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Is reselling payments and becoming a PayFac right for my SaaS?

Intro

You’re a SaaS platform with merchants, you need payment services to allow those merchants to sell stuff, you have a choice to integrate one or many payment service providers. You think that reselling might be able to increase your revenue and make it simpler/cheaper for your merchants... You’re therefore looking for a ‘PayFac’ solution, of which there an increasing number of options in the market that allow the embedding and reselling of payments. Your SaaS becomes the Payment Facilitator (PayFac).

Shuttle knows many of these providers and SaaS who’ve tried it or done it. We’ve heard from multiple people say —

“It’s the best thing we did”

“It’s the worst thing we did”

... It just depends whether it’s right for you and your merchants.

Why consider it

Get a margin from the transaction and therefore make more revenue per customer (SaaS + Payments business model)

Potentially reduce your merchant’s payment fees

Simplify/reduce your payment integration requirements

Potentially increase customer retention

What type of SaaS does this work well for

SaaS with micro or small merchants

All in one SaaS solutions i.e. all payment channels are covered off in the SaaS - invoicing, online sales, etc

SaaS with merchants that are from one or two countries (since payments are licensed nationally)

SaaS with merchants who sell low risk products

SaaS with merchant who sell products that have low chargebacks, fraud and refunds, because the SaaS might be liable for those

SaaS with a larger team especially customer service reps, since the SaaS company will now be the point of call for all payments related issues and upfront risk processes

What type of SaaS does it not work well for

SaaS who do not cover off all the merchants needs i.e. the merchant receives payments via other channels (since they won’t be able to use your payments service in those channels)

SaaS with mid-market or enterprise, they will get cheaper and better service elsewhere and will not be willing to go through procurement for a new payment service provider

SaaS who’s merchants are higher risk or in certain industries

SaaS who’s merchants who have a lot of fraud or chargebacks

The middle ground

Shopify is probably the best known SaaS when it comes to reselling payments. They used Stripe’s Connect model to do this. When Shopify’s merchant grew in $$ size and they wanted to win larger merchants they realised they had to work with other payment providers. It meant that Shopify ran a hybrid model, reselling Stripe and working with other payment providers to increase customer acquisition and GMV.

It’s right for us, how do we get started?

Find out your Gross Merchant Volume (GMV) per annum

Determine if this model will work for all or some of your merchants

Approach payment providers that offer a PayFac solution with your GMV

Negotiate a buy rate

Ask what liabilities and responsibilities you will need to take on (risk, KYC, PCI compliance)

Decide a pricing strategy to resell to merchants

Equip your team with payments knowledge or employ a payments expert to be on team

Embed the service

Resell the service

What providers offer a PayFac service?

Before we get into the who, let’s talk about the what - the different offerings:

The best buy rates will come from providers that want to pass all the risk, KYC and compliance processes on to you, that will significantly eat into your profits if you’re not setup to handle this with team and processes

Some providers offer a middle ground where you take some risk, but you will still have to board the customer. And very few providers will take the risk and onboard the customers for you but your buy rate will be weaker and at the end of the day once you add your margin in, the payments fees will be comparable to the list price of the payment provider

Adyen, Checkout.com, Global Payments, Stripe , UniPaaS, Worldline, Worldpay

What else could we do?

Resell a gateway, instead of a gateway and merchant account provider, your profits will be smaller but you will be able to work with more customers and reduce your overheads significantly

Do any of the above with Shuttle, to reduce your PCI scope and integration and maintenance burden, Shuttle will provide commission for certain payment providers