Payment Pulse – Ep. 7

Payment Pulse: The Power of Social Proof: Learn how influencer endorsements, online reviews, and peer behavior shape our buying habits.

Status Spending and Luxury Psychology: Understand why consumers use high-end payment methods to signal prestige and how brands capitalize on the “Keeping up with the Joneses” mentality.

FOMO and Impulse Purchases: Explore the role of limited-time offers and BNPL services in reducing purchase friction and triggering rapid spending.

Digital Trends on Social Media: See how platforms like Instagram, TikTok, and YouTube are revolutionizing product discovery and checkout experiences.

Cultural Influences on Spending: Discover how global payment preferences vary and why adapting to local norms is key for businesses expanding into new markets.

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Episode Transcript

Steve: Payment Pulse, a podcast by Clearent by Xplor, a leading full-service payments provider. Welcome to Payment Pulse, a podcast by Clearent by Xplor where our goal is to humanize and simplify the complex world of payments. My name is Steve and I’m here with my co-host Max, as always. How we doing today, Max? 

Max: Not bad Steve. Dude, I just realized now looking at your face, your beard is looking epic.  

Steve: I appreciate that. Dude, it’s March. We’re at the end of March. I let myself go here. I feel like I let myself go, but yeah. I appreciate the comment there. That’s we’re all good though. Really flattering me. We’re doing great on this Friday.  

With that said, let’s jump right into it. In previous episodes we’ve discussed various influences to consumer behavior from purchasing decisions and ultimately the payment technologies that are used. 

Now that we’ve set that groundwork, we’re starting to zoom in on the actual payment tech side of the equation. And today’s episode is really all about peeling back the layers on PayFac as a Service. That’s right. It’s the term that’s been flying around the market. We’re not gonna go super in depth into the tech of this, but we are gonna cover a couple things. 

We did just have last week, myself and Ron Smith, our VP of Product, hosted a in-depth webinar titled Busting Common PayFac as a Service Myths. And so, while today starts our journey into the payments tech, we’re really gonna explain PayFac as a Service, why there’s so much confusion and even frustration building around it. As well as recap a few myths that we covered in that webinar, about three of them today. Then ultimately to give you a sneak peek into the full discussion, we will have the recording for that webinar available in the description of the podcast. So please take a look at that and get the full glimpse of the webinar and the topic. 

Max: Yeah, it was a great webinar Steve. I certainly learned a lot, not being a super technical person. No secret at all, that PayFac is generating a lot of buzz. But, hopefully we can help clear some water that people might have around building this into their system, if you’re a software provider. In the webinar, you tackled a few of the persistent myths that can cloud judgment around building PayFac as a Service and honestly full payment facilitation. So, I’m hoping that today we’ll dive into a handful of these myths. Clarify what PayFac is to us and why understanding some of the misconceptions would be a game changer for businesses. So, Steve, let’s jump into it. Explain, you know, ultimately what was this webinar, why we had it all that?  

Steve: Yeah, it’s a really important question to address, kind of off the rip. The reason for this webinar ultimately is that there’s a lot of confusion and frustration, like I mentioned earlier, building around PayFac as a Service. That’s really one of the number one reasons. PayFac as a Service is very convoluted. Every provider of PayFac, payments provider, really has a different way that they offer PayFac and even define it. 

But because of this, the confusion and the frustration is really built, even for myself, when I first started researching into PayFac as a Service some two years ago, a year and a half ago, it was confusing. 

It really is. You go one place and you see a different definition. Each and every time you go and research it, it feels like. So that’s a big one. The other big one too is PE firms, private equity firms, are really urging full payment facilitation. And honestly, that’s one of the bigger contributing factors to why PayFac as a Service exists. It really became an alternative to full payment facilitation and it was a needed solution in the market. That said, there’s a lot of misconceptions, convolutedness about each of those definitions. I wanna add as well, the reason that we do this podcast and we have these webinars and really in any of the content we produce, we are huge on payment education. That is the purpose of really everything that we do. It’s extremely valuable to even everyday people to have a solid understanding of how payment technology works, all of the trends that we talked about in the first few episodes and everything that we’re gonna talk about moving forward as well so a lot of benefit to that.  

Max: Yeah, it’s totally a fair point there Steve. I think you made a good point, it’s interesting, we’ll touch on this, I’m sure in further episodes, but there’s a lot of economic viability with this product, with PayFac as a Service. For companies, especially growing companies, growing software, vertical companies. 

One thing I took away from that webinar was that venture capital that PE, even just business owners, are looking to become or looking to add in PayFac as a Service to their tech stack because it’s economics. The economics are great. Yeah, it does put some of the ownership of underwriting and other elements under your own roof. But man, it’s so good for your bottom line and ultimately, that’s why PE gets involved, why VC gets involved. So, let’s back up. Let’s not go to the weeds, let’s not go down that rabbit hole today. Can you start off by briefly explaining how we at Clearent define PayFac as a Service and how other providers are defining it?  

Steve: Yeah, you made great points about the finances of all of this and there’s a little bit of a battle between PayFac as a Service and true payment facilitation, which is better, but we’ll dive more into that later. There’ll be a little bit of that in this episode, but I wanna start out with other PayFac as a Service providers. 

