Payments Models

The backbone of a successful payments strategy is the right payments model. See how the three most common models compare so you can determine which is the right fit for your business.

Talk to an Expert

Payments Model Comparison

When you’re looking to embed payments into your product or software, there are three main options you can choose from.

.

REFERRAL

Learn More

HOW IT WORKS

The software provider sets up a referral agreement with a third party, typically a payment processor, acquiring bank or ISO.

The software provider integrates their technology to a payment gateway so they can send transaction data to the payments system for processing.

The software provider then refers their merchant customers directly to their payments partner for contracting,underwriting, onboarding and transaction settlement.

MERCHANT BOARDING

Can be slow – dependent payments provider’s timeline

LIABILITY

None

OWNERSHIP OF CUSTOMER DATA

None

CONTROL OVER CUSTOMER EXPERIENCE

None

SHARE OF PAYMENTS REVENUE

Lowest

MERCHANT SUPPORT

Disjointed – merchants are referred to third-party provider for any service related to payments on the software platform. The software company has no visibility into payments activity or issues.

AGREEMENTS / CONTRACTS

Between third-party payments provider and customer

PAYFAC-AS-A-SERVICE

(aka Payfac Lite or Managed Payfac)

Learn More

HOW IT WORKS

Third-party payment providers(often Payfacs themselves) offer customized, white-labeled merchant applications and underwriting processes that the software provider can use with their clients. They also offer integrations that enable more streamlined merchant onboarding.

The software provider integrates their technology to a payment gateway to enable transaction processing.

Merchants contract directly with the third parties -not the software provider -for payments. The third parties also manage transaction settlement.

MERCHANT BOARDING

Branded – Faster than referral (with integrations)

LIABILITY

Varies – it is important for software companies to fully understand the treatment of risk and liability the provider is offering.

OWNERSHIP OF CUSTOMER DATA

Varies – can be negotiable

CONTROL OVER CUSTOMER EXPERIENCE

Minimal – mostly related to brand presentation

SHARE OF PAYMENTS REVENUE

Medium

MERCHANT SUPPORT

Varies – dependent on provider

AGREEMENTS / CONTRACTS

Between third-party payments provider and customer

PAYMENT FACILITATOR

(aka Payfac)

Learn More

HOW IT WORKS

As Payfacs, software providers fully facilitate payments on behalf of their individual merchant customers.

They integrate their technology with a payment gateway to enable transaction processing. They control their own merchant application, underwriting and onboarding processes. They also control how their merchants are funded.

Payfacs position themselves as a single point of contact for all of a business’s operational needs, including payments.

MERCHANT BOARDING

Nearly instant – controlled by software provider

LIABILITY

Full – managed with available tools

OWNERSHIP OF CUSTOMER DATA

Full

CONTROL OVER CUSTOMER EXPERIENCE

Full – software provider can tailor underwriting, onboarding and funding processes to industry’s unique needs.

SHARE OF PAYMENTS REVENUE

Full – can be recognized as top-line revenue

MERCHANT SUPPORT

Best – software company manages payments support as part of its platform and has complete visibility into payments activity.

AGREEMENTS / CONTRACTS

Between software company and customer

Get the PDF Version of the Chart

Download