How SaaS Companies Can Monetize Payments Without Becoming a PayFac
Learn how SaaS companies can monetize payment processing through embedded and white-label payments without becoming a full PayFac.
Presented by Allen Kopelman, CEO — Nationwide Payment Systems-Host of B2B Vault: The Biz2Biz Podcast
AI Overview
SaaS and ISV companies can turn customer payment activity into a recurring revenue stream without becoming full Payment Facilitators (PayFacs). By partnering with an experienced payment provider, they can embed card payments, ACH, invoicing, recurring billing, and B2B payment capabilities directly into their software while the partner manages underwriting, processing, compliance, risk, and merchant support.
Models such as revenue sharing, white-label payments, referral partnerships, and managed embedded payments let SaaS companies retain their brand and customer relationships while participating in payment economics. This approach can generate additional revenue, improve customer retention, and create a foundation for future embedded-finance services.
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How SaaS Companies Can Monetize Payments Without Becoming a PayFac
For many SaaS companies, payments are one of the most valuable revenue opportunities hiding in plain sight.
Your customers are already accepting payments.
They may be processing:
Credit cards
Debit cards
ACH
Recurring billing
Invoices
B2B transactions
Commercial cards
And every one of those transactions creates payment revenue for someone.
The obvious question is:
Why shouldn't your SaaS company participate in that revenue?
A lot of founders assume the only way to monetize payments is to become a full Payment Facilitator, or PayFac.
That can sound intimidating.
Becoming a PayFac may involve:
Underwriting
Risk management
Compliance
Merchant monitoring
Chargeback oversight
Sponsor-bank relationships
Operational controls
Technology requirements
Significant internal resources
For many SaaS companies, that is far more than they want to take on.
The good news is:
You do not have to become a payment company to make money from payments.
With the right payment partnership, a SaaS or ISV can integrate payment acceptance into its platform, improve the customer experience and participate in payment revenue without taking on the full burden of becoming a traditional PayFac.
Why Payments Are So Attractive to SaaS Companies
SaaS companies already understand recurring revenue.
Monthly subscriptions and annual contracts are valuable because revenue continues over time.
Payments can create another recurring revenue stream tied to customer activity.
The opportunity can grow in two ways:
More customers
and
More payment volume per customer
For example, if a SaaS platform serves 100 merchants and each merchant processes $50,000 per month, the platform is influencing:
$5 million per month in payment volume
or:
$60 million per year.
If the SaaS company simply sends those merchants to another processor, it may be giving away the payment economics.
What Does It Mean to Monetize Payments?
Payment monetization means the software company participates in the economics created by payment processing.
That can happen through different program structures.
Depending on the arrangement, the SaaS company may receive a share of net payment revenue generated by merchants using its platform.
The exact economics can depend on:
Merchant pricing
Interchange
Card mix
ACH volume
Transaction size
Industry
Risk
Processor costs
B2B card activity
Program structure
The point is not that every merchant produces the same amount of revenue.
The point is that the payment activity already exists.
Someone is earning money from it.
You Do Not Need to Become a PayFac
This is the key idea.
A SaaS company can participate in payments through models that do not require it to become a full traditional Payment Facilitator.
Depending on the program, those models can include:
Referral partnerships
Revenue-share programs
Integrated payment partnerships
White-label payment programs
Managed embedded-payment models
ISO-style relationships
The right structure depends on:
How much control the SaaS company wants
How much risk it wants to take
How much of the merchant experience it wants to manage
How much development it wants to own
How much payment revenue it wants to participate in
There is a wide range between:
“Send your customers somewhere else”
and
“Become a full PayFac.”
That middle ground is where many SaaS companies can create real value.
What NPS Can Handle Behind the Scenes
Nationwide Payment Systems can help manage the payment infrastructure that many software companies do not want to build themselves.
That can include:
Merchant underwriting
Acquiring relationships
Payment processing
Risk review
Merchant support
ACH
Card acceptance
B2B processing
Level 2 and Level 3
Higher-risk merchant underwriting
Payment gateway services
API connectivity
This allows the SaaS company to focus on:
Building software and serving customers.
Embedded Payments Without Becoming a Payment Company
Embedded payments allow payment functionality to live inside the software experience.
The SaaS company can provide:
Invoice payments
Checkout
Recurring billing
ACH
Card payments
Payment links
Transaction reporting
without building an entire acquiring operation from scratch.
That is the difference between embedding payments and becoming the payment company itself.
White-Label Payments Can Keep Your Brand at the Center
A white-label payment strategy can help the SaaS company keep more of the customer relationship inside its own platform.
Instead of telling the merchant:
“Go sign up with another processor.”
the payment experience can be incorporated into the software.
That can create:
Stronger branding
Better customer retention
Better control over the experience
More consistent support
Payment revenue opportunity
The payment infrastructure may operate behind the scenes while the SaaS company remains at the center of the customer relationship.
Revenue Sharing Creates a New Recurring Revenue Stream
A revenue-share model can allow the SaaS company to participate in payment revenue without taking on every operational responsibility.
