--- title: Should Your Software Company Become a Payfac? description: Explore whether your software company should become a Payfac. Learn about the benefits, risks, and when it’s worth considering the payment facilitator model. --- # Should Your Software Company Become a Payfac? Explore whether your software company should become a Payfac. Learn about the benefits, risks, and when it’s worth considering the payment facilitator model. [ James Shepherd ](https://www.ccsalespro.com/blog/author/james-shepherd) Aug 28, 2024 --- ### **Introduction to the Payfac Model** If you're a software company processing payments, you’ve likely encountered the question: Should we become a Payfac, or payment facilitator? This is a hot topic in the world of payment monetization for software companies. In this post, we’ll dive into what it means to become a Payfac, the potential benefits, and the significant considerations you need to weigh before making this decision.   ### **What is a Payfac?** A payment facilitator, or Payfac, is essentially a merchant that processes payments on behalf of sub-merchants under its own umbrella. Popular examples include Square, Stripe, and Toast. As a Payfac, you own the merchant account and take on the responsibility for the transactions processed by your sub-merchants. This means you handle the risk, the onboarding, and the entire payment flow.   --- ### **Why Consider Becoming a Payfac?** 1. **Control and Autonomy:** As a Payfac, you have complete control over the onboarding and underwriting process, allowing you to create a seamless and smooth experience for your users. This can significantly reduce friction during account setup and enhance customer satisfaction. 2. **Clear Chain of Ownership:** Being a Payfac means you have a clear and undisputed ownership of the payment processing account. This can add value when negotiating with acquirers or selling your business. ### **The Downsides of Becoming a Payfac** While the benefits might seem attractive, becoming a Payfac is not without its challenges: - **Operational Complexity:** Setting up as a Payfac requires building out an underwriting department, customer service support, and the infrastructure to handle merchant statements, interchange fees, and more. - **Significant Risk:** As the Payfac, you bear the risk of fraudulent transactions, which can be substantial. Managing this risk requires robust systems and procedures, which add to the operational burden. - **High Costs:** The process of becoming a Payfac involves significant upfront costs, and ongoing operational expenses can be steep. It’s generally only worth considering if your company is processing over $100 million in annual volume. ### **Conclusion: Is Becoming a Payfac Right for You?** For most software companies, becoming a Payfac is only worth considering if you’re processing over $100 million annually. If you’re below that threshold, the operational complexities, costs, and risks may outweigh the benefits. Instead, focus on scaling your business, refining your payment integration, and possibly using a Payfac-as-a-Service model as you grow. Once you reach a substantial volume, you can revisit the idea and make a more informed decision. To learn more about payment processing and monetization strategies, check out the full YouTube playlist [here](https://youtube.com/playlist?list=PLJ02KCP2W60TLp9HPCQ0Z78Bx_mR7pWBO&si=W1-9l5w5MGUPQtIH). --- Understanding the pros and cons of becoming a Payfac is essential for making the right decision for your software company. Stay tuned for more insights in the next post. 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When I first got... James Shepherd Aug 7, 2018 ### [Integrating Payment Processing APIs: A Guide for SAAS Monetization](https://www.ccsalespro.com/blog/integrating-payment-processing-apis-a-guide-for-saas-monetization) Learn how to integrate payment processing using an API for SAAS. Explore practical steps for secure transactions and start monetizing payments... James Shepherd Aug 28, 2024 Blog ### [Getting Down to Basics – Payments Processing (Part 1)](https://www.ccsalespro.com/blog/getting-down-to-basics-payment-processing) Getting down to basics What’s your payment processing IQ? I’ve stated this before, but I’ll state it again: the most successful sales reps are those... James Shepherd Mar 15, 2023 ### Get notified about new blog posts Enter your email to have each new CCSalesPro blog article delivered straight to your inbox. 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