5 Common Challenges in Payment Facilitation and How to Overcome Them

Marketplaces and platforms are evolving, with a growing trend towards those offering integrated payment services. Entities are attracted to solutions that streamline payment processes. Payment facilitation is nuanced due to its adherence to the standards of three key groups:

• Banking and financial institutions
• Card networks
• Regulatory bodies

These groups ensure the security of the payment landscape from various angles.

Typically, payment facilitators are categorized into:

• Commerce platform providers
• Independent Software Vendors (ISVs)
• Marketplaces or platforms

Commerce platform providers facilitate transactions using advanced payment technologies, managing the flow and payout to sub-merchants. ISVs provide payment solutions without overseeing the tech infrastructure. Marketplaces aggregate sub-merchants and oversee fund flow and payouts, which is ideal for SaaS platforms requiring payment processing.

Engaging as a payment facilitator involves partnering with:

• Acquiring or Merchant Banks, offering merchant accounts, and assuming transaction liability for the facilitator’s clients. Approval requires meeting stringent standards.
• Payment Processors, responsible for transaction authorization and settlement, necessitating full integration by facilitators for accurate processing.

Payment facilitators also collaborate with clients, regulators, software engineers, and more to maintain a smooth payment system.

Considering becoming a payment facilitator for your SaaS? This role comes with several key advantages that can enhance your business operations and improve your relationship with clients. Here are the top three benefits:

• Increase Your Revenue with Each Transaction: When you become a payment facilitator, you get a small amount of money every time someone buys a product or pays for a service using your system. This can add up quickly, especially if you have many transactions. Over time, this can become a steady source of revenue.
• No Need for Outside Help: Being a payment facilitator means you can manage payment processes by yourself without needing companies like PayPal or Stripe. You can directly set up and oversee everything for your clients, making things quicker and easier. For example, if a small shop using your software wants to start accepting credit card payments, you can handle all the necessary steps without involving another company.
• Improve Your Experience: As a payment facilitator, you can directly solve your clients’ transaction issues so they don’t have to wait for help from another payment service provider or third party gateway. Providing prompt and direct support enhances client satisfaction and fosters a deeper sense of loyalty toward your services which makes your offer more attractive, encouraging clients to stay with you longer and trust you more.

While the payment facilitation model offers unprecedented opportunities for revenue and growth, navigating its landscape is far from straightforward. The journey of becoming a successful payment facilitator is fraught with challenges that stem from regulatory compliance, technical integration, risk management, and the need for transparency and efficiency in merchant onboarding and support. As we dive deeper into the intricacies of payment facilitation, we will find how understanding and overcoming these hurdles is crucial for harnessing the full potential of this promising business avenue. Let’s explore these common challenges in detail and discuss strategies to mitigate them, ensuring a robust and reliable payment facilitation service.

Regulatory compliance and merchant onboarding are crucial in the payment facilitation sector, especially for SaaS platforms, ensuring transactions are secure and legal while offering a seamless user experience. The main challenge is adhering to complex legal standards, requiring a thorough evaluation of merchants’ risk profiles based on their business operations, financial health, and fraud risks. Failure of inaccurate assessment can expose platforms to high-risk merchants as well as fraudulent and bad actors threatening their reputation and financial stability.

Merchant onboarding presents significant challenges, including meeting strict regulatory requirements without slowing down the process. A smooth onboarding process is vital to keep potential clients from getting frustrated and lost with lengthy procedures. However, this efficiency must not compromise the essential underwriting due diligence, aiming for a balance between speed and comprehensive risk assessment.

One of the biggest challenges for SaaS platforms in payment facilitation is balancing quick merchant onboarding with strict regulatory compliance. This balance prevents losing potential clients to onboarding delays while ensuring compliance and risk mitigation are thoroughly addressed. Developing an onboarding process that is both fast and thorough requires advanced technologies and processes, highlighting the difficulty in facilitating payments without sacrificing compliance or the merchant experience.

To navigate these challenges, platforms should implement automated tools for comprehensive merchant underwriting. This approach streamlines the onboarding process, balancing rapid account verifications with rigorous compliance checks, thus ensuring efficient merchant onboarding without compromising on legal compliance or risk management.

Pricing transparency and monetization are crucial for payment facilitation, focusing on how platforms disclose costs and generate revenue. These elements are important because they can foster trust and enhance competitiveness through clear communication of fees and a strategic approach to pricing.

• Complex Fee Structures: Payment facilitators must manage intricate fee setups that include transaction fees, interchange fees, chargebacks, and more. The complexity of these structures poses significant challenges in presenting them transparently and understandably to merchants, especially small businesses that might lack the resources to decode them. The elaborate nature of fee structures makes it difficult for merchants to grasp the full extent of costs associated with using a payment facilitation service. This obscurity can deter small businesses from engaging with these platforms due to the perceived effort and expertise required to navigate the pricing landscape.
• Comparison Difficulties: Merchants often compare rates and fees across different platforms, so offering clear and comparable pricing information is imperative.

