photo of Caleb Avery

When is it worth it to become a PayFac?

If you’re a B2B software company interested in adding payment processing to your product, you may be wondering when it will be worth it to become a payment facilitator (PayFac) yourself.

The short answer? Probably never.

For some software companies processing upwards of $2 billion a year in payments, it may be a bit more complicated than that. But, for the vast majority of ISVs operating today, the real costs often outweigh any potential benefits.

If you’ve recently sat through a discussion from one of the PayFac-in-a-Box providers (like we have), it might not seem that way. You’ve probably seen some top-line numbers that make it seem like it’s no-brainer to become your own PayFac. But what they won’t talk about at all— even when asked— is what it takes to get there.

The Truth Behind Top-Line Numbers

Top-line numbers fail to take into account the hundreds of thousands of dollars a year in costs of being a PayFac, including staff and overhead, fraud losses, registration and software fees, and more. They also don’t mention the hundreds of thousands of dollars in upfront investment, all before your company ever sees a dime from payment revenue.

For companies processing even hundreds of millions of dollars, it just doesn’t add up to become your own PayFac. As the numbers get larger, the math still isn’t on the side of payment facilitation.

“What about a billion dollars?” may be the stereotypical question if you’re in Silicon Valley, but no, even at a billion dollars processed every year, the math still does not work.

Part of that is because as your payments volume increases, so do the costs — the more you process, the more staff you will need to hire, the more you will lose to fraud, and the more you will need to invest in your systems and processes. In order to truly benefit from any economies of scale as a PayFac, you would need to become a true payments expert.

And what for? If you’re the CEO of a software company, how does it benefit you to learn the ins and outs of payment processing? When adding payments to your software, your two goals should be1) to create a frictionless onboarding experience for your customers and 2) to generate revenue. Becoming a PayFac expert isn’t required to achieve either of those goals. At least, not anymore.

Dollars and Sense

At Tilled, we’ve done the work to become true payments experts. Our APIs and SDKs give you and your customers the seamless experience you expect and need, with no upfront costs or large investments of time and work.

More than that, because our entire model is flexible, we’ll continue to work with you throughout the growth of your business to ensure your revenue share makes sense. Whether you’re processing $2 million or $2 billion, we can ensure it remains logical for you to continue to partner with us and grow with you.

And if you think you can become a PayFac without all the costs (spoiler alert: you can’t), Tilled just makes more sense. Even if you hire a small team, have minimal fraud losses, and attempt to limit costs elsewhere, you’ll still be investing huge amounts of time and effort in becoming a PayFac, as well as adding additional liabilities and risks to your business.

If the only reason you’re considering becoming a PayFac is to make money, don’t make less by becoming a PayFac. Work with Tilled, and together we’ll partner with you not only so the numbers make sense, but so you have the easiest and best payments solution for your business.

Get Started with Tilled Today!

And if you think you can become a PayFac without all the costs (spoiler alert: you can’t), Tilled just makes more sense. Even if you hire a small team, have minimal fraud losses, and attempt to limit costs elsewhere, you’ll still be investing huge amounts of time and effort in becoming a PayFac, as well as adding additional liabilities and risks to your business. If the only reason you’re considering becoming a PayFac is to make money, don’t make less by becoming a PayFac. Work with Tilled, and together we’ll partner with you not only so the numbers make sense, but so you have the easiest and best payments solution for your business.


More articles.

Bugs and Love Bugs

A Tale of Quality at Tilled From Butch Mayhew, Head of Quality and Reliability at Tilled One of my main responsibilities at Tilled is to create a strategy for how we deliver high-quality software at Tilled. This all starts with defining what quality is. When you think about quality within a product, how would you […]

Read More

Monetizing Payments for SaaS Platforms: How Does Payment Processing Work?

We’re breaking down how money is actually made through payment processing.  What happens when a card is charged? In episode three of the nine-part video series, James offers a behind-the-scenes look at payment processing, using his self-storage management software, CCStorage, as a real-world example. Check out the entire episode at the video link below, or […]

Read More

Monetizing Payments for SaaS Platforms: Demystifying Payment Processing Terminology

Being “in the know” with common industry terms can set you up for greater success with integrated payments. Before jumping into the world of integrating payments, stop and think about that age-old piece of advice: don’t run before you can walk. Our nine-part series with James Shepherd on “Monetizing Payments for SaaS Platforms” serves up […]

Read More

Introduction: How Software Companies Can Monetize Payments and More

The secret’s out – Tilled has teamed up with James Shepherd of CCSalesPro to give the people what they want: more information on payments.  You heard us! Over a nine-part video series, James will be providing his expertise on a variety of topics and delivering valuable insights into the world of payments and how software […]

Read More