The payment industry has undergone many changes in the last few years. It was only a few decades ago that credit cards were first used. And now, the technology has evolved to the point where seamless payments can take place in mere seconds. The latest trend is payment facilitators or PayFacs.

PayFacs enable a faster and smoother process by playing as an intermediary between merchants and payment processors. They allow their customers to accept payments quickly through credit cards.

What is a Payment Facilitator?

PayFacs are software companies that enable their customers, known as sub-merchants, to accept electronic payments. They are different from a multi-currency online payment gateway. These sub-merchants are typically merchants who sell their products/services to customers. Let’s understand how payment facilitators help streamline the payment process for sub-merchants.

Before PayFacs, merchants who wanted to accept credit card payments in their business had to open an account with a merchant acquirer. A merchant acquirer is typically a bank or a company sponsored/backed by a bank.

The problem with this process was that setting up an account was lengthy and complicated. At first glance, this might not seem like much. But the time-consuming process delayed the merchant’s ability to start their business and sell their products/services. This is where PayFacs help. They set up a master merchant account with the merchant acquirer and extend it to their customers. This enables the merchants to start accepting payments without any delay.

The payment industry recognized the benefit of offering payment facilitator services to their customers. It enabled a better customer experience and a smoother payment process and helped them increase their revenue significantly.

Parties involved in the payment facilitator process

There are many parties involved in the payment facilitator process. Let’s take a look at the primary parties involved.

Payment processors

A payment facilitator cannot do their business without the involvement of payment processors. Payment processors are responsible for processing payments that take place using cards. They authorize the payment request and share it with the card company for verification.

The payments initiated by PayFacs’ customers (sub-merchants) will have to be processed by payment processors to be completed.

Acquiring banks

Acquiring banks are the banks with whom merchants used to set up their accounts. Since payment facilitators do that in the new model, they have to agree with acquiring banks to offer their services.

The acquiring banks have a lot of responsibilities under this agreement. They monitor the PayFacs for compliance and receive and share data and money transferred during a payment transaction. That is why, to open a master merchant account, payment facilitators must ensure that they have the required technology and infrastructure to function properly and comply with all the regulations.

Also Read: Tips for Safe Online Transactions

Submerchants

The sub-merchants are usually merchants who want to start accepting electronic payments from their customers. They are the payment facilitators’ customers who want to get PayFacs’ services to begin their business quickly and securely.

Payment facilitators have several policies and rules in place while onboarding a sub-merchant. Only the sub-merchants who prove their legality and comply with mandatory regulations can use payment facilitators’ services.

Payment facilitators

Payment facilitators are software companies who acquire the necessary infrastructure and technology that enables sub-merchants to accept card payments. Their functions include underwriting and onboarding, monitoring transactions, funding their sub-merchants, and managing chargebacks.

Payment facilitator companies

Many software companies are choosing to become payment facilitators to provide a better customer experience and retain their customers. This is because, as payment facilitators, they can control a significant aspect of their customer’s experience. They can create a better customer experience and ensure customer satisfaction by enhancing their offerings. They also get to stand out from their competition with payment facilitator services.

However, franchisors are also perfect for becoming payment facilitators. You may wonder, how? It is easy to become a payment facilitator for franchisors since they already practice some control over their franchisees. They are in a unique position to put requirements on franchisees as they are already monitoring them and have even done background checks.

Let us look at some benefits franchisors will get from becoming payment facilitators.

Consolidated processing volumes

One of the major benefits of becoming payment facilitators for franchisors is that they already have several customers. All their franchisees will become their sub-merchants, and the franchisor can show their combined value. The consolidated processing volume will be much higher, resulting in negotiable processing costs. Instead of having to negotiate individually for each franchisee, franchisors can negotiate with the acquiring bank at once.

Smooth underwriting and onboarding

The payment facilitators exist to make the payment process smoother for sub-merchants. This means ensuring smooth underwriting and onboarding, monitoring their transactions, and even managing chargebacks. To achieve this, PayFacs have to take many responsibilities and risks on behalf of merchants.

Of course, they cannot take the risk without doing a thorough check on each of its sub-merchants. Franchisors are uniquely positioned as they have already conducted thorough background checks on their franchisees. Therefore, the underwriting process is simpler for them as they don’t have to do it from zero. The entire process becomes smoother, more streamlined, and more efficient.

Merchant service fees

Franchisors earn by charging service fees to their franchisees. And sometimes, they face problems in collecting this fee. As payment facilitators for all of their franchisees, franchisors assume greater control over their franchisees’ cash flow. This means that they can easily get their service fees without any delays.

