March 29, 2021
Written by
James Davis
Written by James Davis
Senior Technical Writer at United Thinkers

Author of the Paylosophy blog, a veteran writer, and a stock analyst with extensive knowledge and experience in the financial services industry that allows me to cover the latest payment industry news, developments, and insights. Read more

Reviewed by
Kathrine Pensatori
Product Specialist at United Thinkers

Product specialist with more than 10 years of experience in the Payment Processing Industry. I help payment facilitators and PSPs solve their various payment processing issues. Read more

PayFac Gateway Integration for a SaaS Platform

Key Takeaways

  • SaaS platform owners, along with independent software vendors and online marketplaces, are prime candidates for becoming payment facilitators due to their established customer bases and inherent ‘know your customer’ logic.
  • SaaS companies can augment their revenue streams by assuming liability for merchant underwriting, enabling them to earn a portion of processing fees without being full-fledged payment processors.
  • Becoming a payment facilitator involves considerable costs, effort, and increased liability, requiring comprehensive involvement in the merchant lifecycle from underwriting to chargeback disputes.
  • For SaaS companies hesitant about the high costs and requirements of becoming full PayFacs, intermediary options like white-label, virtual, or managed PayFac models offer a cost-effective and less labor-intensive alternative.

SaaS platform owners are among top candidates for becoming payment facilitators. Other candidates include independent software vendors, online marketplaces, and franchise owners. All these business models (including SaaS model) have “know your customer” logic. They also have established customer bases. So, they are already on the way to becoming PayFacs.

Now, let us consider the options of SaaS companies that want to participate in electronic payment processing.

SaaS Platform Prospects

A traditional SaaS platform develops and sells payment software products. So, it lives mostly on revenues coming from software licensing and subscription fees.

Presently, SaaS companies can get some additional revenues from transaction processing. For this purpose, they do not have to take MC and Visa interchange fees from card networks. However, a SaaS platform can get its rightful reward if it assumes the liability for merchant underwriting. It does not have to become a payment processor but it can become a PayFac and get its share of processing fees.

Payment Facilitator Model for a SaaS Platform

On the one hand, participation in merchant credit card processing as a PayFac is a lucrative prospect. On the other – the process of becoming a payment facilitator is associated with significant costs, efforts and liability levels. Indeed, as a PayFac, you need to go through various integrations and certifications. Moreover, you become responsible for your sub-merchants’ operations. To be exact, you participate in the whole merchant lifecycle, including:

  1. Underwriting
  2. Onboarding
  3. Sub-merchant funding
  4. Payment settlement
  5. Balance reconciliation
  6. Reporting
  7. Chargeback disputing

If you partner with high risk payment processors (and merchants), then your revenues might get higher. But your risk score gets higher as well.

Intermediary PayFac Options for Saas Companies

Some prospective PayFacs do not have the funds needed to cover the upfront costs, associated with the process. Others are not ready to face the requirements, inherent to PayFac model implementation. However, even for these companies (including SaaS platform owners) some intermediary options are available. These include white-label, virtual, or managed PayFac models.

Another try-it-before-buy it option is integration with a white label PayFac gateway. The key advantages of a white label PayFac gateway solution are as follows.

  1. You get most of the functionality specific to a regular PayFac model.
  2. You boost the image and business reputation of your SaaS company.
  3. Your white label PayFac gateway is your point of connection to the banking system, to Visa/mastercard network.
  4. You save considerable amount of money, because the process is much less costly than a regular PayFac model implementation.

To Summarize

Becoming a PayFac is a labor-intensive and costly process, even for a successful SaaS platform owner. If the costs seem too high and requirements – too hard to comply with, in-between solutions might help. And, white label PayFac gateway partnership is one of such solutions.

United Thinkers, providers of UniPay Gateway technology by will be glad to provide more information. UniPay Gateway white label PayFac gateway solution has already helped many SaaS companies start making money on payment facilitation.

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