Innovation has consistently been one of the biggest driving forces of the economy throughout history. By pushing the envelope of what is possible, what is known and what can be done, business has jumped forward, taking quantum leaps in all areas where there is inefficiency.
A recent leap forward has happened within the realm of payments, with the advent of payment facilitators. These may also be known by other names, such as payment aggregators or Payments APIs. This model has become incredibly popular, especially with tech firms in recent years. Platforms, marketplaces, ISVs, SaaS developers, small business and large enterprises alike are adapting a payment facilitator model.
What are Payment aggregators or payment facilitators, and why are they so popular recently? Payment Facilitators is a merchant service provider that simplifies the boarding and enrollment process. In the software and app development space, becoming a payment facilitator means providing payment processing integrated into the software so customers can now accept payments. The software provider becomes the master merchant, and the customers they board are their sub-merchants. This makes it easy for their customers to manage payments through the platform instead of having to use a 3rd party gateway that can be cumbersome and time-consuming to set-up and manage.
An example of payment facilitation in technology is popular accounting software. Vendors such as FreshBooks and QuickBooks provide small businesses and corporations with accounting tools such as invoicing, bill tracking and expense management. In the past, payment processing was connected via API from third party gateways. Now firms like these have begun adding payment processing into their core features they offer. This means new and existing clients can board seamlessly into their payment processing services and start managing payment transactions, accepting a variety of payments including ACH and alternative payments all integrated in their accounting solution.
This has become incredibly popular for software and technology firms in recent years for many reasons. The main reason is because it simplifies the payment process. No longer is there a need for their customers to go through a third party payment processor that requires the arduous process of filling out long applications and getting bank approvals. Instead, under the payment facilitation model, they can get their customers immediately enrolled and set up to accept payments through their merchant services, so they can begin doing business straight away.
This efficiency is behind the massive growth and popularity of the payment facilitation model in the last five years. Technology savvy business people with a good idea or growing a startup can now go to market faster and easier than traditional payment models of the past.
As the fuel behind the gig economy, payment facilitators are now integrated into many software and platforms in the market including ride-sharing services Uber or Lyft, Upwork, Fiverr, and Etsy. Even crowdfunding services like Kickstarter have grown tremendously by adopting this model into their core software solutions. The wave of tech companies switching to this model is on the rise.
There are, of course, inherent risks that go with implementing this model, which has provided a different set of challenges for companies trying this on their own. Challenges include fraud, legal compliance and regulatory reporting, as well as risk of other financial loss.
Building a payment platform from the ground-up can be a drain on the tight budgets of startups, as well as pulling away engineering talent toward the core mission of the firm. This drain on resources can cost the firm precious time, slowing down time-to-market for a new idea or causing established firms to react slowly to changing market conditions, resulting in them falling behind their competition.
All told, it is often expected that a firm looking to become a payment facilitator could spend $50,000 or more just to launch, which goes toward startup costs and retaining a staff well-educated on the compliance and regulatory needs of the payments industry.
There are a few ways tech companies are implementing payments into their solution, for a fraction of the capital requirements of going solo. The most popular method is to enroll with a handful of payment processing firms that offer hybrid versions of payment aggregation. The drawback for enrolling with these firms is the lack of customization or control of the payment technology. One firm for example offers only a wholesale solution, where tech companies are required to follow strict risk compliance of every new customer that enrolls. While a second option is to go with a firm that only offers limited support from underwriting to client management, forcing tech companies to still make a significant investment in resources and time.
The third option is GlobalOnePay’s Payment Facilitator Connect. It is the only option for payment facilitation that works closely with customers to fully support and customize solutions based on the needs of their business.
The team at GlobalOnePay has designed a fully comprehensive payment facilitator tool that comes in three different customizable and scalable models - Complete, Choice and Control. Each platform comes with our innovative payment technology services including Auto Account Updater, Fraud Security Tools, Tokenization and more.
Startups or firms in the growth stage can begin by using Complete, which offers the lowest levels of risk while also providing the easiest implementation. Complete is an all-in-one payment facilitator solution that performs all the major requirements of payment aggregation so you can focus on building your business. Once you join Complete, we’ll do all the work including full bank sponsorship, legal framework, reporting, automated underwriting and more. Once payments are integrated into the software, clients can be boarded in near-real time, allowing them to start processing within minutes of sign-up. Additionally, you will have access to our robust back-office tools that track every transaction including funding, billing and chargebacks.
The next level, Choice, you are offered a flexibility to choose from the services offered in Complete in an a la carte mix. You will still have the ability to customize the enrollment process as well as access to our robust and intuitive back-end dashboard. However, you will have a share in the underwriting process as well as greater control over funding.
Finally, with Control, you will be responsible for the risk requirements of being a payment facilitator, but you will have the greatest levels of control while using our cutting-edge payment processing tools and services. This includes full liability for underwriting, risk, chargebacks, fraud, security and compliance, including compliance and regulatory reporting. Likewise, you will be responsible for client care. However, you will have customizable control over the enrollment process, terms of service and pricing.
With these three options, Payment Facilitator Connect is the most comprehensive payment facilitator model on the market today. Not only that, it is fully scalable to your needs – Payment Facilitator Connect can scale with you as your business grow, be it 50 payments or 50,000. This is makes it the strongest and most versatile option for firms looking for help entering the payment facilitation payment space.
Contact our team today to find the best way to start integrating payments for your business and give your customers more ways to engage and connect with your brand.
Shannon is currently the SVP Sales and Business Development for GlobalOnePay, a division of Pivotal Payments Inc. His goal is to establish strategic partnerships with sales organizations that specialize in the eCommerce space globally. As commerce shifts online, there is exceptional growth potential that Shannon can help ISVs, SaaS, Marketplaces and platforms tap into, to drive payments into profits.