Revenue shared payment processing

What defines revenue-shared payment processing, and which measures can you undertake to integrate it as a new income source for your enterprise?

Every business aims to increase its revenue, yet many overlook the efficiency of upselling to existing customers. Statistically, it costs five times more to attract a new customer than it is to upsell to an existing one, with upselling potentially increasing revenue by as much as 43%. The strategy involves offering additional services, products, or value to your current clientele, though it requires persuasive efforts to encourage purchases. Among the straightforward methods to boost income is revenue sharing from payment processing. With forecasts suggesting payment processing will amass revenues of $248.93 billion by 2028, securing a portion of this is an attractive prospect. Who wouldn’t want a cut from that? Let's explore this concept further:

What is payment processing?

Payment processing plays a crucial role in all online shopping and purchasing activities, primarily involving the checkout section or payment page. At this stage, customers evaluate their choices, select a preferred payment method, and finalize their purchase.

The payment processing, or transaction processing, is a complex sequence of actions designed to move money from the buyer to the seller. This process is managed by a payment processor, which acts as the intermediary between the buyer's bank and the merchant's bank, facilitating the transaction. The process begins with the buyer initiating a purchase and entering payment details, which are then encrypted and sent to a payment gateway. This information is passed to the payment processor, which confirms the transaction's validity and the buyer's ability to pay. Subsequently, the transaction details are sent to the card association (like Visa or MasterCard), and then on to the issuing bank for fraud verification and approval. Once approved, the confirmation is relayed back through the chain to the merchant, signaling that the payment has been authorized. The settlement phase then starts, transferring funds from the issuing bank to the merchant's account, typically within a few days. During settlement, transaction fees are deducted by the payment processor and any other involved parties. Ultimately, the merchant receives the transaction's net amount after these deductions.


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To enable transactions as described, a payment processor needs to ensure compliance with the merchant's country's tax laws and legal requirements in the participating countries. Therefore, it's essential to check the range of countries your processor accommodates, particularly if you're considering expansion or already function in various markets. If a client is from a country not supported by the processor, those transactions cannot be processed. This underscores the importance of choosing a payment processor with a broad international reach to accommodate your business needs and growth plans.

Having covered the fundamentals, it's crucial to delve into the concept of payment facilitation (PayFac), a key component in generating a new revenue stream. PayFac allows your clients or users to carry out transactions via your platform, assigning you the significant responsibilities of choosing a payment processor, implementing it, and embedding it within your software or service. All that's required from your clients is to register and start processing payments against a predetermined fee, from which you derive a portion as your new revenue channel. Let's take a closer look at this process.


What distinguishes a standard payment processor from a revenue-sharing payment processor?

How do they function?

Every revenue-sharing payment processor also functions as a standard payment processor, with revenue-sharing acting as an additional feature. While both types handle financial transactions, they adhere to distinct business models. Let’s dive into the differences.

Standard payment processor

A standard payment processor facilitates the processing of payments made via credit card, debit card, and other electronic methods. It manages the transfer of funds from the customer to the merchant, initially verifying the customer's available funds before moving them to the merchant's bank account. For each transaction processed, the payment processor levies a charge, usually comprising a percentage of the transaction value plus a fixed fee.

Revenue-sharing payment processor

A revenue-sharing payment processor does more than just handle payments; it also distributes a portion of the transaction fees or profits derived from those transactions to one or more partners. This approach is commonly adopted in collaborative arrangements where the payment processor works alongside another party, like an affiliate or reseller. The key distinctions include:

  • The client utilizing the payment processor receives a specific share of the profits from transactions.
  • This model motivates partners to endorse the service, typically leading to an increase in transactions, since partners benefit directly from the revenue generated.
  • Such a model is particularly prevalent in ecosystems where additional services or platforms are crucial in enabling the sale or transaction, for instance, in affiliate marketing, and software platforms.


    How do the revenue-share models differ?

    The revenue-share models differ markedly, affecting both the generation of income and its distribution among the stakeholders involved.

    Normal payment processor

    A standard payment processor typically imposes transactional fees, which include a percentage of the transaction amount plus a fixed fee. For instance, a processor could charge 2.9% plus €0.30 for each transaction. Beyond these transactional costs, there may also be monthly or annual fees associated with utilizing their platform or services. Payment processors might also apply additional fees for extra services like payment gateways, fraud protection, and chargeback management. Merchants with high transaction volumes might negotiate reduced transaction rates, which could lower the revenue the processor earns from these merchants, but might also lead to an increase in the total number of transactions processed.

