Platforms are rapidly forging their own ecosystems — matching supply and demand, buyers and sellers, sometimes on a global scope. In other cases, they serve specific verticals — for example, hair salons or restaurant delivery — to offer a one-stop shop for a variety of activities, such as ordering or booking appointments.
And not surprisingly, payments are at the center of it all, binding the two sides of any interaction done in digital commerce.
PYMNTS has covered the evolution of PayFacs — short for payment facilitators — the firms that make it possible for merchants to accept, and to process, digital payments, taking those capabilities in house.
For the software platforms that are serving businesses and marketplaces, embedding payments into their software can prove a lure to attract merchants seeking to broaden their own end use base, and in turn boost the platforms’ revenue streams. By embedding payment options into the normal flow of customers’ interactions with the platform, transactions become convenient and may spur repeat business.
PayFac as a Service is proving to be a burgeoning business model, where instead of businesses taking on their own payment processing and the back-end upgrade to processes and systems that would come with that endeavor, those functions are offloaded to a provider.
A PYMNTS Intelligence report done in collaboration with Carat from Fiserv, titled “Platform Business Survey: The Rise of Embedded Payments,” showed that independent software vendors (ISVs) and PayFacs offer an average of seven payment methods each — and marketplaces provide an average of eight, which gives the nod to the fact that end customers demand a range of choices. We found, too, 74% of marketplaces were in the midst of enabling a broadening set of digital payment experiences to remain competitive.
The data show that 49% of marketplaces offer, and wanted to innovate, digital wallets; roughly half were mulling the installment payments. More than 50% said they were interested in offering buy now, pay later (BNPL) options.
As for funding and a spate of recent announcements, in October, Tilled, a PayFac as a service provider focused on embedding payments for software firms, said it raised $12.5 million in a round led by Canvas Ventures and UPC Capital Ventures, and has raised $40 million since its genesis five years ago.
Elsewhere, and also as announced that same month, Clearent by Xplor, operating as a payment processor under Xplor Technologies, launched its PayFac as a Service solution. The solution, according to the announcement, is designed to help Software-as-a-Service (SaaS) companies optimize their payments infrastructure by simplifying operations while generating additional income.
As reported earlier this year, Forward raised $16 million in seed financing, which will be used to help bolster its PayFac software and services platform. The company’s seed round was led by Commerce Ventures, Elefund and Fiserv. Fiserv in turn, said it was using Forward’s capabilities as it provides services to ISVs.
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