Every firm its own payments processor?
Finix, a payments infrastructure firm focused on giving companies what it terms “ownership” of the payments stack, said that it had closed on a $17.5 million Series A funding round that was led by Bain Capital ventures.
Additional participation came from Insight Partners, Aspect Ventures and Visa along with a number of existing investors, a roster that includes Homebrew, Precursor Ventures, and Act One Ventures. The latest funding brings the total capital raised to date to more than $20 million, the company said Tuesday.
The overall goal is to bring payments into the core functionalities of companies so that they can process their own payments and improve their margins and value proposition to end customers.
In an interview with Karen Webster, Richie Serna, CEO and co-founder of Finix, noted that through the traditional processes it can take companies as long as two to three years to become a payments facilitator PayFac), with an outlay of $3 million to $5 million.
“And that’s before you ever process a transaction,” he told Webster.
Beyond those costs, paid in time and money, he said that companies that elect to handle payments will likely hire 10 to 15 engineers, and then must do the heavy lifting required to maintain those technology systems and staff.
Against that backdrop, he said, Finix provides a platform that allows the company’s customers to better monetize payments without the pain of building all the infrastructure in-house. Finix has said that it can help businesses become a PayFac in as little as two months and at a fraction of those multi-million dollar costs. The company has said it makes it money off subscription fees.
There is value inherent in bring payments in-house, he said, where companies can reduce costs (and boost profits as they do not pay outsourced processors transaction fees) and where payments exist as a product.
“Payments are an indistinguishable part of the value proposition,” that companies must offer their customers, he said.
“It’s about how you can pay out your merchant. It’s the experience of being able to get them their funds as quickly as possible and as frequently as possible,” he added. He noted that firms such as Airbnb and MindBody all have integrated payments into their experiences.
And yet, he added, managing and enabling payments is not within the core functionality of many other businesses, which are of course focused on building scale and presence within their chosen competitive landscapes.
Dealing With Complexity
For online platform or marketplace companies, he said, challenges come with building capabilities in-house or even outsourcing payments processing to other companies. He said that these companies have to manage the onboarding and underwriting of merchants, deal with chargebacks and manage customer support, he said.
With other providers, he contended, a lot of those operational tasks still remain across disjointed platforms, which translates into inefficient operations.
And, he said, at least some providers tend to use scare tactics — in other words, that there is business risk inherent in taking on payment processing (when actually, for many software companies, chargeback rates are quite low) — in a way that obfuscates the economics and value of managing payments internally.
He said that many of those complex functions are streamlined by Finix through the use of application programming interfaces (APIs), and estimated that 90 percent of manual workflows are automated.
Finix, he continued, also differs from other PayFac enablement firms by focusing on the vertical software space and also the integrated software vendors (ISVs) that in turn serve companies that need more control of payments, defined as firms that process at least $50 million.
Those ISVs, he said, already have relationships with the major acquirers and processors, and the value add lies in helping end customers replace in-house development initiatives that seek to develop payments infrastructure internally.
Grappling with PCI compliance, verifying bank account information, storing credit card information and meeting KYC and settlement mandates is in turn outsourced (and updated as needs and regulations change) to Finix. Another advantage lies with the linkup with Visa (and Visa Direct) that enables instant payout via push to card disbursements done across debit card rails.
Of Finix’s customers, said Serna, “we’re delighting them because now they can focus on the core capabilities and differentiators of their businesses,” he told PYMNTS, “ and we subtract away the complexity of this payment model for them.”