You’ve decided that monetizing the payments that flow through your software is the right move, and now it’s time to get started. So, what now? The payments industry is complex and, naturally, most software-as-a-service (SaaS) companies are not experts in its intricacies. Without that expertise, it can feel difficult to get started.
If you’re like the vast majority of SaaS companies, you’re probably looking for the simplest way to tap into payments without having to shift attention from your core development. That is unquestionably the partner-driven reseller option where an established platform handles the technical aspects of payments for you in the background.
In the final part of this series, we explore why that process is so much easier than the alternative, and some of the things you can do today to move closer to the goal of unlocking payments as a new revenue stream.
Registered Payment Provider vs. Payment Platform Reseller
Before we discuss the steps necessary to get into payments as a reseller for a partner platform, let’s talk about the alternate option — becoming a full-fledged payments company like a payment facilitator (PayFac).
Becoming a PayFac is a great option for certain really large SaaS companies. But, for most SaaS developers, the difficult process isn’t worth the slightly higher fees earned on transactions. Here’s a brief outline of what the steps to becoming a PayFac looks like.
Step 1 — Find a Sponsor: PayFacs either need an acquiring bank or a large payment processor to sponsor them. This is necessary to access processing products and to begin the registration process. Because of the risks involved with the PayFac model, finding a sponsor is no trivial task.
Step 2 — Register With the Card Networks: PayFacs must be registered with any card network they plan to accept payments from. At a minimum, that means Visa and Mastercard. Registration is a months-long process that involves providing the networks with an enormous amount of documentation including business plans, financial histories of the company and its principles and more.
Step 3 — Pay the Registration Fees: Each card network charges a $10,000 initial registration fee that must be paid before any transaction processing can happen. They also charge $5,000 per year to maintain registration. That means a minimum of $20,000 upfront and $10,000 per year to work with just Visa and Mastercard.
Step 4 — Build Out a Tech Stack: Being a successful PayFac requires a lot of tech. A new PayFac will need an onboarding system that connects to their sponsor; a system to manage merchant underwriting and due diligence; systems for reporting, managing their commissions, security; and more. It’s important to remember that underwriting, in particular, is crucial to maintaining a secure system and meeting compliance requirements. An ineffective underwriting system or team can have a serious impact on a PayFac’s risk and fraud levels.
Step 5 — Figure Out Risk: A PayFac is responsible for underwriting its own customers. That means assuming all the risks of payment processing. As a result, creating and maintaining extremely well-defined risk management strategies is crucial.
Step 6 — Become Compliant: Everything a PayFac does needs to be fully compliant with the Payment Card Industry Data Security Standard (PCI-DSS). It’s a complex, expensive process that requires specific expertise, which a SaaS company will have to pay to bring in upfront and, ideally, develop internally over time. Becoming PCI-DSS compliant also requires annual audits and penetration testing, a costly and time-consuming endeavor that most payment providers won’t want to deal with each year.
Step 7 — Build a Support System: Banks don’t hold their PayFacs’ hands and guide them (or their merchants) through the growing pains of entering payments. That means new PayFacs need to learn fast and create their own expert support teams to keep merchants up and running.
Getting Started in Saas Payments as a Platform Reseller
Partnering with an embedded payments platform eliminates almost all of the roadblocks mentioned above. The partner platform is responsible for registration, underwriting and risk management. They also handle most of the security and compliance burden. As a reseller, you are only responsible for marketing and selling your payment services to your users — a much simpler task.
That said, if you use a partner, don’t just pick a provider and go. Take your time to evaluate your options by going through the following steps.
Self-Assess Your Needs
First, make sure you understand your SaaS company’s needs. Start by asking yourself the questions outlined in part four of this series to ensure you understand the opportunity, the needs of your users and your company’s capacity to resell payments. You don’t need to be a payments expert, but defining what you want from embedded payments will build a foundation for success.
Create a Short List of Potential Partners
Research the platforms that enable embedded payments and find ones that seem like the best fit. There is no shortage of payment companies, and not all are created equal. Look for qualities like stability, reputation and experience to find a provider who can offer you a frictionless experience that will last.
Evaluate Your Top Choices Based on Priority
The self-assessment phase will give you an idea of what types of payments, add-ons and hardware are most important to your customers. Factor in the features and services and weigh each provider you’re considering against your priorities.
Questions like “Does this provider offer the services my users need?” or “Does this provider have a reputation for top-notch support?” are probably more important than nice-to-haves like “Does this provider offer white labeling?” Although, with the right provider, you can access all of the above.
Ask Each Prospective Partner To Map Out the Integration Process
Talk to the providers who emerge at the top of your weighted evaluation and ask each one to outline their integration and ongoing service processes. Put a high value on things like dedicated integration managers, one-on-one support, available training and materials and anything else that will make integration and adoption by your team and your users seamless.
Unplugging a payment platform from your tech stack can be challenging, which means it’s important to find the right partner the first time. Pay close attention to the service you receive even before you’re signed as a client, as that will give you insight into what the company is like to work with long-term.
Unlock Frictionless Embedded Payments Revenue With NMI
NMI is a full-service embedded payments platform designed to offer SaaS partners and next-gen ISOs all the benefits of monetizing software payments without any of the headaches. Our dedicated team of integration specialists design a rollout process specifically for you to make things as streamlined and frictionless as possible. Plus, our low-code, no-code sandbox developer portal makes it easy to start your integration journey without taking too much time away from core development.
We also offer a complete line of payment services, including add-ons and hardware. That ensures your users always have what they need and you enjoy the widest set of revenue generators possible. Finally, our support team is second to none. We’ll have your back throughout your entire payments journey.
To find out more about how NMI can power your SaaS payments journey, reach out to a member of our team today.
Don’t just turn on payments, transform the way you do business
- Generate New Revenue By adding or expanding payment offerings to your solution, you can start earning higher monthly and transaction-based recurring revenue.
- Offer the Power of Choice Allow merchants to choose from 125+ shopping cart integrations and 200+ processor options to streamline their onboarding.
- Seamless White Labeling Make the platform an extension of your brand by adding your logo, colors and customizing your URL.