With so many growth opportunities as B2B transactions move online, payment facilitators (payfacs) are now competing to embed payments in software platforms by offering revenue-sharing deals and competitive advantages like cross-border payments, seamless customer onboarding, fraud protection, marketplace payments and invoicing.
If you are a software 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 Software Platforms
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 preschool 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 software platforms were built to handle payments.
Although payments might seem like an obvious strategic choice for platforms, starting out by becoming a PayFac themselves would be a considerable undertaking. 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 many platforms have avoided developing their own payments technologies in the past. Instead, either the platforms choose to outsource risk to several third-party payment providers and juggle multiple, often clunky, integrations, or they allow their customers to choose their own payment solutions off the platform.
A B2B Payments Turning Point
Today, several major software platforms have already begun an onerous path into the payments business. Mastercard’s list of registered payfac companies now includes several household names, like Shopify, Klarna, Wix.com and Toast, which all offer their own payment 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 every software platform to jump right in and manage their own developer teams, risk managers, product experts, and legal and compliance professionals. Instead, these companies can start reaping the benefits of embedding payment processing into their platform without 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 software platforms and are offering multiple options to help software platforms join in the payments business. These include embedded payments, payfac-as-a-service and hybrid models. Together, the partnering companies share revenue, optimize client experiences and drive sales.
How to Get Started in the Payments Business
This is the new world of embedded payments – payment capabilities integrated into software platforms – and it’s here to stay. Identifying the right partner can help your platform maximize both revenue and efficiency, while also putting you on the path to become a payfac yourself, if desired.
Many factors play into finding the right fit for a successful partnership – industry, location, customer base and average order value, to name a few.
While some payment solutions cater specifically to B2C, others may focus on B2B and can better facilitate essentials like 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.
Software platforms should 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 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, platforms 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.