It is not necessary for franchisors to straightway become payment facilitators. In case of initial hesitations, they can opt to take the white-label PayFac model. With this model, they have to lower upfront costs, and their responsibilities are not much, either.

However, payment facilitators are the future of the payment industry. The number of payment facilitators is expected to grow significantly in the coming years. And sooner or later, every industry will have to adapt to them. Franchisors have the great option to do it earlier and at fewer costs.

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The growth of mobile payments in the UAE and the rest of the Middle East has become quite noticeable in recent times. And such modes of payment are no longer popular only among the tech savvy or financially literate. They have become an important part of the general society as we know it. Digital payments have also helped SMEs (small-and-medium-enterprises) and business owners in the Middle East to expand their markets in ways never thought of before!

With online shopping on a steep rise, especially in the wake of the pandemic, eCommerce and the mobile payment industry are set to experience major growth in the coming years. Read on to know more and understand how UAE will soon evolve into a cashless society, backed by the power of mobile payments.

COVID and mobile payments

As lockdowns and movement restrictions encouraged consumers to switch to cashless payment alternatives, COVID-19 accelerated the adoption of digital payments in the Middle East.

A study conducted by Checkout.com, a London-based payments system, says the Middle East region used to be dominated by cash earlier but online shoppers have now shifted to using digital payments. This change has presented a huge growth opportunity for multi-currency online payment gateway providers like PayTabs. The report included a survey conducted on more than 5,000 consumers in Saudi Arabia, UAE, Jordan, Kuwait, Pakistan, Egypt and Qatar.

• The number of consumers who anticipate shopping online more often over the next year in those countries is 47%. 38% expect their online shopping frequency to remain the same, while only 15% expect it to decline.
• As a result of the pandemic, 40% of online shoppers say they are shopping and paying online, according to the regional manager at Checkout.com, Mo Ali Yusuf.
• “Digital payments have been on the rise for the past six years, but the pandemic fastracked the growth trajectory and condensed five years of growth into just a few months,” Yusuf said.
• The impact of COVID-19 has caused e-commerce and digital payments to surge this year, but the changes we are witnessing today go beyond a temporary shift.”
• While digital payments have become more popular in the Middle East in the last few years, cash on delivery still occupies a large portion of consumers’ wallets.
• Over the next decade, there is a great deal of potential for growth in this market, he stated.

As consumers shop online more frequently, they prefer digital payments over cash on delivery or bank transfers. 62% people who purchased something online once a month used a card or digital wallet in UAE and other countries. This is compared to the 44% who were shopping online less frequently.

UAE takes the lead in digital payments in the Middle East

UAE’s mobile payments growth has been especially noteworthy in the Middle East region. A regulatory framework and a supportive government have paved the way for the establishment of a Cashless Dubai Working Group. All digital payments in Dubai will be shifted to secure and easy-to-use cashless platforms through this group.

The Vice President, Prime Minister and Ruler of Dubai, Sheikh Mohammed Bin Rashid Al Maktoum, announced recently that the UAE Cabinet had adopted an agreement linking the payment systems of the GCC, ensuring greater integration of the region and facilitating a more significant expansion of its multilateral trade.

Compared with Europe’s annual growth of 4 to 5 per cent, consumer digital payments transactions in the UAE grew at a rate of over 9 per cent between 2014 and 2019. During 2022, digital payment volumes from SMEs grew by 44 percent, according to a report by McKinsey and Co.

There is no doubt that this adoption is having a positive impact already. As a means of promoting financial inclusion and promoting efficiency in the public and private sectors, digital payments have and continue to increase efficiency.

Business opportunities due to digital payments

The rapid growth of the mobile payments industry has presented exciting business opportunities to capitalise on. Younger generations are looking to make payments directly from their mobile phones or even smartwatches. This kind of technology has combined the convenience of online payments and the security of an app.

Smartphones account for more than 80% of all mobile devices, promoting the possibility of new inventions. The utilisation of e wallets in UAE and other Middle Eastern countries is also on the rise since they allow the user to go cashless without having to use a traditional bank account.

Sending and receiving money through apps on mobile phones has become increasingly popular. The process removes any ‘middleman’ and makes online transactions cheap or even free. Just one click and the money gets transferred. Apart from the ease of use and speed, it also prevents the need for users to carry their cards or remember an endless number of PINs.

Numerous multi-currency online payment gateways have also emerged in the UAE and they are gaining popularity in the domain with their extensive lists of digital payment solutions. But some challenges still stand in the way.

