The methods of accepting credit cards are evolving, thanks to the Payment Facilitator (PayFac) model, by increasing card acceptance for those merchants who do not have a traditional acquiring relationship. This model is blowing up thanks to the number of merchants who rely upon streamlined solutions to run their business.
Steve Blentlinger, chief strategy officer and co-founder of Payline Data sat down with Joe Bush of Payment Facilitator to discuss Payline’s role in the PayFac game. So far this year, Payline has signed on 10 “eager yet fearful” software companies and began testing the platform back in March of this year. Payline hopes to offer the platform to the public in early 2017.
Payline tests Payment Facilitator model to streamline process of accepting credit cards for businesses – [PODCAST]
Joe Bush: Hi, there. It’s Joe Bush, editor-in-chief at PaymentFacilitator.com. This week’s podcast will feature Steve Blentlinger, chief strategy officer and co-founder of processor Payline Data Services. He’s joining us today to talk about his company’s new payment facilitator platform, and this payment facilitator industry niche in general. Steve, thank you for joining me today. How are you?
Steve Blentlinger: Happy to be here, and, thanks for having us on.
Bush: Yeah, great. Exciting news about trying a new platform and working that out to attract some payment facilitators. But, that must mean that you feel really good about the payment facilitator niche in general. Can you tell us what your company’s point of view is on that segment of the payments industry?
Blentlinger: Absolutely. We’re very excited about expanding our services into payment facilitation. We’ve seen a lot of growth in the traditional payment side of things. As anybody that’s familiar with this space knows, there’s a ton of employers in the market that are software companies or other service companies that are almost acting like payment facilitators without taking the steps to properly register and make sure they’re within the compliance and regulations to do so.
We saw the market opportunity – that the demand is absolutely there – both from other customers as well as our existing customer base. We’ve used that to springboard into developing what we look at as a turnkey solution for companies that are either struggling with their current method of accepting credit cards and would like the flexibility and ease of use of a payment facilitator without the complexities and long-term struggle of going through the compliance and regulatory and development. And, we’ve seen a lot of success in that.
Bush: What tipped the scales into e-entering this, and was there anything in particular that you saw that made the decision to go?
Blentlinger: That’s a great question. We saw a demand from the market. We actually dabbled with the mobile payment sector and went after micro-merchants who are accepting credit cards early on. And, we ran into a lot of the issues of what Square’s earnings calls are – that it’s very hard to make money on very small merchants. They’re very inconsistent on their volumes. Risk and fraud become very complex and challenging to deal with.
Looking at our existing customer base and existing software companies that we were working with, we started the conversation with them about how to speed up the onboarding process and used what we learned from dabbling with the PayFac model in the mobile side and relayed that over to the traditional ISO side, the traditional onboarding side… just tried to streamline things.
From there, we saw some great efficiencies, taking what used to be a three- to five-day onboarding process, down to where we have approvals running the range of as fast as two hours to two days – a significant increase. That led to excitement around what payment facilitation could do for growth on these businesses. We knew we were going to invest in this ourselves, and we knew that we had customers that were interested in it. We really tried to look down-road of this and see where the market was headed.
We saw a great opportunity for a platform player, — or players, I should say — where there’s a simplicity of becoming a payment facilitation provider and dealing with the regulatory compliance and complexities that exist as well as integrating directly into back-end processors and dealing with the intricacies as far down as the charge-back resolution interface, and how does that tie into payment facilitation and dynamic funding versus static funding and dealing with how to report and reconcile the reports for the merchants that are using the platform.
Those are all very complex conversations, one in each of its own. By taking the time to invest heavily in developing the platform and making it a very user-friendly experience for both our partners as well as their end-of-line merchants – looking at that opportunity to be a leader in the market in that segment – we took the dive into investing in it.
Bush: There’s different levels of risk and different verticals. Did your company have any particular verticals? Or how would you describe your palate for risk when you made this decision?
