Payment facilitators (PayFacs) have become a crucial component of the ever-evolving financial landscape, playing a pivotal role in enabling seamless digital transactions, connecting businesses with payment networks, and enhancing the overall payment experience for both merchants and consumers.
A recent study conducted by PYMNTS Intelligence in collaboration with Carat from Fiserv explores the characteristics, sentiments, and behaviors of payment facilitators (PayFacs), independent software vendors (ISVs), and marketplaces in relation to embedded finance products.
According to the study, PayFacs currently derive nearly 70% of their income from payment processing, and a majority of the firms in this category anticipate a rise in their revenue share in the coming year, largely driven by the incorporation of value-added services.
In fact, findings detailed in the report shows that PayFacs view value-added services such as digital wallets, installment payments and invoicing as key revenue drivers, accounting for half of their projected revenue next year.
Regarding digital wallets, 66% of PayFacs that offer this service as an embedded finance product intend to enhance and develop their digital wallet solutions, demonstrating their optimism about the significant opportunities for future returns. Similarly, 76% of PayFacs that offer invoicing regard it as crucial for their success and plan to innovate this offering further in the coming year.
Furthermore, among the 24% of PayFacs currently offering installment services, there is a strong drive for continued innovation while nearly 40% of facilitators express a keen interest in introducing this service.
Those who are yet to adopt installment payments like buy now, pay later (BNPL) can draw inspiration from the success of PayPal, which is one of the PayFacs benefiting from the surge in installment adoption.
As PYMNTS noted earlier this year, the company announced that more than 32 million consumers have used PayPal Pay Monthly — an offering issued by WebBank and available at roughly 3 million merchants — since its inception in 2022. This had led to a 70% increase in payment volumes to reach $6 billion as of May this year.
Additionally, separate research by PYMNTS Intelligence reveals that more than 40% of consumers plan to increase use of installment plans this holiday season compared to the rest of the year, with over 50% of Generation Z and millennials expecting to increase their use of these plans during the holidays.
This further highlights the need for PayFacs to capitalize on the surging demand for installment payment choices and diversify their value-added services to meet the evolving preferences of consumers.