Platforms and Payments: How Payment Facilitation as a Service or PayFac as a Service Can Drive Revenue and Acquire New Customers

4 min readFeb 10, 2020

Payment Facilitation as a Service also known as PayFac as a Service helps software platforms easily leverage payment solutions. The platform is able to both monetize payments and onboard new users instantly.

This ability to board customers without forcing them to apply for a traditional merchant account affords friction-free onboarding. If instant onboarding is a must Payment Facilitation and Payfac as a Service in particular, is the solution.

Essentially the platform acts as a master merchant account and is able to set up sub-accounts for end users instantly.

Becoming a Payment Facilitator or PayFac can be a great fit for SaaS platforms that offer a business management app. If there is a payment acceptance need, Payment Facilitation bridges that gap

An example would be a SaaS platform that provides carpet cleaning providers a solution to helps them manage appointments, inventory, driver route mapping, CRM and payments.

The payment collection solution is one part of the software offering. Prospective carpet cleaning users sign up for the platform and as part of that, they provide business info and their bank account data.

PayFac as a Service tends to be the best solution when your ideal client is a smaller business owner that tends to be time and attention challenged.

Usually, they are so busy in their business that they simply don’t have the time or energy to go through paperwork hassle.

THAT is why you offer Payment Facilitation.

In the past, the carpet cleaner would complete a burdensome merchant account application, wait up to a week to be approved, and then be prompted to enter their processing credentials into the SaaS application.

The difference between Traditional Payment Facilitation and PayFac as a Service is that traditional or True Payment Facilitation involved the platform going through an arduous application process. Think of applying for a home mortgage for 20 million $ and then quadruple the hassle.

That process was required to mitigate financial risk as the platform operating as the PayFac is funded the money from sub-merchant processing. If there were instances of fraud or wrongdoing the PayFac platform provider was on the hook for financial loss.

Integrating the payment onboarding and processing solutions as well as risk, payouts, etc was easily a 6+-month process that could easily cost $200k or more. Tack on risk mitigation and customer service staffing needs and it is very easy to see why true Payment Facilitation is only for the big players.

In the last few years, payment providers like FirstData and TSYS have realized there’s a sizable market for Payment Facilitator solutions without all of the expense and hassle.

Enter PayFac as a Service|Payment Facilitation As A Service

In the Payment Facilitation As A Service model, you are in essence a sub-PayFac. So your master, True PayFac assumes all those compliance and regulatory and infrastructure costs.

They have created a platform for you to leverage the payment tools and risk monitoring and allow you to act as a sub Payment Facilitator. They have a lot of insight into your clients and their processing. This level of insight mitigates much of the financial risk alluded to above.

For the vast majority of platforms, it simply makes little sense to become a true Payment Facilitator.

How does the Platform make money from PayFac As A Service?

Revenue is derived from the difference in buy rate from the processing networks and the sell rate charged to the end customer. For example, if a Payment Facilitator knows their true overall cost amounts to 2.4% of processed volume and they sell at 2.9% their margin is .5% of dollars processed. If they process $10,000,000 per day that works out to $50,000 in revenue per day.

You must keep in mind that allowing your platform to leverage Payment Facilitation has hard costs and ongoing costs. Becoming a true Payment Facilitator takes $100k+ initial investment plus ongoing payment costs. True Payment Facilitation ultimately means you are becoming a payments company.

Another Option?

There is another alternative to using Payment Facilitation as a Service, while also still being able to offer fast account set up. There are Third Party Processors with elegant API’s for merchant account onboarding. Some of these providers are moving to auto boarding.

Once your end-user profile is understood the vast majority of applicants are auto-approved. You can have a very similar onboarding experience.

There are still revenue benefits (in many cases greater) without admin burdens. It is unlikely you would be able to provision accounts as quickly as if acting as the PayFac, but this may be the best fit for you. Especially if you want to focus on your core product but realize payments can play an important role in business growth [and revenue generation].

In summary Payment Facilitation As A Service isn’t for everyone but that’s not what is important. The question is “Is it right for you”?