Your Payments Layer Cake Questions, Answered
As the landscape of the payments ecosystem continues to evolve, innovation and improved technical capabilities from legacy organizations and challengers alike continue to create new economic opportunities. During our Payments Layer Cake webinar, we gave an overview of the connected network of organizations that work together to facilitate transactions AKA the Payments Layer Cake. We shared the economics of transactions, how financial institutions make money on interchange, and how companies are rethinking their payments strategy to realize more growth and revenue.
Dozens of attendees participated in rounding out the discussion, sharing over 100 great questions during the Q&A. Due to time constraints, we weren’t able to get to all of them. But we’ve gone through every question submitted and identified the most commonly asked ones we could find. We hope our answers here provide more context and clarity around the usage, benefits, and economics of payment facilitation with Finix.
Does Finix take a cut of processing fees? If not, how does Finix make money?
Finix does not take a percentage of our customers’ payments volume. Instead, we charge a monthly licensing fee as well as a few cents to a few dollars per event such as credit card tokenization or merchant onboarding request. We work hard to allow our customers to cut out the middle-men and take more revenue for themselves. We’ve seen our customers reinvest that additional revenue into their product development or pass along the savings to their own merchants to boost customer acquisition and retention.
What is the difference between Finix and Stripe or Square?
Finix is for software platforms, digital marketplaces, and independent software vendors (ISVs) that want to bring payments in-house to generate more revenue and provide a better user experience. Our ideal customer is one that moves money between consumers and merchants and wants to optimize that process by becoming a payment facilitator. If you’re a merchant that is just looking to sell things directly to customers, you might want to consider Stripe or Square.
Stripe and Square both started off selling software and payment processing directly to merchants as payment facilitators. Since then, both have moved into platform payments: The platform can refer a merchant to Stripe/Square for a merchant account and then interact with the merchant via API. A customer using Finix, becomes a payment facilitator themselves, setting up their own relationship with the bank and payment processor. By becoming your own payment facilitator, you can effectively take the basis points (bps = 100th of a percent) you were paying to a Stripe or Square and keep it for yourself–investing that in R&D, merchant acquisition, or lowering your own process to access and keep new customers.
To save you the time, cost, and headache required to integrate into these legacy payment processors (i.e. to spare you the 170 payment engineers Airbnb employs) Finix licenses our technology to you but ultimately, the bank and merchant relationships are yours.
With Finix, who is responsible for the customer service component?
Many platforms and ISVs refer their customers to a processor/acquirer like Worldpay or First Data. Under this arrangement, the platform has very little insight into a payment if something goes wrong. They may not even know why a merchant was unable to be underwritten. With Finix, a merchant would get in touch with the payment facilitator for all of their questions. Finix would provide support to the payment facilitator in the case of a more serious issue.
Does a platform/marketplace/ISV using Finix need its own Money Transmission Licenses (MTLs) with this model?
No, most payment facilitators use a For Benefit Of (FBO) account that is provided by their sponsor bank to hold funds for sub-merchants before those funds are disbursed. This allows a payment facilitator to process payments on behalf of their customer–the sub-merchant–without taking custody of the funds, which would require money transmission licenses. That said, there are certain advantages to having MTLs. As you can see, companies like Square and Stripe have applied for and received MTLs in several states since they launched, but they are not necessary for most payment facilitators to get started.
To learn more about the Payments Layer Cake and payments ecosystem, watch the full webinar here.
If you have a specific question that you don't see answered here about how payment facilitation can transform your vertical software platform, speak with a member of the Finix sales team.