What is Payments as a Service? This question is central to understanding the transformative impact of PaaS on various platforms.
By facilitating a streamlined and secure payment process, PaaS significantly reduces integration time from months to days, simplifies compliance, minimizes financial risks like fraud and chargebacks, and enhances product offerings. Moreover, it opens new revenue streams, enabling platforms to charge processing fees.
Reasons for Using Payments as a Service on Platforms
Payments as a Service can be of tremendous benefit to platforms for the reasons detailed below:
- The duration of our integration process is in days, not months.
- Simple compliance. You circumvent the PCI scope through the use of technology.
- There is no financial risk. Regarding your payment partners, fraud and chargebacks are a concern.
- Developing an enhanced product. The distress caused by abandoning a solution is exacerbated in the context of integrated payments.
- The idea of generating revenue relates to increasing the value and income sources of a company.
Through Payments as a Service (PaaS), platforms and developers can earn money by charging processing fees and providing their clients with different payment options (like ACH and credit cards). Upon registering for the platform, any individual can promptly begin processing or distributing payments to clients. Integration of a payment solution typically takes many months. Still, developers can test, deploy, and go live with Payments as a Service in a few days due to the service’s elegant and robust APIs.
The Intended Market for Payments as a Service
You can add or expand payment solutions to your SaaS platform using Payments as a Service providers. By adopting this approach, one can generate recurring revenue through payment-related charges, all while avoiding concerns related to compliance, financial risk, integration, or certification. Platforms can expedite the registration process for end users and efficiently integrate and monetize payments by utilizing PaaS. One example is a childcare software vendor that specifically caters to smaller providers. The program manages several facets of the facility, including check-in, visual display, and scheduling. It would be significantly beneficial if they incorporated payment reconciliation and collection services into their package. The idea of incorporating payments is excruciating, as months of integration have generated little adoption due to complex application processes. The childcare provider could integrate, test, and deploy Payments as a Service in less than a week. Parental payments could potentially be processed within a time frame of five minutes subsequent to the submission of an application for the payment solution provided by the software.
Another example is a field service application enabling contractors or painters to manage their businesses from mobile devices. Scheduling, estimating, and client communication are critical components of the application. With that being said, timely payment is vital. Reintroducing a payment option is an exceptionally simple task for the app developer. An uncomplicated registration procedure is essential for the painter, and you also ensure its provision. In addition, each card scan generates an additional revenue stream.
Understanding the Functionality of Payments as a Service Companies
By leveraging the Payment Facilitation functionalities offered by its payment service providers, an organization can implement the Payments as a Service framework. A payment facilitator handles the onboarding process for merchants instantly and is responsible for all regulatory and risk matters. Consider your platform a subsidiary of your partner’s Payment Facilitation. You are permitted to utilize them as a result of their multimillion-dollar investments in compliance, risk mitigation, and technology. Your compensation will be a share of the earnings, proportional to your contribution.
Income Possibilities with Payments as a Service Platform
The going rate for most systems that provide Payment Facilitation or Payments as a Service is 2.9% plus 30 cents. It is widely recognized and uncomplicated. The degree to which payment processing fees vary is highly dependent on the card type utilized by the customer. The use of a regulated debit card may result in transaction fees of no more than 0.2% and 22 cents, while the use of a business card may incur fees approaching 3%. Although the precise quantity remains uncertain until the transaction is executed, a conservative approximation assigns the percentage to 2.1%. There is also a margin of 30 cents, perhaps 25 cents, leaving a total of 0.8% in this scenario. Your percentage of the platform’s revenue is determined by several factors, with the quantity of money processed being the most significant. This ratio may vary between 25% and 65% or potentially exceed that.
To illustrate, we shall employ 40%. Consequently, the platform will generate a profit ranging from 0.32% to 10 cents per transaction. Suppose there are 1,000 transactions per month, and the average transaction amount is $100. In that case, your platform will generate approximately $420 monthly recurring revenue.
The potential earnings can be ascertained through the use of this convenient calculator. Monthly revenue for platforms can range from several hundred to millions of dollars. Why wait when you can earn from your platform’s payment system with minimal effort and integration?
How Payment Facilitation and Payments as a Service Worked in the Past
The HVAC operator was required to complete a laborious application process akin to obtaining a second mortgage when traditional Payment Facilitation Solutions were utilized. Due to the fact that the platform bore liability for any financial losses resulting from fraudulent activities or improper conduct, the objective was to mitigate financial risks. Six months may be required for integration, onboarding, and compliance assurance. Despite this, payment processors have developed alternatives akin to payment facilitators over the last few years, resulting in cost and inconvenient savings. Through utilizing the infrastructure and compliance resources of a legitimate PayFac, users assume the responsibility of sub-Payment Facilitators within the Payments as a Service paradigm. This approach significantly mitigates potential hazards. What’s the issue? Credit card statements in the authentic PayFac model prominently feature the customer’s identity. However, in the Service model, the name of the Master PayFac appears concurrently. Certain organizations, especially those involved in the procurement process, might discover that payment process management is crucial. However, Payments as a Service is perceived favorably by many because of its expeditious and risk-free integration of payments and its potential for generating supplementary income.
Conclusion
PaaS can be viewed as a new visionary opportunity for platforms looking to upgrade their offerings by incorporating efficient and risk-free payment solutions. By adopting PaaS, platforms can benefit from quick rollouts, circumvent compliance requirements, and establish poignant uniformity. This not only ensures the generation of a cash-rich revenue stream but also takes the value of the business to unparalleled heights.
Embrace the future of financial transactions with Zift’s Payments as a Service. Our advanced solutions offer seamless integration and unparalleled reliability. Let us help you enhance your payment systems for a better tomorrow