How to Become a PayFac
7 Steps to Turn Your Software Company Into a PayFac
You’ve steadily created a great reputation that makes businesses search out your software solution. You’ve partnered with a payments provider to offer clients the ability to process transactions and have drastically grown your payments program — Are you ready to take the leap into becoming a PayFac (payment facilitator)?
Why go PayFac?
A PayFac is a master merchant that deals with the processor and has sub-merchants – customers – underneath. Here are some benefits:
- The ability to set your own fees
- Increased residual income from transactions
- Freedom in underwriting
- Faster merchant onboarding
For a comprehensive list of pros and cons check out this blog post. If the PayFac route still sounds attractive and you are ready to move to the next step, here’s what to do next.
Turning Your PayFac Dreams into Reality
- Find a partner: Partner with a company that can not only help you become a PayFac, but one that can set you up for long-term success.
- Build your base: More customers mean more income, especially where transactions are concerned.
- Understand liability: With huge financial opportunities come great responsibilities. From here on out, fraud and failed payments fall upon you. Take steps to understand the risk and liability that your business will own. (Your payment partner should provide compressive training and support when setting you up as a PayFac.)
- Analyze costs and profits: Becoming a PayFac can be costly and time-consuming. Compare your overall costs with market rates. You can make excellent profit – with enough customers. The question is: Do they process enough transactions to cover costs?
- Create a clear model: Your sponsoring financial institution wants minimal risk. Everything from fraud protection to underwriting must be clearly spelled out. Hiring experienced merchant sales agents and underwriters are key to your success.
- Reach your targets: Provide evidence of your current customer base and transaction volume. With this information your payment partner can help you transition from referral partner to PayFac.
- Set up your software: The final key to success is to find a partner that does not require additional development work to become a Payfac. There is a lot of non-development work that goes into becoming a PayFac, if you work with the right type of partner you should be able to avoid extra development work.
Whether you prefer a referral partnership or a PayFac, look for a partner that has your back. Look or an integrated payments provider that offers flexible scalable payment partnerships and understand that what you want – and what your customers want – varies. Are you ready to explore your end game?
Ready to see our API or open a test account? Looking for more information on our Partner Programs? Are you a merchant with a question? We are here to help!