Becoming a payment facilitator could be a prudent move for your business if all the chips are stacked in the right direction – but there are a few things to consider first before you make the call.
The first question to ask yourself is: why is payment facilitation right for you? Although true payment facilitation offers the potential for a brand-new revenue stream that can allow your business to grow and prosper, as well as the speed with which onboarding clients can occur, it’s important to check in on your ultimate goals for payment facilitation before making the move. Furthermore, there are a huge amount of logistics involved in becoming a true payment facilitator which you’ll need to be aware of before integration with your business can begin.
It’s also important to point out that although true payment facilitation is a great option for some businesses, for the majority of platforms it’s actually a pretty bad move. For starters, you’ll need a huge amount of capital available, with it being easy to spend over $50,000 alone, with many businesses going higher than $100,000. You’ll need a strong payment understanding, and a very good knowledge of risk mitigation, lest there be any bumps in the road (and there can be many). For many businesses, Payfac As A Service may be a much better, simpler option, which gives you the capabilities of payment facilitation with much less risk.
For true payment facilitation, you’ll also need resources, both financial and human, to be able to devote to continuing risk and compliance issues; and beyond that, and most importantly, you need a sizeable and active user base that’s able to help you generate enough transactional revenue to balance the books. Given the fact that you make your money as a Payfac from the margin between sell rate and costs, without a large number of transactions, it’s just not financially viable for most SaaS platforms.
With this in mind…
How Do You Become A Payment Facilitator?
In order to become a payment facilitator, there are a few significant steps to be taken. The first is to register with a sponsor bank, which then needs to approve your application and registration. You then need to connect with a technology platform. Integration via API is the next step, in order to get your application connected.
You then need to retrieve your Payfac/aggregation credentials from your sponsor bank. And finally, development: you take your product to market, you learn from your mistakes, you refine.
The registration and approval process can be a fairly lengthy one, comprised of multiple documents and steps within the overarching approval step. There are agent applications (which must be signed by principals that represent at least 80% of total ownership), and agent agreements (three distinct and original copies that need to be signed by both the sponsored party and the agent). There’s also an underwriting/business or principal validation step, which requires a write-up.
You’ll also, crucially, need a business plan and description – which needs to include your business history, your investor information, and your volume projections. Partnership Agreements and/or Articles of Incorporation are vital, as is evidence of all DBA Names Listed (provided through government-issued documentation). Your business financials of at least 2 years and financial statements (including your balance sheet, P&L, and interim) are required – and if you’re a start-up, you’ll need your opening balance sheet and financial projections.
Then, you’ll also need two years of business tax returns, three months of bank statements, a copy of a drivers license for all principles with at least 25% of the ownership and for all signers, a resume and/or bio for the same parties, resumes and/or work histories for all staff in the credit and, if you have it available, a D&B (Dun & Bradstreet Report).
As you can see, it’s not exactly a simple process! And, nor is it quick – the whole thing can take up to six months, and even longer, depending on your back-end provider and other variables. Some clients, on the other hand, can complete it in under a month, and others can run the gamut anywhere in between – it’s a highly variable process, based on a number of factors.
I’m Not Sure True Payment Facilitation Is Right For Me – Is There Another Option?
For many businesses, true payment facilitation is an unfeasible option (and based on the application process alone, we don’t blame you). That’s why hybrid payment facilitation – or Payfac As A Service – may be a much better option. With Payfac as a Service, you’re still able to create a brand-new revenue stream for your business and enjoy the benefits of simple onboarding and a rapid application and approval process for customers, without a huge amount of the compliance and risk issues that burden true payment facilitation – and which make true payment facilitation only truly viable for businesses with the resources to cope.
That’s why Payfac as a Service could be an excellent choice for your business. And to discuss more options for your business around payment facilitation, contact Agile Payments today. With almost twenty years of experience in payment integration, Agile Payments’ team of professionals is equipped to give you the knowledge and solutions you need to make an informed choice and to make sure your business grows and develops as it deserves to. Get in touch now.