PayFacs Boost Revenue by Improving Customer Experience

Payment facilitators (PayFacs) are entities that enable their customers to accept electronic transactions using the payment facilitator’s platform, which has control of the end-to-end transactions. Examples of PayFacs include SquareStripe and PayPal.

A recent study conducted by PYMNTS Intelligence in collaboration with Carat from Fiserv, “Platform Business Survey: The Rise of Embedded Payments,” explores the key characteristics and behaviors of PayFacs, independent software vendors (ISVs), and marketplaces in relation with embedded finance products and the value they deliver to the payment ecosystem.

According to the study, PayFacs generate about two-thirds of their revenue from payment processing, but most companies in this segment estimate their revenue will grow primarily due to an increase in value-added services offered, such as digital wallets, installment plans, invoicing or reward programs. PayFacs project that nearly half of their business in the next year will come from these services.

However, as important as it is for these businesses to boost revenue by adding new services that customers like and use, it is also key to improve the infrastructure and fix potential issues that make the customer experience much worse.

For instance, approximately 25% of PayFacs’ business customers report monthly issues with embedded finance products, which may have a direct impact on present and future revenue. Moreover, 12% of PayFacs’ customers experience payment failures monthly, with a total of 43% over the year. One in three faces chargebacks and disputes, and 15% of firms report that customers have difficulty integrating the payment processing platform with their website or app.

In sum, some of PayFacs’ platforms are mostly well-served, but there still exists a high degree of friction with transactions, per the PYMNTS Intelligence survey.

As customers value modern, easy buying experiences more and more, providing reliable error-proof payment services and improving customer experience is becoming key to maintaining market competitiveness.

To address these issues, PayFacs are investing in products and solutions that neutralize these challenges, including, among others, chargeback and dispute management, 24/7 customer support and fraud prevention.

Around 8 in 10 PayFacs already offer 24/7 customer support, and a similar share consider it essential for the overall success of the software solution. Also 8 out of 10 respondents say chargeback and dispute management are essential for their businesses, though only 56% offer this service currently.

That relatively low rate of adoption means there is still room for PayFacs to continue developing these solutions, as well as other relevant ones such as invoice payments, or preventing and blocking fraud. In fact, data protection and security issues are the main concern of PayFac clients when it comes to payment acceptance.

One-third of PayFacs consider improving the customer experience as the most important factor to push innovation, which may explain why more than 70% of PayFacs offer embedded finance solutions to enhance the customer experience. If a customer-centric approach drives adoption, eliminating payment frictions and solving usage issues may contribute to augmenting the customer base and fostering loyalty, resulting in an increase in business in the medium term.

PayFacs are at the forefront of driving innovation and improving the customer experience in the payments industry. By offering embedded finance solutions and investing in value-added services, PayFacs are addressing customer needs and fueling their growth.

As they continue to prioritize the end-customer experience and dedicate resources and efforts to correct customer issues, PayFacs may continue gaining competitiveness in the digital payments industry. How these players will succeed in facilitating payments and providing better seamless digital transactions may well determine their viability and medium- to long-term growth.