In the realm of modern businesses and financial services, PayFac-as-a-Service has come up as one of the best ways to simplify payment processing for businesses. Not only does it make it more convenient for your customers to make payments, but you’ll easily track your revenue and make changes if necessary.
One of the greatest contributions of PFaaS to businesses is revenue monetization. But how does it happen? Here are a couple of ways:
1. Shared revenue
This is the most direct way for businesses that use PFaaS to make money from their payments. When using this method, businesses will have a joint relationship with their payment facilitator (PayFac), and create a plan that allows both parties to make a profit.
One of the greatest benefits of this method is that when you work with established PayFac companies, like Tilled, you can expect to earn a specified share of not less than 30%. This revenue share will be calculated after deducting the interchange costs and the PayFac’s margin.
2. Tiered pricing
Using payment facilitation as a service also makes it possible to enforce tiered pricing. With such a pricing method, you can have custom transaction rates for different types of customers.
This means that you can charge higher fees to customers who are interested in having ancillary features such as the ability to use different payment methods.n However, since some features will directly impact the cost to your business, you will want to establish their profitability before introducing them.
3. Cost plus revenue method
Another way through which PayFac as a Service monetizes payments is through the cost + revenue method. This is quite similar to the shared revenue method in terms of how it works, but there are a few key differences.
While you have to rely on the PayFac provider to process the transaction, each party will determine its margins independently. The PayFac provider will offer you a quote for transaction fees that you can accept or reject depending on the needs of your business.
If you accept the rate, you can upsell the value to your clients to earn a small margin for each transaction that is processed. Compared to the shared revenue plan, this plan subjects you to greater liability. Additionally, it works best only for models that use the standard 2.9% pricing or more.
4. Account and gateway fees
PayFac providers also make money by charging sub-merchant account set-up fees or subscription fees on a monthly or annual basis. These fees are not only meant to increase the provider’s revenue but also to cover the costs of onboarding and supporting new clients.
There are also cases where a PayFac provider can charge gateway fees to their client, to facilitate transmission of payment data securely through their application.
As a merchant, you can become a reseller of PayFac services, offering these services as your own. This works best if you can identify a target market that is willing to put up with a marked-up pricing plan.
A good example would be customers who are in a region where PayFac services are not available, so they are willing to go the extra mile to access hassle-free payment processing services.
There you have it
Now you know the various strategies that PayFac-as-a-Service employs to monetize revenue streams while offering an easy way for businesses to accept payments. Understanding these strategies can make it easier for you to evaluate the benefits and costs of using PayFac-as-a-Sevice so that you can make an informed decision.
At Tilled, we not only offer PayFac-as-a-Service to our customers, but we also devote ourselves to offering unlimited support to our customers. So if you have any questions about PFaaS, contact us today, and we shall gladly help you out.
