Payment Facilitation Evolution
The Origins of Payment Facilitation
Today, the number of consumers using online payments continues to grow. While cash transactions are still the top choice for consumers, taking up nearly 30% of all transactions according to the Federal Reserve, digital payments and mobile transactions are increasing at a lightning-fast rate. Many merchants may not even realize, but they probably accept credit cards through a payment facilitation model.
The Need for Payment Solutions
For many merchants in the 1990s, taking payments could be a tricky operation. Many smaller ventures didn’t have the resources or capabilities to add credit card merchant services. Merchants had to team up with banks which was time-consuming as the application process was long and complex. With the complex application and onerous process Smaller merchants didn’t see the need to accept credit cards.
Software Companies Answer
By the 2000s, some software companies saw an opportunity to add payment processing to their software to help their customers streamline their business management operations. As software providers added payments to their software, they also saw the benefits of another lucrative revenue stream – integrated payments residuals.
As integrated payment industry consolidation took hold in the payments industry, software providers began to see and feel the need to maintain more control over the payments process – but didn’t want to necessarily act as a fully ISO – enter in the demand for payment facilitation.
The Rise of Payment Facilitation
In 2010 MasterCard officially launched a payment facilitation program, Visa shortly followed in 2011. Since 2011, Payment facilitation has continued to grow and to become a popular choice amongst many ISVs.
With this model, Payment Facilitators receive maximum revenue earning potential and are responsible for controlling sales and operations while also assuming all costs, risk and responsibility for the entire payments process.
There is no doubt that payment facilitation gives software providers the control they want over the entire payments process – but it’s not a model that’s necessarily great for everyone. Many integrated payments providers offer payment facilitation alternatives that give software providers the control they want but without the risk and complexity of full-blown facilitation.
Whether you are looking to become a payment facilitator or want to learn about facilitation alternatives, look to Paragon Payment Solutions to tailor a partnership that meets the needs of your business.