How Can Becoming a Payment Facilitator Improve My Software Product?

Become a payment facilitator and improve the user experience. Focus on improving the user experience and payfac offering, and make money being a payfac. Evaluate different types of the payfac model.

When it comes to running a software company, there’s no questioning the importance of the user experience. If your software is unattractive, difficult to use, or inefficient, customers will know right off the bat. Many software companies struggle to retain customers over long periods of time, but that endeavor is only made more difficult when your user experience is not up to snuff.

For software that enables transactions between parties, becoming a payment facilitator is one major way that you can improve your customer experience. Without the payment facilitator model, parties that connect through your software would have to meet in person or use a third-party application to complete a transaction (Craig’s List and Facebook Marketplace are good examples of this). However, when your software becomes a payment facilitator, users can complete the transaction directly in your application, no third-party required.

Several major companies utilize the payment facilitator model, and that number is growing every day. Many mobile applications, including Uber and Postmates, are payment facilitators, as are companies like PayPal and Square. These companies boast fantastic user experience which is only made better by how easy it is to make payments with them.

In this article, we’ll discuss what a payment facilitator does, how it improves user experience, and how you can turn your software into a payment facilitator.

What is a Payment Facilitator?

As we discussed above, a payment facilitator is a software that facilitates payments between one person or business and another. For example, when you order food on an app like DoorDash, the app facilitates payment between you and the restaurant (with a cut going to the driver and to DoorDash). There’s no need for you to visit the website of the restaurant to complete the payment. You just pay the app, and the app pays the store.

How Do Payment Facilitators Work?

Traditionally, merchants were required to use their own merchant account to process payments. If you were accepting card payments, there was an account attached to your business which was underwritten -- a fancy way of saying backed by -- a bank.

Payment facilitators offer a slight tweak to that model. While the payment facilitator (a.k.a. your software) possesses a traditional merchant account, all sellers on your platform become “sub-merchants” of the master merchant account. Rather than being underwritten by a bank, individual sellers are backed by the software company.

This structure allows payment facilitators to easily manage transactions between outside parties and those on their platform. There’s no need for the software company to bill its sellers at the end of the month, they just take a portion of the transaction as it passes through the master merchant account on its way to the sub-merchant.

How Does the Payment Facilitator Model Improve My Software Product?

There are numerous ways that the payment facilitator model can help improve the user experience of your software product. Here are a few that are worth considering:

  • More control over quality: Because the payment facilitator underwrites the individual sellers itself, they have greater control over the quality of vendors using the software. It’s much easier for you to get rid of fraudulent or low-quality vendors when you can simply stop payments to a sub-merchant account. Uber, for example, doesn’t allow drivers to drop below a 4.6-star rating or they are removed from the platform. Controlling sub-merchant accounts will allow you to easily do the same with your software.
  • A simpler payment process: Have you ever visited an online store and been redirected to another site after putting something in your cart? It’s off-putting and interrupts the immersion of your site. Using a third-party payment option in your software feels just like that. By keeping everything in one place, the customer experience is unified and uninterrupted.
  • The feeling of safety and security: Even if users love your software, they might turn away when they’re forced to check out with some other company. They might wonder if your software is a scam or if they’re paying the right people. It’s a sketchy feeling that no customer likes. Facilitating payments directly in the software helps to avoid that.
  • Customer service all in one place: Customers will inevitably have issues, but you don’t want them to be confused about who’s responsible for what on your platform. As a payment facilitator, you ensure that every piece of the customer journey, from discovery to purchase, is under one roof. They won’t have to contact the seller, then you, then the third-party payments company to figure things out. Instead, you become the one-stop-shop for any questions they have.
  • More billing options available: With complete control over the payments process, you can set up your software for any number of advanced billing options, from recurring transactions to split payments. While this is possible through a third-party, it’s markedly easier to achieve as a payment facilitator. If your software deals in these more complex transactions, you should seriously consider adopting the payment facilitator model.

If you’re interested in turning your software into a payment facilitator, feel free to visit SwipeSum.com. SwipeSum has helped dozens of companies make this transition, and we’d be happy to do the same for you! You can contact us by emailing save@swipesum.com or calling (314) 390-1461.

Zack Hechtman

Zach Hechtman is the former Director of Payment Facilitation Solutions at Swipesum. A rising senior at Washington University in St. Louis, Zach is studying Entrepreneurship and Healthcare Management.

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