White-label payfacs explained: How branded payment services benefit businesses

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  1. บทแนะนำ
  2. What is a payfac?
  3. How do payfacs work?
  4. What is a white-label payfac?
  5. Benefits of using a white-label payfac
  6. How to choose a white-label payfac
  7. Stripe’s white-label payfac solution

Increasingly, as digital transactions make integrated payment solutions more relevant than ever, businesses are recognizing the value of white-label payment facilitator (payfac) services as they try to simplify the payment process and improve their customers’ experiences. Businesses across industries that incorporate integrated payment solutions are primed to add a significant revenue stream to their overall portfolio.

Incorporating a white-label payfac into a business's platform means the business can manage and process payments directly, giving customers an all-in-one branded commerce experience.
Below is an explanation of white-label payfac services: their benefits, how different businesses use them, and important considerations for choosing the right solution. Here’s what businesses need to know to select a white-label payfac service that aligns with their goals and paves the way for sustainable growth.

What’s in this article?

  • What is a payfac?
  • How do payfacs work?
  • What is a white-label payfac?
  • What types of businesses use white-label payfac?
  • Benefits of using a white-label payfac
  • How to choose a white-label payfac
  • Stripe’s white-label payfac solution

What is a payfac?

A payfac, short for payment facilitator, is a type of provider in the payments industry that simplifies the process for other businesses to accept credit and debit card payments.

Traditionally, a business that wanted to accept card payments would need to set up a merchant account with a bank, which can be a complex and time-consuming process. By contrast, a payfac acts as a master merchant that facilitates transactions on behalf of sub-merchants under its umbrella. A payfac extends merchant account functionality to a large number of businesses, relieving them of the burden of having to apply for and maintain their own merchant account.

A few key features of the payfac model are:

  • Simplified sign-up
    Payfacs usually offer a streamlined application process that means a business can get up and running with card payments much faster than if they were to set up a traditional merchant account.

  • Underwriting
    The payfac takes on the responsibility of assessing the risk associated with each sub-merchant. This can include evaluating the sub-merchant's credit history, type of business, and potential for fraudulent transactions.

  • Pricing
    Payfacs typically charge a flat rate per transaction. This model can be easier to handle for small businesses when compared to the interchange plus pricing model often used by traditional merchant accounts.

  • Support
    Payfacs often provide technical support for payment processing, such as APIs for integrating payment processing into a website or app.

  • Payouts and reconciliation
    Payfacs manage the entire flow of funds, tracking each transaction from the point of sale to the deposit in the sub-merchant's business bank account. They also handle chargebacks and refunds.

  • Compliance
    Payfacs are responsible for maintaining compliance with payment card industry (PCI) security standards and other relevant regulations.

Payfacs, which include companies like Stripe, lower the barrier to entry around payment acceptance, making it easier for small businesses and individual sellers to accept these payments.

How do payfacs work?

Payfacs provide a platform through which businesses can handle electronic transactions without needing to set up their own merchant account with a bank or card processor. Here's a breakdown of the process:

  • Application and setup
    A business signs up with a Payfac online, which is a relatively quick and easy process. The payfac handles the setup of a sub-merchant account under its master merchant account. This sub-merchant account is unique to the business and will be used to process its transactions.

  • Transaction processing
    When a customer makes a purchase, the business processes the payment through the payfac's platform. The payfac submits the transaction to the relevant card network (Visa, MasterCard, etc.) through the payfac's master merchant account.

  • Fund settlement
    After the transaction is approved, the funds are transferred from the customer's bank account to the payfac's master merchant account. The payfac sends these funds to the business's bank account, minus any fees.

  • Risk management and compliance
    Payfacs handle the risk and compliance aspects of payment processing, including fraud detection, dispute resolution, and adherence to Payment Card Industry Data Security Standard (PCI DSS) regulations. This allows businesses to focus on their core operations without worrying about the complexities of payment processing.

  • Reporting and support
    Most payfacs provide businesses with reporting tools to track transactions, monitor sales, and gain insights into their customers' purchasing behavior. They also offer support services to assist businesses with any issues related to payment processing.

Payfacs simplify the process of accepting electronic payments for businesses by providing them with a ready-to-use platform, handling the complexities of transaction processing, compliance, and risk management. Many payfacs also offer users additional services like card issuing, subscriptions, financing, and fraud protection.

What is a white-label payfac?

A white-label payfac, also known as payfac-as-a-service, is a business model in which a company uses a third-party payfac platform to offer payment processing services under its own brand name.

In this model, the white-label payfac provider takes care of the underlying technology, payment processing infrastructure, compliance, and risk management. The business using this service, often an independent software vendor (ISV) or a SaaS provider, can seamlessly integrate payment processing into their product offering, without the complexity of building a payment processing platform from scratch.

