What Could Go Wrong With Payment Facilitation? 

Payfac as a Service

If you’re a SaaS provider, you may already know the potential positives of becoming a Payment Facilitator. And there’s no denying that they’re a pretty attractive option: by integrating payment facilitation with your business, you’re able to completely streamline client onboarding for your customers, as well as creating an entirely new revenue stream that could see your business prosper and grow.

Also, true payment facilitation allows your customers to accept credit and debit cards instantly, also enabling them to circumvent the challenges and issues that come with the traditional merchant application experience – making this option a competitive one. The users’ newly streamlined experience also means that adoption rates and engagement tends to skyrocket, meaning that as the SaaS provider, you’re able to retain customers. All of this, naturally, means more revenue for your business, and ultimately more cash in your pocket.

However, it’s important to consider everything – and before becoming a payment facilitator, it’s vital to consider every option, as well as your business capacity and profile. Although there are huge positive to true payment facilitation, the level of the expense required, your available capital and your user base volumes are all things which you’ll have to consider before taking the plunge, as all of these factors will have an impact on your business’s ability to create and generate profit – whereas Payfac as a Service, on the other hand, could be an option which could help your business thrive without any significant additional risks or burdens.

So, let’s start with the most important question of all…

What Could Go Wrong?

It’s important to remember that payment processing is naturally a risky move – you’re dealing with money, after all. However, generally, risk scope is considered within the traditional merchant dynamic, where risk exposure tends to be smaller.

For example, let’s say that you’re an air conditioning company, that advertises and accepts payments through your website. Let’s say that you installed a new unit in someone’s home, at the cost of $1,500 – but they’re not happy.

What’s the risk here?

Well, if you’re unable to settle the dispute, the homeowner could call their credit card company and initiate a chargeback for the full amount paid. In a case like this, where there’s no documentation and a robust contract present, your company’s merchant account provider would then debit out the fee, with you as a business than having to lose the $1,500 – not an insignificant sum of money.

But what happens, then, if you don’t have the money? Their payment processor must have to take steps, and potentially legal action, to get the money back. And, although their contract with you has legal terms written in, if that payment processor doesn’t have the resources, money, and staff to take action further, they might lose the money instead.

Now, imagine that you’re that payments company.

And now imagine that you have 3,000 users, and every single one of them could be that air conditioning company, ultimately leaving you responsible. Not the ideal situation to be in, is it? Due to them all being subject to customer chargebacks if things go wrong, it’ll ultimately be you as the payment facilitator who is liable for financial responsibility and non-payment.

Now imagine that, again, you’re the payment facilitator, and you’ve unwittingly approved a criminal group to use your payment solutions. This group is pretty sophisticated, and over the space of a fortnight or so, they process $60,000 entirely through stolen credit cards – all of which you, of course, fund.

What happens now? Although you’d likely catch on after some time and disable the account as chargebacks start to roll in, trying to recover the initial chargeback payments that you’re responsible for will be much easier said than done. To add to this, there could even be additional fines applied by Visa or Mastercard, if these companies determined that you weren’t practicing proper diligence around practice, or else lacked the necessary security measures.

What if a sophisticated criminal group is unwittingly approved to use your app’s payment

But, There’s Another Way…

As we can see here, although payment facilitation could be a great choice for certain SaaS providers out there, there are a few pretty significant risks – and could cost you big-time.

However, there’s another option.

With Hybrid Payment Facilitation – also known as Payfac As A Service – you’re able to glean all of the benefits of true payment facilitation without incurring any of the huge problems, consequences, or responsibilities associated with it. Payfac as a Service takes away the majority of administrative burdens, associated risks, and financial consequences, reducing your risk burden (particularly around underwriting and compliance), while simultaneously offering lightning-quick enrollment and easy revenue generation. Sounds good to us.

So, if you’re interested in exploring the possibility of Payfac as a Service for your business, there’s never been a better time to get in touch with Agile Payments. With almost twenty years in the payment integration sector, Agile Payments are well-placed to offer your business the guidance and solution it needs to improve your operations and your revenue stream. Get in touch now.

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