Learn about payments and the payment facilitator model from our team of experts

What SaaS Revenue Leaders Need to Know About Becoming a Payment Facilitator


By Ali Mast, Senior Vice President of Sales, Infinicept

The idea of generating more revenue is important for everyone in a SaaS organization, but if you’re one of the company’s revenue leaders – someone with a title like chief revenue officer or chief sales officer – it’s personal.

You’re probably looking for ways you can hit your revenue goal for YoY growth without doubling sales numbers and cutting territories in half. Those were the things that kept me up at night when I was running the sales team at a growing software company.

I wish I knew then what I know now – that by becoming a payment facilitator, a SaaS company can check all kinds of boxes, not the least of which is generating a new recurring revenue stream. It allows you to gain revenue from each customer who processes payments with you. Would you believe that payments revenue can be 2-3 times SaaS revenue at scale, or even more? Shopify makes 61% of its revenue from payments. Toast makes 93% of its revenue from payments.

Essentially, PFs are companies that bring the payments function in-house. They handle the underwriting and onboarding of their payments customers (called submerchants) and provide them with the technology they need to process payments.

This is not an opportunity you should ignore. Doing so leaves you open to lack of competitive differentiation if your competition offers an embedded payment solution before you do. Just ask Toast’s competitors… what it’s doing to their business?

And by the way, if you don’t think your competition is already doing it, or at least considering it, you’re wrong. The reason is simple: we have all come to expect doing business to be much cleaner than it used to be.

And now companies in your field are out there bringing the payments aspect of their business into the fold as well. They’re making it easy for your customers (or potential customers) to begin to accept payments without having to go through a whole separate process with another vendor. They’re embedding payments into their platform in ways that make it easier for customers to accept payments in the field or help manage their cash flow.

Who do you think those customers are going to choose?

In the SaaS business, we’re always striving for an easy experience and happy customers. Embedded payments are what your customers are seeking, even if they aren’t asking for it yet. And by helping them, you’ll end up with higher user adoption and stickier customers, resulting in a competitive advantage and revenue retention. We’ve seen customers with high churn in their core product cut down their churn dramatically. One customer cut their churn from 3.5% per month to 1.6% when adding payments. Others have lowered churn below 1%. So imagine this. You DOUBLE your revenue per customer (or more) and halve your churn. Sound like a good business decision?

How much recurring revenue can you make, you ask? Great question! This will, of course, vary depending on your pricing and other factors. You can use our ROI calculator to quickly get a sense for the value of payments in your specific situation.

But we can also use a typical, achievable revenue of 3% on your volume as a PF to do a quick back-of-the-envelope calculation. 1% of that is net revenue after direct costs (called interchange).

So, if you have 500 small business customers, each accepting $200,000 per year in payments, you would be able to process $100 million in payments volume through your platform annually. Believe it or not, that would bring in $3 million in payments revenue, and $1 million after interchange.

Since you’ll have a little bit of cost to manage that payments business, you’ll probably end up with $700,000 added to the bottom line. Compare that with $200,000-300,000 in total revenue from a third-party payments company. No wonder they’re so eager for your business – they are keeping the difference for themselves!

It is possible to dip your toe in the payments water without becoming a full PF, giving up revenue in exchange for taking on less of the payments operations and associated risk. Those options can work well for some software companies, particularly smaller ones or those that don’t have a compelling reason to invest in payments at this point in their strategy.

So, are you a good fit for this next step in your journey as a growing SaaS provider? Rapidly growing software companies who are seeing $50 million or more in annual payments volume – or those seeing $100 million if their growth is flatter – often find becoming a PF worth the effort.

If you work with a company like Infinicept to help navigate the compliance and mitigate the risks of becoming a payments company in addition to providing your core SaaS solution, you’ll be a hit with the rest of your C-suite.

You’ll also be a hit with your board and investors. Payment facilitators dramatically boost revenue, increasing their valuations and driving interest and investment opportunity. (At sales multiples accepted for typical payments revenues, PF-generated revenue could provide $20-30 million in valuation.)

But most importantly, you’ll be a hit with your customers. When they are deeply engrained in your embedded payments offering by having your platform automatically bill end users and handle payments, the concept of leaving or switching to another competitive provider becomes painful. Your revenue retention will soar, and your customers will thank you.



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