Today’s digital age has presented businesses with a wide variety of options when it comes to accepting payments. As a merchant, you can accept any payment method from cash to online transfers.
The major drawback of most online payment methods is that they are not directly beneficial to your business. If anything, they eat into the margins of your business.
Luckily, there is a solution – you can monetize these payments, and that’s what you are going to learn from this article. If you’ve been looking to increase your profit margins by monetizing the payments to your business, here are some tips that you should try:
1. Get shared revenue from a PayFac
You’ve probably heard about Payment Facilitation as an alternative to opening and managing a merchant account. Payment Facilitators (PayFacs) handle the payments coming from buyers and going to online merchants, but as a merchant, you will white-label these services as your own.
Of course, that’s welcome input, considering the challenges that come with payment processing and handling any related issues. But there’s more – payment facilitation often comes with shared revenue.
The way shared revenue works is by having a revenue share agreement with the payment facilitator. They will then offer you a predefined percentage of the revenue that they make from processing payments. Therefore, when you choose a company like Tilled that offers PayFac-as-a-Service with built-in rev share, you can increase your profit margins by a huge value. Payments.
2. Leveraging a cost-plus revenue plan
This one is almost similar to the shared revenue method. You will strike an agreement with the PayFac, based on the true cost of the payment facilitation. The PayFac will have a defined revenue percentage on top of the true cost of facilitation.
For example, if the true cost of the facilitation is 2.1%, the PayFac may have a revenue of 0.35% on top of the true costs. That would bring the cost of the platform that they offer to a total of 2.45%. So if you sell your payment facilitation services to customers at 3.0%, you will make a profit of 0.55%.
This method of monetizing payments works best if your pricing model surpasses the standard 2.9% and 30 cents.
3. Become your own PayFac
It’s highly advisable to avoid this method of monetizing payments, but you can take up the challenge if you have the resources.
One of the most important things to keep in mind about this method is that you will undergo an often-complex underwriting process. Additionally, you are required to adhere to stringent guidelines, not to mention that you’ll also have to acquire a merchant account from your bank.
Well, if we were to say just a few words to help you make the decision, becoming a PayFac will only work if you have a large volume of transactions in a day and you have enough resources to manage the payment facilitation.
4. Use a third-party payment management service
There are lots of third-party payment management providers like PayPal or Stripe that help you process payments.
These are different from in-house payment facilitators like Tilled in that they handle the payments on their platforms. As such, if a client is making a payment, they will be redirected to the provider’s platform to complete the transaction.
You can monetize this payment model by getting a small cut from the provider. In return, they offer additional services like payment protection and others. However, this method comes with various downsides such as huge fees, a bad customer experience, and a complicated relationship.
Use shared revenue to earn more
Of all the methods that are available for monetizing payments, teaming up with a PayFac which offers shared revenue is simply the best.
At Tilled, we not only offer an attractive revenue share, but we also have a straightforward onboarding process and a dedicated customer support team for when you need any assistance.
So if you’re looking to monetize payments to your business while avoiding all the hassle, make sure to leverage the power of Tilled.