Addressing these challenges is pivotal for SaaS platforms to maintain an advantage over market competitors. Developing clear, simple, and understandable pricing strategies is fundamental to overcoming the issues presented by complex fee structures and comparison difficulties. This will ultimately contribute to a more trustworthy and competitive offering in payment facilitation.

Risk and chargeback management are vital components of payment facilitation. Understanding and addressing the complexities of risk and chargeback management is crucial for SaaS platforms wanting to become payment facilitators. The challenge lies in implementing advanced fraud detection systems that accurately distinguish between fraudulent and legitimate transactions. Balancing strong security measures with user convenience is key to reducing false positives and minimizing unnecessary friction in the customer experience, ensuring smooth transactions, and building trust in the payment platform.

Moreover, effective handling of chargebacks and disputes is fundamental to risk management. This includes:

• Swift dispute resolution
• Transparent communication
• Clear evidence provision
• Process streamlining

Payment facilitators should use machine learning and big data to address risk and chargeback management challenges to improve fraud detection accuracy. Additionally, partnering with financial institutions and card networks helps access shared intelligence, enhancing the facilitator’s fraud prevention and chargeback handling. Continuous strategy analysis and adaptation ensure effective fraud defense while keeping the user experience smooth.

Technical integration complexities in payment facilitation involve the challenges that Software as a Service (SaaS) platforms encounter when incorporating payment processing capabilities. These complexities are pivotal for ensuring operations run smoothly and facilitating platform growth. The process of embedding these capabilities involves several critical aspects, from ensuring compatibility with a wide range of merchant systems to achieving scalable growth efficiently.

• API Compatibility: SaaS companies often work with various platforms, each with different APIs and disorganized documentation. The diversity of merchant systems and the lack of uniformity in API design and documentation can pose significant challenges in establishing a smooth integration process.
• Scalability and Performance: Scalability and performance become paramount as the platform grows in terms of merchant numbers and transaction volumes. Achieving efficient scalability while maintaining high performance and consistent uptime presents a substantial technical challenge. Platforms must manage peak traffic loads effectively, ensuring that transaction processing remains swift and reliable. The ability to scale efficiently is crucial for sustaining growth and maintaining the trust of merchants and consumers alike.

To overcome technical integration complexities in payment facilitation, businesses should prioritize partnerships with experienced payment processors and adopt flexible, scalable integration frameworks. They can ensure seamless compatibility with various merchant systems by choosing payment solutions with robust APIs and plug-and-play capabilities. Furthermore, focusing on scalable architectures from the outset will facilitate easier adaptation and growth, allowing businesses to expand their payment facilitation services without facing significant challenges.

Customer support in payment facilitation is a critical service provided by SaaS platforms to assist users with payment-related queries and issues. This includes handling transaction failures, addressing fraud concerns, and providing multi-channel assistance to ensure a smooth user experience. When SaaS platforms incorporate payment facilitation, they also face the crucial challenge of offering effective customer support.

• Complex Payment-Related Issues: Payment facilitation involves many problems, such as failed transactions and fraud concerns. To offer accurate solutions, support staff must deeply understand the payment process. Ensure employees are well-versed in these aspects to preserve customer trust and satisfaction.
• Multi-Channel Support: Customers now expect to receive support through various channels, including email, phone, chat, and social media. Coordinating these channels to provide consistent and high-quality support is a significant challenge.

Partnering with an embedded payment partner is crucial for SaaS platforms to address these issues. It allows platforms to utilize the partner’s expertise, reduce the support team’s workload, and ensure expert customer assistance. Additionally, it streamlines support across multiple channels, enhancing customer service quality, satisfaction, and trust in the payment process.

The journey to becoming a payment facilitator within the SaaS industry is fraught with numerous challenges, ranging from regulatory hurdles to technical intricacies. However, these challenges can be effectively navigated and overcome by partnering with a provider that offers a robust payfac model.

With Zift, the complexities of payment facilitation, including regulatory compliance, merchant onboarding efficiency, transparent pricing, risk management, technical challenges, and comprehensive customer support, become manageable.

Zift’s innovative payments as a service, featuring automated onboarding and sophisticated fraud detection, along with its commitment to clear communication and scalable solutions, are geared toward mitigating these challenges effectively. Emphasizing transparent pricing and steadfast customer support, Zift aims to foster trust and nurture enduring relationships with merchants. Using Zift’s technology and partnership aligns with your platform’s aspirations and growth trajectories, paving the way for a frictionless payment facilitation experience.

Explore the Zift payment gateway and see firsthand how our cutting-edge, user-friendly solutions can streamline your payment processes, allowing you to focus on growth and innovation.