That revenue may grow as:
More merchants sign up
Existing merchants increase sales
Payment volume increases
More payment methods are adopted
For a SaaS company, this can create a recurring-revenue stream that grows alongside the customer base.
ACH Can Make the Payment Offering More Competitive
Many SaaS platforms think first about credit cards.
That is fine for many consumer-focused businesses.
But B2B software often needs more.
If your merchants issue invoices for:
$10,000
$25,000
$50,000
$100,000
ACH can become an important part of the payment strategy.
Offering ACH can help merchants manage payment costs and give their customers another way to pay.
That makes the SaaS product more useful.
B2B SaaS Can Create Even More Value
A SaaS platform serving:
Manufacturers
Distributors
Wholesalers
Suppliers
Contractors
Equipment companies
Professional-service firms
may need payment functionality that goes well beyond a standard card checkout.
Those merchants may need:
ACH
High-ticket card processing
Commercial cards
Purchasing cards
Virtual cards
Level 2
Level 3
Smart Invoicing
Deposits
Partial payments
Recurring billing
A payment strategy designed around the actual merchant base can become a competitive advantage.
Level 2 and Level 3 Matter for Commercial Payments
If your SaaS platform serves B2B merchants, commercial-card optimization can be important.
Level 2 and Level 3 data can include information such as:
Invoice number
Purchase-order number
Tax amount
Product description
Quantity
Unit price
Freight
Line-item detail
For qualifying transactions, enhanced data may improve interchange qualification.
That gives your software more value than a generic card integration.
High-Risk Merchants Need Specialized Underwriting
Some software platforms serve specialized industries.
Examples may include:
CBD and hemp
Telemedicine
Supplements
Tobacco
Firearms
Adult
Subscription businesses
Other higher-risk categories
A mainstream payment provider may not support all of those merchants.
Nationwide Payment Systems has experience with specialized underwriting and can help evaluate whether there is an appropriate acquiring relationship available.
That can help a SaaS platform serve more of its customer base.
Merchant Support Matters
Once payments are part of your software, merchant support becomes part of your product experience.
Eventually, a merchant will ask:
Why did this transaction decline?
Why is this deposit delayed?
Can I process a larger sale?
Can I add ACH?
What happened with this chargeback?
Why is my account under review?
If the payment provider does not respond well, the merchant may blame the SaaS platform.
That is why payment support should be part of the partnership decision.
You Can Monetize Payments Without Owning All the Risk
One of the biggest benefits of a managed payment partnership is separation of responsibilities.
The SaaS company can focus on:
Product
Customer acquisition
User experience
Software development
while the payment partner handles much of the acquiring and payment infrastructure.
That can let the software company participate in payment economics without trying to recreate an entire payments company internally.
Payments Can Also Improve Retention
Payments are not only about revenue.
When a merchant uses your platform for:
Customers
Orders
Invoices
Payments
Recurring billing
Reconciliation
your software becomes more deeply embedded in daily operations.
That can improve customer stickiness.
The more useful the platform becomes, the harder it is to replace.
Embedded Payments Can Lead to Embedded Finance
Payments can also become the starting point for additional financial products.
Depending on the platform and partnership, future opportunities may include:
Buy Now, Pay Later
Working capital
Business financing
Payroll
Alternative payments
Faster payments
Other embedded financial services
Payments can become the foundation for a larger financial-services strategy.
You Do Not Need to Build Everything at Once
A SaaS company does not need to launch every possible financial product on day one.
A smart approach is:
Start with payments
Add ACH
Add recurring billing
Add B2B optimization
Add more financial tools as customer demand grows
The payment strategy can evolve with the software platform.
When Should a SaaS Company Consider Payment Monetization?
Ideally, early.
The payment decision you make with 10 customers can be difficult to unwind when you have 10,000.
Think about payment strategy before architecture becomes deeply embedded.
Ask:
Who owns the merchant relationship?
Who controls pricing?
Who handles underwriting?
Who handles merchant support?
Can we earn payment revenue?
Can we support ACH?
Can we support B2B?
Can we support higher-risk industries?
Can we add financial products later?
Those answers can shape the long-term value of the platform.
How NPSONE Supports SaaS and ISV Companies
NPSONE provides payment infrastructure designed to help businesses and software companies integrate payment functionality into their systems.
Through RESTful APIs and webhooks, SaaS and ISV companies can build payment capabilities into their platforms.
Depending on the application, NPSONE can support:
Credit cards
Debit cards
ACH
Recurring billing
Smart Invoicing
Payment links
B2B payments
Level 2 and Level 3
High-ticket transactions
Customized payment workflows
Nationwide Payment Systems can also help with merchant underwriting, acquiring relationships and payment support.
The Big Question
If your SaaS customers are already processing payments every day, the revenue opportunity already exists.
You do not have to become a full PayFac to participate.
You do not have to become a bank.
You do not have to build every payment function from scratch.
You need the right payment structure and the right partner.
Your customers are already generating payment revenue. The question is whether your SaaS company should participate in it.
