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A Deeper Look at Payfac-in-a-Box

The payments industry continues to rapidly evolve, creating excitement and also confusion within the payments ecosystem, especially when it comes to facilitating payments through various software platforms and applications. Similar to what Stripe (the San Francisco-based payment processing company) offers for smaller e-commerce merchants, Usio’s Payfac-in-a-Box™ solution is similar to Stripe, yet its purpose is for Enterprise Software applications and systems. PayFac-in-a-Box™ provides software companies just like yours with a full suite of API calls for automated and frictionless onboarding, auth, settle and capture, as well as reporting. It is available in each language so that you and your developers are able to effortlessly copy and paste any code or code segment that is useful to you.

PayFac, which is short for Payment Facilitation, is still a relatively new concept. In short, Payment Facilitation is an operating model that affects the acquiring side of the payment ecosystem. While there are many benefits of integrating to a Payfac, two of the most notable are frictionless onboarding and  risk, liability and costs associated with being your own registered PCI. We know that stepping into a full understanding and utilization of Payment Facilitation can be difficult, and that’s exactly where we step in and help. We essentially offer all of the tools you need in a “box”, so that the end-user merchants of the software system you own can be onboarded in mass and process transactions immediately and securely inside of your software application. We also ensure the development associated with this integration is minimal. Essentially, what has taken us years of time and millions of dollars to develop can be integrated into your software application in a matter of days at effectively no cost (outside of the cost of development).  

What are some of the wins for Software Developers and Merchants when leveraging a PayFac model?

  • Expedites and simplifies the merchant account enrollment process. Literally board hundreds of thousands of sub-merchants at once.
  • Automated risk and underwriting procedures, providing for near real-time acceptance. Merchants can begin processing transactions within seconds.
  • Allows for flexibility on where and how often funds are settled and disbursed to merchants.
  • Allows for both automated posting and reconciliation, as well as analytics.

Sounds pretty simple, right? Anyone who thinks to themselves, “I will just become my own PayFac. Since I develop software, this module should not be that big of a deal, right?” Wrong. So, what are the responsibilities, risks, and costs associated with becoming a payment facilitator like us? Good question!

First, there are underwriting expectations and responsibilities as the gateway. Policies and documentation that explains the due diligence process you go through as a PayFac in underwriting your sub-merchants must be developed. This due diligence may include KYC, AML, Graduation processes, flow of funds schematics validated by third-party opinions that cost tens of thousands of dollars of time, legal and other consultative services and fees.

Secondly, we cover the risks involved in payment processing including fraud loss, chargebacks, and non-payment. Also, we are responsible for all compliance fees. When assuming the title of being a registered Payment Facilitator, many commonly used credit and debit cards, such as VISA, MasterCard, and Discover require level 2 PCI Attestation to be complete, which means tens of thousands of dollars per year in AOC, ROC and vulnerability scanning, not to mention periodic “reviews” which are more like audits from MasterCard and Visa, who separately charges an annual fee of $5K for PayFac registration.

Lastly, we have to deal with certification. Ask any PayFac who has gone through the certification process and they will tell you this is a black hole. The complexities of the processes vary depending on the requirements of your specific industry, tender types, and hardware you are certifying to if you are, or plan to play in, the card present environment. Certification also involved a review of your authorization and settlement process, payment page, ACH/e-check, tokenization, disbursement APIs, reporting and establishing a file connection and more.

As you most likely have gathered, the process and price tag of becoming a PayFac is quite hefty, especially when compared to the ease and simplicity of Payfac-in-a-Box™.

Usio’s easy-to-use and simple suite of APIs is a complete commerce payments toolkit for software developers. We enable all major card types – Visa/MasterCard/Discover/Amex – as well as ACH in one interface! We also have a full electronic bill presentment and payment (EBPP) platform that allows you to pick and choose the functionality you need to build a full circle billing and collections integration.

What is holding you back?  

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