The payments ecosystem is in constant flux. Every day, there seems to be another innovation connecting sellers and buyers in unprecedented ways.
First was the advent of credit cards. Then, the rise of the internet made it possible to buy products/services on eCommerce sites or online marketplaces like Amazon. Now we have more ways to accept and make payments, like buy now pay later programs, digital wallets, text-to-pay, ACH, and so on.
So what's the next wave of innovation that is poised to disrupt the payments landscape and be the next growth lever for technology companies like you?
If your answer is to become a payment facilitator, you're correct.
The payment facilitator model is nothing new. After all, it's been around since the 90s. Yet, it’s the application of this model that presents an opportunity for software companies to develop a true competitive advantage.
Before we get too deep into understanding the why of this model, let's first define it for those who are unfamiliar with this term A payment facilitator, in a nutshell, is a company or entity that holds a payment processing account or the master merchant identification number (MID).
Since the company holds the payment account, it can onboard sub-merchants under its master account, enabling sub-merchants to accept payments under their merchant umbrella. And therein lies the opportunity.
Due to technological advancements, many merchant service providers are realizing the benefits of embedding payment capabilities directly into their platforms. This drives customer stickiness by delivering a more streamlined onboarding and payments experience.
But that’s not all.
Companies can also tap into a new revenue stream by earning a percentage from every transaction that passes through their platforms on top of processing fees and the established sub-merchant pricing.
Earnings from transactions increase as the number of sub-merchant accounts onboarded increases — resulting in top-line revenue growth. And with the added value of a more intuitive and seamless onboarding experience, the platform becomes more valuable to existing and future customers.
Yet to truly understand the value of this model today, it's important to first understand where it all started and why this model is the next payments trend that will change the way businesses like you operate.
If a merchant wanted to start accepting payments, it first had to create a direct partnership with a sponsoring account to obtain a MID. Because of the amount of paperwork involved in obtaining a MID, the process was lengthy and often took days or weeks to complete.
The first wave of innovation changed all that with the introduction of electronic payments, making it easier to buy and sell online. As juggling physical and digital storefronts became more complex, processors moved to develop partnerships with merchant services providers to make it easier for merchants to operate in this new reality.
However, evolving buyer expectations soon ushered in the second wave of payment facilitator innovations with merchant services providers, like accounting software platforms, beginning to realize the benefits of owning the entire customer experience from start to finish. Many started to embed payment capabilities directly within the platform, becoming payment facilitators as a result.
But there’s a caveat. Developing your own infrastructure can be challenging, risky, and costly, which brings us to where we are today: the payment facilitator as a service model or the off-the-shelf payment facilitator solution.
Instead of merchant services providers creating the system from scratch, they can once again partner with a payment processor who has the relationship, PCI compliance, and security features needed to set up their model.
By adopting this new approach, companies like you can accelerate market entry and start benefiting from this model within days.
If the revenue potential is there, and you want to develop deeper relationships with your customers, then becoming a payment facilitator may be the right choice for you. In fact, many software companies, such as eCommerce platforms, business management software, booking platforms, and more, are adopting this model to increase the value of their business.
One way to ensure a successful transition to this model is to work with a payment processor partner, like MerchantE. In doing so, you can white label the product to get set up faster while also enjoying the benefits of providing customers with more payment options, security features, and PCI compliance.
Interested in learning more about MerchantE’s payment facilitator solution? Click through to get a closer look at what you can achieve.