If you’re a software business considering becoming a payments facilitator, your intrigue is understandable– having seemingly infinite control over your profit margin, functionality, and end-user experience is, undoubtedly, desirable. However, while this sounds great on the face of it, building your own infrastructure isn’t as straightforward as it may seem.

I feel uniquely equipped to speak to this topic; my entry into the tech world began in the business of cloud infrastructure hosting services. While I now work with payments infrastructure services, I can’t help but notice some striking similarities in terms of how each industry is evolving to an “as-a-Service” model for good reason. I will share a few examples in this post to help illustrate these similarities.

What it Takes to Build an Payment Processing Solution

In today’s fast-evolving digital environment, businesses are often faced with the challenging decision to “buy, build, or partner” when evaluating a new, value-added solution. In the case of backend infrastructure, more outsourced, third-party services are becoming available to SaaS businesses of all sizes and industries. As a result, fewer of these businesses are “building” their own solution.

Case in point: cloud computing. The reality at this point is that the control, flexibility, redundancy, and scale that you’ll achieve using the cloud via a third-party service provider is superior vs. building and hosting your own cloud and maintaining it in-house. there is a reason why Twitter runs on Google Cloud Platform, and why NASDAQ relies on Amazon Web Services (AWS) to deliver cloud services. These services are managed by a staff of skilled infrastructure experts that maintain a wide array of security and compliance certifications that keep businesses running with an almost-guarantee of no downtime or security breaches.

So how does this relate to payment facilitation services?

The seismic shift to backend, third-party services among businesses has led to an increased focus on the user experience. Third-party payment systems are no longer simply providing outsourced services. Instead, they are delivering flexible, redundant, and white-labeled solutions that are simple to consume.

The Hidden Costs of Building a Payments Solution

Let’s imagine that you do decide to build your own payment facilitation infrastructure. As Actum is an ACH payment solution provider, here are the high-level steps you’d need to take to build your own ACH payments solution:

  1. Learning ACH: Just trust me on this one– learning ACH is no easy feat. Our team has been working with ACH for over 20 years. To build an ACH solution, you’d need to consider disbursements and payouts. These factors are often overlooked, from both cost and operational perspectives, but they’re crucial to being able to create ACH Debits and Credits.
  2. NACHA Compliance: Once you have your head wrapped around ACH, you’d then need to get a grasp on NACHA Rules and regulations. These rules are extensive, and violating them could keep you from processing. You would also need to adhere to regular compliance audits, as mandated by the industry.
  3. Hiring Skilled Developers: Experienced developers in the payments space will often come with a higher price tag than other SaaS developers, easily costing six figures. When you hire a team of non-skilled payment infrastructure developers, it will take time to bring them up-to-speed. In addition, features and enhancements are constantly being released among payments companies– meaning you’d need a full-time staff to help you reach feature parity, plus keep up with the latest technologies.
  4. Establishing Relationships with Banks: In order to become a third-party payments facilitator, you’d need to establish relationships with multiple banks to secure redundancy. This means that if a disruption were to happen to one bank, you’d still be able to process payments using another bank. Plus, in order to process for an industry, you would need to find a bank that supports that industry. If your industry is considered “high-risk”, this part of the process would be particularly cumbersome.
  5. Building the Components of a Payments System: Why not build, sell, and add value? Amazon can do it! Unfortunately, we’re not all Amazon. And, with payment facilitation, your ROI is likely minimal. To build your own payment infrastructure, you’d have to build a settlement engine, a pricing and billing engine, and a reconciliation engine. These costs stack up with the infrastructure needed to support payouts, and there is a hard cost associated with each payout you’d send. At Actum, we’ve also built a risk scoring engine to assist with our underwriting processes, which is another cost to consider.

Mastering each of these steps would result in a critical delay in your time-to-market.

The Payment-as-a-Service Alternative

When answering the question of “buy, build, or partner?“, building can be a cumbersome approach for businesses. Buying or partnering, however, can allow you to reap many benefits of payment facilitation, without the headaches.

The best alternative for most software businesses is to work with an existing payment facilitator, like Actum which offers Payments-as-a-Service through ACH payment processing. This means that software companies can accept ACH payments using a white label API and embeddable Javascript widget that requires only the end-user’s online banking credentials, using Actum’s secure infrastructure, without having to spend the time, money or effort needed to become a payment facilitator themselves.

Learn More

To find out what it takes to integrate with Actum, read our ACH Guide for Software Companies.

Or, Contact Us to get the conversation started!

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