Build vs Buy? A Playbook for Choosing the Right Payment Solution

Business leaders acknowledge the growing complexity of financial management, especially with the evolution of digital transactions and sophisticated B2B payment solutions. A pressing question emerges for numerous enterprises: 

Is creating an in-house payment facilitation system more advantageous, or does the future favour adopting a plug-and-play embedded payment solution from the market?

For SaaS providers, product managers, and tech innovators, the stakes of this decision are high. Is it expected that 85% of all company software will be SaaS solutions by 2025, but how do you know yours will be one of them? 

It doesn't matter what product or service you deliver; you will get lost in the crowd without a reliable and smooth payment processing mechanism. 

The choice to build vs buy your payment solution is not just about operational efficiency—it's about securing a competitive edge, delivering customer value, and unlocking new revenue streams.

Whatever decision you make will impact your business's productivity, cost, and overall success. 

This guide delves into the pivotal decision-making process between building a payment processor or opting for white-label payment processing tailored to enterprise software, so take the time to read on.

Understanding Payment Facilitation

Payment Facilitation is a service model that simplifies merchant onboarding, allowing businesses to accept payments more efficiently. The main difference between payment facilitation and traditional payment processing is the relationship structure and the speed of onboarding. Standard payment processing means each merchant must individually apply for and set up a merchant account—a time-consuming process involving extensive compliance checks. In contrast, payment facilitation (PayFac) allows merchants to bypass this complexity by signing up through the payment provider. This significantly speeds up the process and reduces administrative burdens.

PayFacs act as intermediaries between merchants and financial institutions, handling transactions for multiple merchants under their master merchant accounts.

So You Want To Be Your Own PayFac

Developing a payment processor in-house or forming a payment partnership with a recognized provider are two distinct paths businesses can take in the realm of payment facilitation. Both will have their advantages and disadvantages.

As you stand at the crossroads of building or buying for payment facilitation, consider the landscape that aligns best with your business goals. While it can offer greater control and customization, it's a substantial investment that comes with significant responsibilities and ongoing operational demands. 

First and foremost, you will need a deep understanding of payment ecosystems and everything that comes with it.

This includes: 

• Compliance and Legal Framework
• Technical Infrastructure
• Payment Gateway Development
• Security Measures
• Merchant Onboarding
• Monitoring and Reporting
• Settlement and Reconciliation
• Fee Structure
• Software Updates and Maintenance
• Compliance Updates
• Risk Management

Challenges in Building a Payment Infrastructure

As outlined above, building your payment infrastructure is a complex and multifaceted endeavour involving several components. Building and maintaining the system will need a hefty upfront technological investment and significant dedicated resources. 

Some of the more considerable challenges you can expect to encounter will be: 

Compliance: Understanding and adhering to international and regional financial regulations, such as the Payment Card Industry Data Security Standard (PCI DSS), General Data Protection Regulation (GDPR), and other local regulations. 

Fraud Detection and Prevention: Advanced fraud detection tools and protocols are required to minimize the risk of fraudulent transactions.

Scalability:  The payment infrastructure must handle rapid growth in user base and transaction volumes without compromising performance, which requires a scalable architecture.

User Experience: Creating an intuitive interface that balances security and user-friendliness is an ongoing challenge in the era of prioritized user experience.

Partnership Ecosystem: Building crucial partnerships with financial institutions, merchant card processors, and payment stakeholders involves navigating intricate collaborations and negotiating terms.

In the time it takes to build your payment solution, competitors may gain the lead by adopting ready-made white-label platforms, placing you at a strategic disadvantage.

If quick market access is what you need, selecting a partnership route offers more than a strategic advantage.

5 Reasons To Buy Your Payment Solution Instead

Forming a partnership with a third-party payment provider offers your business the advantage of leveraging the deep expertise of specialists who navigate the complexities of the payment industry daily.  

Here are five compelling reasons why more and more enterprises are opting to buy instead of build. 

