Becoming a Payment Facilitator (PayFac) offers many benefits for your business. It is important to decide if the PayFac model is suited for you, but first, you should understand the truth behind the most common PayFac myths.
- Becoming a Payment Facilitator is without risk
Risk is always present, even when you think it’s not. When you become a PayFac, you are taking on a range of risks, such as merchant underwriting, compliance, fraud, and PCI compliance. You can mitigate some of those risks by monitoring merchant behavior and detecting uncommon patterns.
- Becoming a Payment Facilitator is the only option for monetizing payments
If you want the benefits of becoming a Payment Facilitator but do not want the risk involved, there are other options you can choose from that best suit your business. The first option is a Managed Payment Facilitator. A Managed PayFac allows you to team up with a payment partner and take advantage of a pre-existing PayFac relationship without their requirements for registration. This will also allow you to control the branding, but not have full risk liability. The other option is an ISO (Independent Sales Organization). An ISO allows you to offload all the responsibility and risk to a processing partner while generating passive income, co-branding your processing service and building your portfolio.
- PayFac is a new innovation
Payment Facilitation has been around for many years. Companies like Shopify, MindBody, and Square are all considered Payment Facilitators. Some of these companies have been around for 15 plus years. The industry is continuing to grow and many new PayFac companies will emerge in the coming years.
- Guaranteed profitability from becoming a PayFac
Becoming a PayFac can be very profitable, but there are many upfront and ongoing costs involved in the process. In order to be profitable, you must process a high payments volume often from a large number of clients.
- Any business can become a successful PayFac
How successful you are as a PayFac depends on your customer base, in-house payment knowledge, and your ability to onboard new merchants and manage risk. If your business is already processing a sufficient amount of payments volume, then becoming a PayFac can create a new revenue stream that can boost net revenue by 20%-50%.