What types of businesses use white-label payfac?

Many types of businesses can benefit from using white-label payfac services. These businesses often look for ways to add value for their customers, and the convenience of integrated payments can be a key selling point. Here are some examples:

  • Independent software vendors (ISVs)
    ISVs often use white-label payfac services to integrate payment processing directly into their software. For example, an ISV that develops software for the restaurant industry might use a white-label payfac to enable restaurants to accept online orders and payments directly through the software. This way, restaurants can manage their operations and payments from one platform, which can simplify their workflows and enhance customer experience.

  • Ecommerce platforms
    Ecommerce platform providers can use a white-label payfac to provide their sellers with integrated payment processing. For instance, an ecommerce platform like Etsy or Shopify could use a white-label payfac to allow individual sellers to easily accept payments using a variety of payment methods, like credit and debit cards, digital wallets, bank transfers, and buy now, pay later (BNPL). This can make the platform more appealing to sellers, as they can get set up quickly and start selling products right away.

  • Marketplaces
    Online marketplaces, like home services platforms or gig economy platforms, can use white-label payfac services to handle transactions between buyers and sellers. For example, a platform like TaskRabbit could use a white-label payfac to facilitate payments between customers and service providers. The platform can manage the entire transaction process, ensuring funds are securely transferred from the customer to the service provider.

  • SaaS companies
    Software-as-a-service (SaaS) companies often use white-label payfac services to enhance their offering and generate additional revenue. For example, a SaaS company that offers CRM software might use a white-label payfac to enable businesses to process customer payments directly within the CRM platform, thus streamlining significant aspects of their overall operations.

  • Event management companies
    Event management companies might use white-label payfac services to enable ticket sales and registration fees for events. For instance, an event management platform could use a white-label payfac to process payments for event registrations, making it easier for attendees to sign up and pay for events.

By using white-label payfac services, these businesses can offer a more comprehensive solution to their customers, refine and reduce friction in their payment process, and potentially generate additional revenue. That said, businesses using white-label payfac services also need to consider other responsibilities associated with offering payment services, such as customer support and dispute management. We’ll go further into these considerations below.

Benefits of using a white-label payfac

Using a white-label payfac can offer a host of benefits to businesses seeking to integrate a seamless payment processing solution into their offerings. The infrastructure and capabilities of a dedicated payfac allow businesses to enhance their services, providing a unified experience for their clients. Here are some of the primary benefits for businesses:

  • User experience enhancement
    White-label payfac services can improve the user experience significantly. Incorporating payment processing into your platform means the customer journey becomes focused and smooth, since customers don’t have to navigate away from your platform to finalize transactions. This frictionless interaction can increase customer satisfaction—and retention—immediately, while the reliability of the system can strengthen your customer relationships over the long term.

  • Accelerated time to market
    The traditional setup of a payments infrastructure is complex and time-consuming. By adopting a white-label payfac solution, you can drastically expedite your time to market. With the payfac provider taking care of the intricate backend, you can focus on branding and integrating it with your platform, saving valuable time and resources.

  • Fuller brand expression
    White-label payfac services offer an opportunity to bolster your brand identity by using your own branding where your payment processing provider’s branding would usually appear. Offering payment processing under your brand portrays you as a comprehensive service provider, which boosts your brand's credibility while contributing to a more consistent brand expression across every customer-facing touchpoint.

  • Increased revenue streams
    The incorporation of a payment processing service can generate new streams of revenue. In addition to your primary services or products, you now possess a profitable facet to your business: transaction fees. With every processed transaction, you gain a fraction of the fee, diversifying and expanding your revenue sources.

  • More bandwidth for core business functions
    White-label payfacs manage the complexities of the payment process, including risk management, compliance, and technical support. This frees up more internal resources that you can use to focus on the primary revenue drivers and customer service.

  • Simplified compliance and risk management
    Navigating the often shifting regulations of financial transactions can be a daunting—and seemingly endless—task. A white-label payfac provider simplifies this by ensuring that the payment processing adheres to all relevant industry standards and regulations, and by handling risk assessment and management—protecting your business from potential fraud and disputes.

  • Scalability
    White-label payfac services offer scalability to match the growth and expansion of your business. As your transaction volume increases, the payfac solution scales accordingly, providing consistent, reliable performance.

  • Global reach
    With white-label payfac services, geographical boundaries become less of a constraint. These solutions often support multiple currencies and payment methods, enabling your business to tap into new markets and broaden your customer base.

White-label payfac services can allow businesses to revolutionize their payment processing capabilities, improve the customer experience, and explore new revenue opportunities—all while maintaining focus on their primary competencies. For businesses with the right needs, goals, and requirements, it’s a powerful tool.