Digital future

There is still some resistance to mobile payments growth though, especially among older people who are, in general, less technologically able – but the popularity of cash transactions is likely to dip overall. Due to their convenience, ease of use, and the increasing number of businesses that digitalise and can accept such payments, digital and especially mobile-based transactions will become increasingly popular over the next few years.

There is no denying that the changes triggered by the pandemic are here to stay, and businesses will soon be expected to offer cashless options; and companies that do not do so will start falling behind their competitors.

Along with traditional debit and credit cards, QR codes and other solutions, mobile payments will play an important role in the UAE’s move towards a cashless society.

PayTabs’ role

By providing seamless B2B ecommerce solutions to SMEs, PayTabs has emerged as an early pioneer in the fintech sector. A full stack of game-changing mobile applications, hospitality, government, education, airline, travel, transportation, and biller solutions has been developed and exported by PayTabs with private Saudi investment, linking the multibillion-dollar MENA enterprise market chains together. With the launch of PayTabs SwitchOn, the real-time, integrated, turnkey platform, PayTabs has consolidated its position as a top multi-currency online payment gateway provider and global leader in end-to-end payments solutions.

In addition to its stellar fraud prevention system, PayTabs has been processing payments since 2014. Businesses have been able to process payments securely, thanks to its innovative and agile solutions. Visa and Mastercard have recognised PayTabs’ security, making it one of the most popular payment gateway providers in the UAE.

Features

• Stellar merchant dashboards
• Omnichannel payment solutions
• Simple documentation and onboarding process
• 360 payment processing

The pricing system at PayTabs is straightforward. The company offers three types of plans: start-up, growth, and enterprise. Early-stage companies will benefit from the start-up plan, which has a fixed monthly fee. Growth plans help drive sales and offer great value. Enterprise plans are for businesses looking to expand.

To conclude

Global financial systems are currently based on the growth of mobile payments. By increasing access, a wide range of benefits are unlocked. To finance their working capital requirements and grow their businesses, merchants have access to new forms of funding today. Real-time data is another advantage businesses gain when they adopt digital payments. As a result, merchants can use data-driven insights to make strategic decisions and identify emerging patterns and trends. Creating more accurate economic forecasts is also possible using the wealth of data generated by digital payments.

On the other hand, consumers benefit too, from fast, secure, convenient payment systems that offer them multiple options. They can also access innovative platforms that allow them to spread payments for goods and services out over time, such as buy-now-pay-later platforms.

So, it is a win-win for both businesses and customers in UAE and the rest of the world. Hence, transitioning to a cashless society is no longer a pipe dream.

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QR codes are not new really. In fact, the first QR code was generated in 1994 in Japan and was used to track parts and vehicles during the manufacturing process. While it did find other uses, QR codes were mostly considered a passing fad or something that enterprises needed internally to keep track of their products. But things changed in 2011, when QR codes were first used for mobile payments. The mobile wallet app for Bitcoin, a cryptocurrency, got a feature where users could send or receive bitcoins with the help of QR codes. In the same year, Alipay introduced a mobile payment system where offline stores could scan the QR codes of a customer in their Alipay wallet.

Also Read: How Shoppers Browse and Buy Products Online & Offline

Since then, QR codes have gone from strength to strength and emerged as the primary method of payment for countless people and businesses around the world. It’s easy, it’s secure, doesn’t take too much time, and payments can be done through smartphones as well. There is no need for a QR code scanner or any other device.

How Does QR Code Payment Work?

To understand how payments happen through QR codes, you need to first understand these codes.

So, what is a QR code? Short for Quick Response, QR codes store digital data in a physical representation, much like barcodes. One of the biggest differences between barcodes and QR codes though is their structure. While barcodes are made up of vertical black and white bars of different widths, QR codes contain a unique pattern of light and dark spots within a limited amount of space.

These spots can contain a larger volume of data than barcodes. They can store anything from payment information to store URLs, location of the store, offers, and more. In QR code payments, whether you are a business owner, merchant, or freelancer, you can generate a unique code, which the customer can scan with their camera or a payment app. The code will contain information about the payment or the business and allow the user to pay any amount freely.

Usually, these QR codes are integrated by a payment gateway which transfers any money generated through these QR transactions directly to your bank account. A robust payment gateway solution will take care of everything from setting up the codes to receiving payment from customers.

Different Types of QR Payments

Static

As the name suggests, static QR codes stay the same and don’t change frequently. They store specific data and can be reused again and again. Static QR codes are ideal if you are a retail store owner, street vendor, or shopkeeper. Once you display the codes on the counter, any customer can scan it, enter the required amount that needs to be paid, and go ahead with the transfer.

