Build Vs. Buy: Becoming a Payment Facilitator Versus PayFac-as-a-Service

Becoming a payment facilitator is on the minds of many SaaS businesses. Payment facilitation has brought the lucrative strategy of embedded payments to masses of software companies. This innovative merchant services model enables ISVs and other software providers to integrate payments within their platform so that clients can start processing payments.

By adopting the payment facilitator (PayFac) model, ISVs can own — and deliver — a seamless payment experience while earning a reliable revenue stream from processing fees. In fact, research from venture capital firm Andreessen Horowitz found that SaaS businesses who integrate payments can increase per-customer revenue by 2 to 5 times.

This software-led payments model brings many benefits to SaaS merchant clients, as well. By registering as “sub-merchants” under the PayFac’s processing account, merchants are able to bypass the traditionally lengthy and tedious account onboarding process. 

The great news is that businesses today have the flexibility to choose whether to build or buy their payment facilitation technology. Buying the technology usually comes in the form of PayFac-as-a-Service, while a full-fledged PayFac builds its own payment infrastructure. While both models facilitate business growth and provide sleek embedded payment experiences, they differ in terms of their overhead costs and ultimate revenue potential. 

Building a full payment facilitation infrastructure is complex and costly, requiring a full tech stack and in-house payments expertise. Yet when considering the incredible ROI potential of the PayFac model, these upfront costs can make sense for larger SaaS providers that are ready to take on the challenge. 

In contrast, buying a PayFac-as-a-Service (PFaaS) SaaS solution is more straightforward and less expensive. It’s great for businesses that want to hit the ground running, without compromising revenue-earning potential. 

There’s a lot to consider when deciding whether to go the build or buy route. SaaS payfac costs and ROI vary from company to company. The best option for your business is highly dependent on your key business drivers, budget, and merchant portfolio size.

In this white paper, we will closely explore these various factors and guide you through the decision-making process. You’ll learn:

• What is PayFac-as-a-Service versus payment facilitation
• How to become a payment facilitator versus using a PayFac-as-a-Service solution
• How much does it cost to become a PayFac
• The difference in overhead payfac costs and initiatives for each model
• The main pros and cons of building versus buying