies share revenue, optimize client experiences and drive sales – all in a mutually beneficial partnership.
How to Get Your B2B Company in the Payments Business
This is the new world of “integrated payments” – PayFac solutions integrated into B2B platforms – and it’s here to stay. Identifying the right partner can help B2B companies maximize both revenue and efficiency in their business.
Many factors play into finding the right fit between a B2B company and PayFac for a successful partnership – industry, location, customer base and average order value, to name a few.
The international nature of your business today, or in the future, should be an important consideration in finding a match. For example, consider a B2B platform with an American client selling $10 million worth of goods and services to customers around the world. If the PayFac processes the company’s overseas payments in the United States, cross-border fees of up to an additional 1% could apply to those sales. If half the sales are international, the business could end up paying an extra $50,000 in avoidable fees. Choosing the right payment partner can help platforms and their customers selling across borders avoid unnecessary cross-border fees and improve authorization rates with localized payment processing.
While some payment solutions cater specifically to B2C, others cater more towards B2B and can better facilitate vital invoicing automation and ACH deposits. Still others support marketplaces, allowing transaction revenue to be split between multiple parties, sometimes in different countries. The key is finding the right match for your business.
B2B companies need to also consider their own business needs. Which payments providers are they using now and are they happy with them? Try to identify the pain points in the payments process and work with a PayFac that can alleviate them, whether it’s slow customer onboarding, missing product features like digital wallets or unnecessary cross-border fees.
Ultimately, B2B companies looking to enter the payments space via partnership need to do their homework on who the best partner really is. Finding the right PayFac for your business impacts your customer satisfaction – and your bottom line.
The Opportunity Is Now
For the industries most impacted by the coronavirus pandemic – like healthcare, education and eCommerce – now is an opportune time to partner with a PayFac to offer electronic payments to help eliminate the cash flow bottleneck of paper processing. As the pandemic wears on and people scramble to get back to work, it is even more essential that they get paid as fast and reliably as possible.
While becoming a PayFac yourself might make sense for some of the largest B2B companies that want to take this on, the better choice for most is to partner with a PayFac like BlueSnap to enjoy a cut of the payments revenue without having to invest in developing the tech yourself or assuming the burden of risk.