Five pitfalls to avoid when choosing a PFaaS provider
Five pitfalls to avoid when choosing a PFaaS provider
All PayFac providers are not created equal. As businesses increasingly embrace payment monetization, new solutions are gaining traction. In particular, many ISVs and VARs are choosing PayFac-as-a-Service (PFaaS) offerings to enjoy benefits such as:
- An additional revenue stream
- Increased control over user experience
- The convenience of a white-glove support staff
A robust PFaaS solution delivers these benefits without the risk, capital investment, and time to market associated with traditional PayFacs. But with new providers entering the market regularly, it’s important to understand what you’re committing to before entering a multi-year partnership. In this blog post, we go through the pitfalls to watch out for when choosing a PFaaS provider.
Pitfall #1: Choosing an inexperienced provider.
When choosing a PFaaS provider, it’s best to opt for a company with extensive industry experience. To gauge their know-how, make sure to ask how long they’ve been in business. Next, you’ll want to know if they have a dedicated, in-house development team or whether that’s something they outsource. And finally, do they specialize in specific verticals or cover a wide range of industries? The right partner will be able to advise on typical rates, leveraging their experience to make pricing recommendations that strike the perfect balance between attractive customer pricing and maximum profit potential.
Pitfall #2: Not understanding the provider’s tech stack.
Some PFaaS providers have been through so many mergers and acquisitions that their infrastructure and internal processes are slow, complicated, and error-prone. This can lead to a variety of stumbling blocks. They may be unable to respond to threats, fix issues as they come up, or bring new technology to market.
Other providers adopt white-label solutions—or multiple third-party solutions—which can lead to uncertainty. Such patched-together systems indicate that the provider will not have control when problems arise.
The best provider owns or builds its own infrastructure, ensuring seamless compatibility. This eliminates waiting on third parties for fixes or enhancements.
Pitfall #3: Trusting an off-the-shelf, one-size-fits-all solution.
The payments landscape is confusing. To successfully implement a monetization solution, you need more than a short-term, off-the-shelf solution. You want a PFaaS provider with API experience so they can offer solutions as you grow. You may also want the ability to white-label the solution to control brand consistency and user experience. This can serve as a good interim step while you build out a more complex integration. Additionally, a one-size-fits-all provider might pigeonhole you into the wrong pricing model for your company. (More on that in a minute!) On the other hand, pricing flexibility will enable you to build a mutually beneficial partnership.
Don’t let your provider become a bottleneck to your growth. Choose someone who can help you scale your solution and make customizations along the way.
Pitfall #4: Thinking all pricing models are created equal.
Familiarize yourself with buy rates and rate structures, and learn to spot hidden fees. Don’t assume that a 50/50 revenue split from two different providers is an apples-to-apples comparison. Examine the details to understand how revenue is calculated—is it top-line or bottom-line revenue? This distinction can significantly impact the final amount you receive.
Pitfall #5: Not having a go-to-market strategy.
Some providers may leave you without a go-to-market plan to successfully launch your payment program (or, even worse, no direction after you complete the sign-up process). To prevent this worst-case scenario, make sure to ask potential providers about what marketing and sales resources they offer to help you introduce the offering to your clients.
Remember: Increased processing volume means more revenue for both you and your PFaaS provider. You need a partner that is just as invested in your success as you are—a partner with the bandwidth and resources to help you scale.