1. Accelerate Market Entry 

Opting for a third-party payment solution dramatically speeds up the process of incorporating payment processing capabilities into a SaaS enterprise. Quick and seamless payment integration enables your business to respond to market demands and fulfill customer expectations rapidly. Furthermore, an all-encompassing payment platform is a vital asset for international growth, making cross-border transactions more straightforward and accommodating a range of payment methods. This not only eases the entry into new markets but also broadens your business's reach and operational capacity.

2. Reduce Costs and Resource Allocation

 Building a payment solution from scratch requires significant financial investment in development, security, compliance, and ongoing maintenance. Hiring a project management team and building out a payment solution could be anywhere from $50,000 and can go up to or beyond $700,000 for a fully-fledged SaaS product​​ (Codica). Beyond the initial development, there will be ongoing costs for maintenance, support, compliance, and updates. These costs can add significantly to the total cost of ownership over time.

SaaS companies can significantly reduce these costs by purchasing a solution and reallocating these resources. 

3. Offload Compliance and Security

The complexity of financial regulations cannot be underestimated. A trusted payment solution provider navigates these waters for you, embedding necessary compliance measures into their services. Third-party payment providers specialize in maintaining high levels of compliance and security, mitigating the risk for SaaS enterprises and ensuring customer data protection without the constant need for internal vigilance.

This alleviates the burden of regulatory compliance, allowing you to focus on core business activities.

4. Stay on Top of Payment Trends and Features 

Established payment solutions often come with a suite of advanced features, including fraud detection, multi-currency support, and global payment options. Investing in a modern payment solution ensures your business is adaptable and ready to embrace emerging trends and technologies. This forward-thinking approach keeps you competitive and relevant in a dynamic industry. 

5. Focus on Core Business

By delegating the intricacies of payment processing to a third party, SaaS enterprises can concentrate on their strengths—delivering core products and services. Prioritizing the challenges your solution addresses is crucial for the growth and expansion of your business.

When you buy a payment solution, you offload the work of building a payment system from the ground up, the upfront technology costs, and the human resources required to create it. Opting for a white-labelled payment solution grants you immediate access to a tailor-made payment infrastructure. 

The result? You can dedicate more energy and resources to scaling and refining core operations instead of entangling yourself in the detailed and often complex process of payment system development. 

The Value Payment Partnerships Play In B2B Payments

Streamlined Operations: A robust payment API simplifies and automates financial processes. This automation reduces manual input and error margins, leading to significant time and cost efficiencies. This is especially beneficial when managing recurring payments, bulk invoicing, and complex financial reconciliations. 

Enhanced Customer Convenience: A payment solution offering various payment methods, such as bank account payments, real-time payments, and push-to-card transactions, caters to the wide range of preferences and needs businesses have. Enhancing payment experiences strengthens business relationships and boosts client loyalty, improving retention rates and decreasing churn.

Data-Driven Insights for Strategic Decisions: Access to detailed analytics through a payment solution is invaluable. It lets businesses gain insights into payment trends, client payment behaviours, and cash flow patterns. This data can inform strategic decisions, helping companies optimize their sales strategies, improve financial planning, and drive growth.

Transaction Fee Revenue Sharing: By integrating a third-party payment solution, your business can earn a percentage of the processing fees for each transaction made through the system. This model can create a new, steady revenue stream, especially valuable for businesses with high transaction volumes.

Value-Added Services: Payment partnerships open the doors to deliver additional services such as extended financing, insurance, and payment terms such as Buy Now Pay Later (BNPL). By offering these value-added services, you can enhance your product offering and introduce new billing for premium features. This approach strengthens your value proposition and opens up additional revenue channels.

Boost Your Payment Processing Potential with VoPay

Upgrade your enterprise with the market's most advanced white-labelled payment infrastructure. Developed over five years, our comprehensive technology is designed to save you time and effort. With just one API integration, gain access to an extensive suite of financial services and payment capabilities. Avoid the pitfalls of complex integrations. 

Impress customers with a superior payment experience and launch financial products in about two weeks. Book a demo today!