Dynamic

Dynamic QR codes change continuously and can store different information each time. In a dynamic QR code, payment details can be encoded for every unique payment, making it impossible to print out the code and place it on the store counter. If you run a petrol pump, food court, restaurant, or other such places, you can use dynamic QR codes for mobile payments. You need to input the billing amount for every customer, and a new code will be generated every time, which the customer can scan to pay.

Also Read: How to Simplify Invoicing and Billing

Customer-Generated

In the customer-generated method, it’s the payer who generates the code for payment. You, the seller, will need to scan this code, enter the required amount that the customer needs to pay, and then the payment request will be generated. The customer can accept this request, after checking the amount of course, and the selected amount will be deducted from their account automatically. In this method, the payment is dependent on whether the customer accepts the payment request sent by you.

Merchant Generated

This is a combination of dynamic and static QR codes. You, the merchant, can generate dynamic codes for each transaction or can have static codes for a specific product or counter. This way, you can speed up the billing by segregating customers as per their products.

Where are QR Payments Being Used?

QR codes as a mode of payment aren’t that old but have taken the world by storm in just a few years since their inception. They provide a lot of ease and convenience to both customers and sellers. Furthermore, the recent COVID-19 pandemic and the need to limit physical contact has boosted the adoption of QR codes in the mainstream.

Research by Statista revealed that nearly 28% of customers in the US and UK markets agree that QR code payments have seen a rise since 2020. Another research has stated that payments through mobile will reach USD 1.3 trillion by 2022 and QR payments have a big role to play in that. QR codes are no longer a complicated technology that only large enterprises can implement. While global companies like MasterCard and Visa are supporting merchants like you worldwide to start accepting payments through QR codes, local companies are providing support in their respective countries as well.

Now, whether you are a roadside food vendor or a multi-floor shopping centre, you can enable QR codes and mobile payment systems so that customers can pay without any difficulty. In developing countries like India and China, mobile payments have become the preferred way to pay, with nearly half the population scanning at least one QR code a week in China for payment purposes. Just from QR code payments, China made more than $1,900 billion in 2020.

Benefits of QR Code Payment

• Easy to Implement

All you need is a smartphone to generate a unique QR code and start using it to receive payments. It doesn’t require any extra devices or deep technical knowledge, and a user can easily generate codes for commercial or personal use.

• More Payment Methods

In 2022, cash is not the only way a person can pay for something. Mobile payments have become normal now, and a QR code gives you the ability to start accepting payments in methods other than cash as well. It also means that there will be an increase in customer flow inside the shop.

• Reach Out to a Wider Audience

QR codes also help you reach a wider audience. They can be embedded in different locations across the store so that the customer can pay for something quickly and head out. They can be sent digitally to the customer or presented on the website as well so that they can pay for something while sitting at home. QR codes can be embedded in any mobile device as well so that you or your colleagues can accept payment from anyone, anywhere.

• Faster Transactions

If the internet connectivity is fine and the account is completely set up, it takes just a couple of seconds for a customer to scan the code, input the amount, pay, and show you the confirmation.

• Secure

As a merchant, rest assured that the code can store only the data that you decide. Hence, these codes protect you against fraudulent activities, false payment confirmation from customers, and phishing attacks as well.

Where customers are concerned, QR code payments are highly secure and transactions happen over an encrypted network so that no one can store or steal their personal information. The only activity they need to do is scan the code and there’ll be no attempt of theft or unauthorized access to their account.

• Enhanced Engagement

While cash discounts might be rare, promotional campaigns, eCommerce companies, nationwide festivals, partnerships between companies, and other such offers can be commonly found if a customer chooses to pay digitally. Not only does this bring more customers and revenue to a company, but it also enhances customer engagement. Everyone loves to score some discounts and often tends to spend more in the hopes of getting a bigger discount.

Also Read: Finding the Best Payment Gateway for Your eCommerce Business Made Easy

The Future of Mobile Payments

If recent trends are to be believed, mobile payments based on QR codes are only going to increase. Digital banking has evolved a lot, with almost every person owning a smartphone these days, and integrating QR codes in stores has become a lot easier. The icing on the cake has been the acceptance of governments and business giants in moving towards a more digital economy. So, if you are a merchant and looking to implement a mobile payment system, PayTabs can help you with generating and setting up your own QR codes. You can then accept payments from a customer in a matter of seconds, even if they aren’t in your store physically.