How to choose a white-label payfac

Choosing a white-label payfac solution is an important decision that can significantly impact your business operations, customer experience, and overall growth. To ensure you select the right solution that aligns with your business goals and requirements, consider the following factors:

  • Integration and customization capabilities
    A key factor to consider is the ease of integration with your existing platform or system. The white-label payfac should blend into your existing platform without disrupting the user interface or experience. It should also offer ample customization options to align with your brand's aesthetics and functionality requirements.

  • Compliance and security
    The payfac solution should adhere to all relevant regulations and standards, including PCI DSS, Know Your Customer (KYC), and Anti-Money Laundering (AML) guidelines. Additionally, it should provide strong security measures, such as data encryption and fraud detection, to protect sensitive transactional data.

  • Scalability
    As your business grows, your transaction volume will likely increase. Choose a white-label payfac solution that can scale alongside your business and handle a larger volume of transactions without performance issues.

  • Support for multiple payment methods
    To cater to a diverse customer base, choose a solution that supports multiple payment methods, including different types of credit and debit cards, digital wallets, and bank transfers. This flexibility can enhance the customer experience and increase conversion rates.

  • International transactions
    If your business operates globally or plans to expand globally in the future, ensure that the payfac solution you choose supports multiple currencies, can handle cross-border transactions, and possibly even enables local acquiring. Any or all of these features can be key to operating in international customer markets.

  • Transparent pricing
    Payfac providers have different pricing structures, such as a flat fee per transaction, a percentage of the transaction value, or a combination of both. Understand the pricing structure clearly and calculate the cost implications for your business. Look for a provider that offers competitive rates and transparent pricing with no hidden fees.

  • Reliable customer support
    A reliable payfac provider should offer robust customer support to answer your questions and assist you with any issues that may arise. Check the provider's support channels—email, phone, live chat—and their availability. Ideally, they should offer 24/7 support.

  • Reputation and reviews
    Do your market research. Look for reputable customer reviews and case studies to gauge the provider's reliability, customer service quality, and overall performance. While the decision is yours to make, hearing from other businesses that have used a provider can be invaluable, especially around such a high-stakes function like payment processing.

  • Reporting and analytics
    A high-quality white-label payfac solution should offer comprehensive reporting and analytics features. These insights can help you track your transactions, identify trends, and make data-driven decisions to improve your business.

With all of these factors, make sure to consider the near-term and long-term needs and goals of your business. Your choice should meet your current needs and have the ability to adapt and scale with your business as it grows.

Stripe’s white-label payfac solution

While, traditionally, establishing a payfac model required substantial investment of up-front time and money, Stripe offers a more efficient, technology-driven solution that simplifies the process and opens up additional revenue opportunities for businesses.

Stripe's payfac solution is designed with a particular focus on technology, allowing businesses to fully embed not only payment services but also additional financial services into their software. This approach is valuable for platforms looking to enter the market swiftly, minimize setup costs, and expand their monetization potential.

Prominent platforms, including Lightspeed and Shopify, use Stripe's solution to create a white-label payment experience, fully embedded within their platform. They provide added value services to their customers, such as point-of-sale payments, card issuing programs, fraud solutions, subscriptions, and financing options. Building on Stripe enables these platforms to deliver customized payment experiences to their customers and to monetize a range of products and financial services.

One of Stripe's primary advantages is its API-first approach. This means that platforms can design the optimal experience for their customers, either by fully customizing the user experience or by using prebuilt UI components provided by Stripe.

Features that platforms can control include:

  • Customizing the user experience: Platforms have the flexibility to design their payment interfaces to best suit their customers' needs.

  • Setting payout timing: Platforms can determine the frequency and timing of payouts to best manage their cash flow.

  • Determining pricing and fees: Platforms can set their transaction fees, enabling them to control their revenue from payment processing.

  • Managing complex money movement: Stripe's solution simplifies the process of handling complex payment flows, making it easier for platforms to manage transactions.

  • Integrating and unifying financial reporting: Stripe offers comprehensive financial reporting features, providing platforms with valuable insights into their payment activities.

  • Scaling globally: With Stripe, platforms can operate internationally without needing to set up local bank accounts and company entities in each market. Stripe's global infrastructure simplifies the process of accepting payments across different countries and currencies.

  • Offering additional services: Platforms can expand their service offerings to include point-of-sale payments, invoicing, issuing payment cards, subscriptions, and lending.

Stripe's technology-driven payfac solution provides a comprehensive, customizable, and scalable solution for businesses looking to integrate payment processing and additional financial services seamlessly into their platforms. To learn more and get started, go here.

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