Blentlinger: That’s probably one of the most challenging questions for companies looking into payment facilitation. Taking the risk on in-house demands very diligent and well-thought-out policies and procedures as well as an understanding of the complexities of the markets that you’re going to serve. We’ve had a ton of success dealing with service-based companies both in the contractor world as well as nonprofits, even stemming into catering and school lunches and services that are very focused on educational systems.
We’ve seen that quite a few different risk profiles in each of those markets. We’ve had a lot of luck with servicing the contracting industry, which has been notoriously higher-risk, by focusing on a top-down model of going after the larger, more established businesses, even partnering with suppliers and other market players. And, that’s led to our entry into this market.
We’re very focused on what we’ve coined “business management solutions software companies”, which is companies that are building software focused on streamlining the processes around delivering these services. And that can include platforms, even marketplaces of the GIG economy and on-demand services, all the way to very robust, vertically integrated financial services tools focused on niche segments of the industry. That’s where we saw the opportunity, where our market launch is focused. Our beta test customers are all focused around those three categories.
Bush: Great, so, testing is the phase right now. Can you take us through the timeline; when it started how many you’re testing with, and how it’s going? What kind of benchmarks are you looking for to decide success?
Blentlinger: Absolutely. You mentioned we’re in the beta phase. We’ve had great success in onboarding the customers.That’s come with the typical challenges of anything new. We’ve really ferreted out a lot of the issues that we think we’re going to have with the partner onboarding and developing a more robust API. So we currently have our system live, and we are processing transactions.
We’re ramping up the volume of those transactions. All of the new merchants with our partners are now going through the payment facilitation platform. And, we’re still finalizing some of the front-end work – the KYC, some of the back-end risk monitoring, refining those tools in preparation for our public launch and really our go-to market of the system.
What we’ve seen so far has been a great success. We’ve seen merchants that normally would not opt in for the payments with our partners who are now seeing anywhere from double the rate to a thousand-percent increase in the rate of customers that are signing on to be accepting credit cards and payment through their services, which,really speaks to the advantage of payment facilitation in streamlining the onboarding process.
Bush: Steve, you’ve taken us through how the test is going, but what’s next for the testing and beyond?
Blentlinger: As I mentioned, we are currently in beta with a group of beta customers. We are looking to expand the list of beta customers. If there’s a few companies out there that are looking for more of a customized solution in entering into payments or even switching from traditional payments and ways of accepting credit cards to payment facilitation, we’ll be boarding a few more customers to round out our beta group. Then we’re eyeing public launch in the first quarter of 2017.
Bush: Well, this is kind of an obvious thing – you must really have faith in the payment facilitator business model to be doing this with your investment. It probably goes to show that you think the future is pretty strong as well. Do you see any changes? Or what are you going to keep your eye on as this evolves?
Blentlinger: I think there are a few detractors of the industry, which are the complexities of the re-regulation and compliance. We see that as an opportunity, and we think those are the types of things that we’re going to be keeping a very strong focus on. The regulations even at a state level versus a federal level are things that could really affect the future.
All that being said, the outlook is extremely positive. The advantages of instant onboarding, the advantages of having the level of reporting, the simplicity of building really takes a lot of the pain points away from the traditional way of accepting credit cards in the payments world.
Then, doing vertical integrations, both on the software front as well as additional value-added services (like auto-updater for card records, for the vault, for subscription billing); more in-depth customer data across the platform so that a customer that is at one of our partners, then processes another partner, gaining that knowledge – those are the types of things that the PayFac world enables both for us and for our partners to improve commerce. And, we think that’s something that we’re going to continue to heavily invest in. We’re going to be more aggressive with boarding customers next year as we start to really bring this to market and develop it.
Bush: Steve, thank you very much for joining us this week, and good luck with the platform and business in general.
Blentlinger: Thank you, Joe. As always, it’s a pleasure.