Digital payments have become the largest segment of the financial technology market, accounting for over $5 billion in transactions worldwide in 2020. Digital commerce payments made online still makes up a significantly greater proportion of value than mobile point-of-sale (POS), where an electronic device is used at checkout.
With the digital payments ecosystem expanding globally, merchant acquiring – a term which refers to the processing of credit and debit card transactions for a company or merchant by a financial institution such as a bank – is becoming increasingly significant as more and more payments are processed digitally. The focus is now turning on increasing the ease with which merchants are onboarded by payment processors.
Merchant onboarding, enrollment and automated risk/underwriting procedures have traditionally been very manual processes that take weeks to complete. One innovation that is accelerating the adoption process for merchants is the rise of Payment Facilitators (PayFacs).
PayFacs, still relatively in their infancy, are predicted to have a global compound annual growth rate (CAGR) of 28.4%, seeing payment volumes of over $2.52 trillion by 2023.
However, becoming a Payment Facilitator can be costly, time-consuming and burdensome. It involves a complex underwriting process, a significant amount of cash reserves and sponsorship from a financial institution, registration with card brands and a costly and lengthy development process – apart from costly compliance with the Payment Card Industry (PCI) Security Standards Council.
Companies offering PayFac solutions for merchants include Fidelity National Information Services Inc. FIS through recently acquired payment company Payrix and JPMorgan Chase & Co. JPM through its subsidiary Chase Paymentech.
Usio Inc. USIO is a financial technology (fintech) company that offers full-circle payment integration services by providing a PayFac platform that integrated software vendors (ISVs) can seamlessly integrate into their own software applications. As a business-to-business (B2B) company, Usio looks to serve these ISVs with consistent payment streams passing through their platforms. Furthermore, Usio helps the ISVs they serve activate untapped revenue streams from their customers by monetizing their payment platforms.PayFac The Usio Way
Usio has automated the risk and underwriting procedure to streamline its processes as part of its frictionless merchant onboarding. It claims unparalleled processing speed, with the average merchant application approved in less than nine seconds and approved merchants being on-boarded in no more than 30 minutes. The pace at which development occurs translates into ISV partners receiving revenue from customer payments flowing through their software applications within 30 days a speed it says is unrivaled by its competitors.
PayFac is a way for software applications to turn a traditional cost center into a revenue-generating business unit. Through its platform, Usio offers a way for companies to access the benefits of Payment Facilitation (PayFac) without facing the hassles or incurring the complex and laborious upfront investment required, much less the risk associated with becoming a PayFac.
Usio also owns and controls the proprietary technology for its PayFac, which it claims distinguishes it from many of its competitors. Its fully integrated infrastructure system makes it a one-stop-shop for PayFac needs, including billing, integration and implementation of the platform.
Usios target clients for its PayFac services include those within low-risk verticals and channels featuring recurring payments representing average transaction amounts of $300 or more. Usio offers companies the opportunity to own the payments ecosystem. These companies are often in fields like healthcare, property management, non-profit management, insurance and education.
Usios acquiring business, which includes their PayFac platform, saw a 35% increase in transactions processed in the second quarter of 2022 (over the same quarter in 2021) and represented the largest segment of revenue for the company, accounting for 40.6% of earnings. Its merchant-acquiring business, including its PayFac, processed more than $1.2 billion the same year.
As a cloud-based company establishing itself as a leader in the fintech landscape, Usio provides other payment solutions in addition to its PayFac business. These include prepaid card issuing, automated clearing house (ACH) and electronic bill presentment, printing and mailing services.
To learn more about Usio, visit its website.
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Featured photo by Joshua Sortino on Unsplash