    Revenue sharing payment processor

    Revenue-sharing payment processors generate income from transaction fees while distributing a portion of these earnings to partners or affiliates. The specific terms of revenue sharing depend on agreements with partners, with two prevalent arrangements being:

  • Sharing between 10% and 50% of transaction fees with a software platform that uses the payment processing services.
  • Or payment processor establishing a base fee, for example, 1.75% per transaction, with the software platform adding, for example, 0.50% for their own margin. Consequently, the merchant incurs a 2.25% fee per transaction, with 0.50% of that serving as profit for the software platform and the remaining 1.75% going to the processor.
  • Beyond transaction fees, revenue-sharing processors might provide tiered pricing, premium options, or subscriptions for enhanced analytics or extra features, which typically remain exclusive from the shared revenue agreements with partners.


    How does payment processing revenue sharing work?

    The distribution of revenue between the payment processor and a software platform can differ, yet the two most prevalent models were outlined earlier. Let's delve into these options more thoroughly.

    Shared profits

    Payment processors usually impose a fee ranging from 1.5% to 3.5% on the total amount of each transaction processed. So, if a client processes a $1000 invoice with a 1.5% fee, the payment processor deducts $15 from the transaction. However, if you've negotiated to receive, say, 10% of the transaction fees, you would earn $1.5, leaving the processor with $13.5. This arrangement establishes a mutually beneficial revenue stream.


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    Marginalized profits

    In this case, the payment processor charges a fee as well, again ranging from 1.5% to 3.5%, with some providers offering even lower rates. This fee forms the foundation of the cost structure. When you integrate this payment processing service for your clients, the fee is applied to each transaction processed through this system. For instance, if a client invoices $1000 at a 1.5% fee, the payment processor retains $15 from the transaction. However, you have the option to add a markup to this fee, say an additional 0.5%, making the total fee for your client 2%. This rate is still competitive compared to other providers. Consequently, for every $1000 transaction your client makes, you would earn a $5 commission, creating a revenue stream from the payment processing service you offer.


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    The initial step involves determining the added value payment processing integration brings to your services. Next, evaluating your current customer base and transaction volume is crucial for gauging your bargaining power in negotiations.

    To facilitate a revenue-sharing agreement, consider whether your current software providers, such as those offering invoicing solutions, also support payment processing. Prioritize engaging with reputable processors known for dependable services and flexibility in customizing solutions and negotiating revenue-sharing terms. It's essential to discuss and agree on terms, such as revenue share percentages or fees, ensuring the deal benefits both sides. Also, ensure the agreement complies with both domestic and international standards for payment processing. However, be cautious as some processors may apply higher fees under revenue-sharing models, which could deter cost-conscious clients.

    Setting up a revenue-sharing model typically requires a substantial time commitment. Integration may encounter challenges stemming from vague instructions and extended setup durations. This could necessitate for extensive communication with the service provider and entail technical adjustments to your website or application and operational modifications to support new payment options.

    Once implemented, inform your clientele about the new payment options and their advantages, like streamlined transactions or more payment choices. Marketing initiatives are vital for encouraging the adoption of this service and, by extension, maximizing revenue.

    Continuously monitor the performance of your payment processing services post-launch, paying attention to transaction volumes, customer feedback, and revenue impact. Collaborate with your payment processor to refine the service. Stay updated on any changes to your processor's services or policies that could influence your agreement or business operations.

    It’s important to notice that payment processing services typically don't feature revenue sharing as part of their standard offerings. So if in doubt, reviewing the service provider's website and making direct inquiries is recommended, as mutual promotion of the service usually serves the interest of both parties.



    Revenue sharing is inherently integrated into our platform, elevating it above a mere additional functionality. Additionally, our white-labeled service, allows you to facilitate revenue-sharing arrangements and effectively serve as an intermediary between the payment processor and the utilizing merchants, thereby accruing fees. Our refined documentation and optimized self-onboarding process, ensure you can activate the service swiftly, typically in a under an hour. Competitive pricing model and comprehensive legal compliance across the European Union, encompassing 29 countries, offer you a distinct advantage in the market and broaden your revenue potential. Our team stands ready to assist with any queries or support you may need.

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