Moving your business to a Payment Monetization Model has many benefits, but there are some things you must know before making the transition! It is essential for you to understand your options when assessing which payment model works best for your business. This article will highlight the different models along with the benefits and hurdles you may face when undertaking such an initiative.
Your business can accomplish payment monetization through these three models:
- Independent Sales Organization (ISO)
- Managed Payment Facilitator
- Full Payment Facilitator
Each model varies in complexity and risk versus reward. Depending on the level of risk and operational support and resources your business is willing to dedicate generally dictates which model is best for your business.
- Independent Sales Organization (ISO)
If you’re looking to have more control over the customer’s experience then becoming an Independent Sales organization (ISO) may be right for you, this will also require you to establish a relationship with a merchant acquirer. As an ISO, you would benefit from picking the right processing partner, so you can offload all of the responsibility and risk to your partner who will provide you with a share of the profits for the processing generated by your portfolio. You’ll generate a large amount of passive income volume, be able to co-brand your processing services and build up your portfolio as a strong asset. No need to let other processors make all the money from volume you could be benefiting from. If you are a Software as a Service (SaaS) or Independent Software Vendor (ISV) company and do not require fast onboarding, then your business will benefit from becoming an ISO.
- Managed Payment Facilitator
As a Managed Payment Facilitator, you are taking advantage of pre-existing PayFac partner relationships without the requirements for registration. This will allow you to control the branding, white-label the processing as your own. As a managed PayFac, you will not have the full risk liability, you will not undertake 100% of the underwriting on your own or incur registration. You will also not have the same reporting requirements by the card brands. The control over the flow of funds is somewhat limited to what the partner allows you to do but time to market is considerably accelerated.
- Full Payment Facilitator
The Full Payment Facilitator model takes on more complexity and requires a sponsoring bank, processing partner, and technology partners to facilitate the payment acceptance process. With a high annual payments volume, you would be comfortable taking on the liability and freedom of a full Payment Facilitator solution. You would be in the flow of funds, able to record the revenue of all processing, and be considered the merchant of record as you board your merchants. You are responsible for underwriting and compliance of your portfolio. You would also have full control of the pricing setup, branding, and disbursements of funds. You would be a fully registered PayFac with the card brands. If you are a SaaS/ISV or a Marketplace making more than $50 million per year and are willing to take on risk, then a Full Payment Facilitator model is right for you.