We’re seeing and hearing that these models are restrictive and restrictive in a way that prevents scalability and flexibility between partnerships and the technology ultimately, that’s being used as you grow and try and achieve the goals that you’d like to get to. That said, for us, our approach to payment partnerships and PayFac as a Service is a bit different. It works on a sliding scale or a fluid modular approach to customizing the payment experience. Again, we’ll touch on that a little bit more later, but we think about PayFac as a Service as more of a journey. So let me remind you that PayFac as a Service is popular or has become popular to full payment facilitation. 

We’re not trying to necessarily steer you away from full payment facilitation but we guide companies down a path that meets their needs today and in the future as well, providing fluidity between solutions and between partnership models as you want to control more or less of the payment process without having to uproot your existing technology. 

And so just to kind of summarize that real quick, we can take you from a referral model all the way up to a payment facilitator model and even down, we can downscale as well. It really just depends on where you’re at in that journey. 

Max: It is a great summary because it does show that we’re not here saying you have to sign up to be a PayFac and that’s your destiny from here on out. We’re a technology company, our goal is to be responsive to the market. I thought that is a very cool element of this product that we’re rolling out. With that said, let’s just bust into a few myths that you and Ron covered. 

Let’s start with the age-old myth these days, that it’s better to become a full payment facilitator rather than using PayFac as a Service.  

Steve: Keep in mind we are just summarizing these, we do a much deeper dive on this, and so I’m kind of just speaking to a lot of the points that Ron made throughout the webinar. 

Becoming a full payment facilitator really does require significant investment upfront and then continually, annually as well in the maintenance of everything. And that’s compliance, risk management and operations. You really have to build out the teams and the payment infrastructure to go this route. Many software com companies are underestimating that complexity and cost that it takes to get there. I’ll say too, that’s the beauty of our program is you can do it in baby steps and you don’t have to jump all in at once. You can take your time with it, which appears to be the more effective approach. 

Everybody wants to be that PayFac that’s what the ultimate goal is essentially but again, as a registered PayFac, Clearent, we can help software providers take those baby steps and ultimately get to that end destination without having uproot technology like I mentioned before and really go along this payments journey as you wish and as you grow your business, acquire more revenue, you can take the steps to get to the next step or like I mentioned as well, you can even go backwards on that.  

Max: It doesn’t seem like we’re pushing some ISV one way or another. It seems like it’s more of a consultative approach and helping guide them through their journey. So let’s just jump right into the next myth, that PayFac as a Service does not work for every industry. Tell me about that.  

Steve: As a model, PayFac as a Service can work for every industry, but it requires the right payments partner who really understands and can customize the solutions based on the software providers industry. 

For example, MedSpa or really anything in the healthcare industry, they might need to tailor for compliance features. With MedSpa and healthcare, it’s really a regulated industry and there might be implications for that in the payment side as well. 

This is where an out-of-the-box solution like we see for a lot of competitors is really lacking. The modular approach that we take in understanding various industries allow us to really tailor the solution to each and every vertical. That’s where, again, the consultative approach that we take is gonna yield in your benefit. 

Max: Probably every industry, right? Whether at you’re in MedSpa, whether you are in hotels, whether you’re in restaurants, each of them are gonna have their set of challenges from a regulatory standpoint, from an industry standpoint, from a consumer standpoint all which, I think it’s really appropriate that we’re building kind of these bespoke tailored solutions. 

All right. Let’s do the last myth, software providers must complete a new integration to switch to full payment facilitation.  

Steve: We’ve touched on this a little bit here, but it really is an important one and it ties in back to again the out of the box solution, is a bit rigid. It doesn’t allow for you to kind of scale and grow at the rate that you’d like. 

Building a payment integration is a strategic play and when implemented correctly, it can have a significant impact on revenue and again your long-term goals. Ultimately, I’ll refer back to the journey because I think that is really the biggest piece that anyone can take. If you’re listening to just this short snippet, the journey that you can take with Clearent to get to the end goal, whatever your destination is you have that fluidity to scale and grow your business at a rate that is preferable to you. It’s about the resources that you have today and the goals that you have for the future. 

Max: I’m happy that we covered some of these myths that we discussed a little bit. I’m sure, like you said, it’s surely not the last time we’ll talk about PayFac, we’re gonna go deeper. I highly encourage if you’re out there to watch Steve and Ron, Ron’s our VP of Product here at Clearent, discuss this more in detail and get in touch with them as they are definitely the PayFac experts. So appreciate that run through Steve. Like I said, you’re teaching me something I didn’t know and stuff that I always need refreshers on. Looking forward to more of those conversations.  

Steve: Definitely a lot more episodes to come on in regards to PayFac as a Service. We’re barely scratching the surface of it, but again, payment education is critical. It’s one that we’re gonna take our time with and just really segment out the episodes to be very thoughtful. This one just happened to play well with the webinar that we just launched. But yeah, the webinar really was packed full of insights. Ron goes a little bit deeper into the nuances of everything and so it’s definitely worth the watch and it’s gonna help you navigate the payment landscape a whole lot better. 

That’s it. Check out the description for that recording. And as always, we’d love to hear your feedback on today’s episode. Drop a comment, you know, on the socials. If you’re watching on YouTube, Spotify, let us know. We definitely wanna hear from you guys and again, always keep this engaging. 

If there’s specific things that you want to hear about PayFac as a Service that’s a great comment for us to address. So please let us know. But as always, until next time, thank you for tuning into Payment Pulse. My name is Steve here with Max as always and we will see you guys very soon.