B2B Marketing
September 30, 2021

5 Signs You’re Ready for an Alternative to Managed PayFac Providers

Many new businesses initially start down the PayFac path with a managed PayFac provider like Stripe or Braintree. And if your business is processing low or zero payments volume, a managed PayFac provider will supply the seamless and frictionless service you’re looking for, with no upfront investments or operational burdens.

But what you’ll come to realize is that while these managed PayFac providers were good partners when you first started your business, you’ve now outgrown them. And that’s OKAY. Chances are you’re ready for a solution that is designed with your business, your customers, and your bottom line in mind. Here are five signs you’re ready for a alternative to your managed PayFac provider:

#1 – You’re tired of talking about how expensive managed PayFac providers are

2.9% and $0.30 sounded great when you first started. It’s simple, it’s transparent, but as you’ve come to realize, it’s also expensive. Despite their benefits to merchants, managed PayFac providers offer next to no benefits to software companies, taking all the margin on processing fees for their own profit.

And as your company begins to scale, you’ll quickly realize you can no longer afford to pass through all your payments processing costs — and profits — to your managed PayFac provider.

At a certain point, you have to ask yourself “why isn’t my business generating revenue from all the payments flowing through my software system?” Payments should be a revenue center for your business instead of a cost center. Check out this awesome Forbes article if you need convincing that your software business should be generating substantial revenue from your integrated payments offering.

If you’re tired of talking about how much managed PayFac providers cost, now’s the time to start looking for an alternative.

#2 – Your managed PayFac provider is not negotiating

Maybe you’ve tried negotiating with your managed PayFac provider, and maybe after a long back and forth battle you’ve gotten them down to 2.7% and $0.25. But let’s face it: it doesn’t cost 2.7% and $0.25 to process most card payments. You know your managed PayFac provider is making a lot of money off the customers you’re bringing to them and none of that money is going into your pocket. Managed PayFac providers are notoriously inflexible, and their flat rate pricing models are often limiting for both you and your customers. It might even be pricing you out of the market if your customers are used to negotiating payment processing rates and can find a better deal elsewhere.

If you are lucky enough to get your managed PayFac provider to negotiate, they will likely ask you to start taking on liabilities like chargebacks in exchange for only slightly better rates. That’s more risk, and, as a software vendor and not a payments expert, you may not fully understand what you’re taking on. Any lower rates you get from your managed PayFac provider could be fully negated by the costs you’ll take on in liability, and you could easily find yourself in a situation you’re not prepared for.

If you’ve hit the point where you’re frustrated trying to negotiate with your managed PayFac provider, it’s time to start looking for a new partner.

#3 – Your payments volume is increasing

Let’s be honest — we all know that managed PayFac providers do a great job marketing themselves. Most companies pick these solutions as their first option because they’re quick and easy, and when you’re not processing very much volume, it’s not very painful to leverage. But as your business grows, and therefore your payments volumes increase, it quickly becomes apparent that your managed PayFac provider isn’t a long-term solution for your business and at some point you’ll need to make a change.

Maybe not today, maybe not tomorrow, but someday it will be too costly to give up all of your potential payments revenue to your managed PayFac provider. You know that eventually you’ll need to start benefiting from the money you’re currently sending straight through to them. It usually comes down to how hard it will be to switch.

What if we told you that you could be up and running with a new partner in less than one week, with no upfront costs, and start generating substantial revenue from the payments volume you’re already processing today. Sound too good to be true? Trust us, it’s not.

#4 – You’re considering your exit strategy (or a new funding round)

When it comes to venture capital, a lot of VCs are starting to recognize the enormous value of payments processing as a revenue stream. They know that a properly monetized integrated payments strategy can have a huge impact on both the bottom line and the valuation of your business. That’s something you just can’t get with managed PayFac providers.

So when you’re considering your next funding round or your potential exit multiple and working to increase your margins, revenue and profitability, don’t ignore the additional recurring revenue that you can generate from the payments being processed through your software today. Think about it: would an extra $500,000+ a year in revenue be beneficial to your business? We’re guessing yes.

#5 – You can’t stop talking about an alternative to your managed PayFac provider

Most companies recognize they need to move on from their managed PayFac provider long before they actually do. But when they’ve looked at the alternatives, the decision is almost always to delay. It could take months to get another solution up and running — time and effort you just don’t have.

Whether it’s your CEO, CTO, CFO, or VP of Sales, you probably do have someone on your team who’s continually evaluating competitors. You talk about it at every board meeting. You ask your colleagues about it at events. You’re ready for a change.

Think you’re ready for an alternative to managed PayFac providers?

Do any (or all) of these signs sound familiar to you? If so, you should seriously be considering PayFac-as-a-Service. At Tilled, we recognized that existing alternatives (PayFac-in-a-Box, Legacy Processors, ISOs) weren’t an adequate solution and so we spent the last few years building the right solution. So now there’s no more reason to delay switching. Our solution is as easy to set up as a managed PayFac provider, just as seamless for your customers, but is designed with your business (and bottom line) in mind. Plug in our easy to implement APIs and start generating substantial revenue from your payments today.

Your managed PayFac provider was likely a great partner when you first started your business. But now, you’ve outgrown them. And that’s a good thing! It’s time to look at an alternative and time to get started with Tilled!

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