PayFacs Help Creator Economy Monetize Content, Grow Small Business Economy

The creators are creating content, yes — but an economy too.

Your favorite influencer is available at the tap of a screen. That influencer can steer you to the products and services — and the merchants — you’d otherwise not encounter, were it not for Snapchat or Instagram.

Casey Porter, vice president of Merchant Sales and Acquiring at Visa’s Global Acceptance Fast Track, told Karen Webster that social media platforms are the new place to do business. But it takes work for the individual influencers — 300 million of them across the globe — to build a following and make sales, perhaps more than a trillion dollars’ worth in just the next few years.

“The creators are now the new entrepreneurs,” Porter said. “If you think about it from the ‘traditional’ sense of a small merchant business, that’s what they are trying to become.”

As Porter noted, the opportunity is significant. Across the 4.6 billion social media users, the average time logged on their platform of choice totals 2.5 hours daily. For merchants, the lure is to get more consumers and commerce steered to their eCommerce sites, or to third-party sites, to take payments.

Payment facilitators (PayFacs), he said, can be a critical link, bridging the gaps between content creators, the platforms they call home, and the merchants who want to reach an ever-expanding marketplace.

The path to that connectivity has its hurdles, as acquirers, financial institutions (FIs) and PayFacs must consider the risks inherent in these nascent smaller businesses — although some of the same rules will always apply (i.e. whether the content/merchants being touted operate in grey areas of the economy; whether payment volumes fluctuate wildly).

Dissecting the Payments

Doing so — and keeping payments flowing through the mix — can be a complex undertaking. PayFacs, he said, need to “dissect” the payment flows so that funds get to the consumer, the influencer and the enterprise/merchant. The platforms have solved a lot of the pain points of getting merchants and creators together in one, centralized location. But they have not solved the payments piece of the puzzle, and that’s where the PayFacs come in.

“What I want people to take away from this is that the intermediary is the social media channel,” Porter said.

For the PayFac tasked with “working” with that channel, there are several approaches that can be taken, he explained. The traditional “track” is one where the merchant advertises and accepts payments through a personal website. There’s the “native checkout” embedded in the platform.

But increasingly, the rise of social media has given tailwind to the “in-app” purchase and to live shopping. Tipping has also been gaining ground, where consumers can be asked to contribute funds if they appreciate the content that is offered.

Getting Ready for Real-Time Payments

“You’ve got to solve for all of these scenarios, whether you’re a merchant or a PayFac,” Porter said.

Payments get even more complex with the imminent launch of FedNow and the demand for real-time payments that is sure to mushroom over time, he said. Immediate deposits and payouts can be a competitive advantage for the platform that promises a speedier payout channel.

There must be a rapid “experience” when it comes to payments, otherwise, creators may balk, Porter said. Creators — just like everyone else — don’t want to wait weeks to be paid. Visa for its part offers products and partnerships to support faster payouts, including real-time funding — which improves fulfillment across the social media channel, as influencers are paid directly. In addition, the suite of Visa tools includes robust fraud defenses.

Looking ahead, he said, the social media-as-commerce potential remains untapped. But PayFacs need to understand how influencers interact with retailers (who might be likened to third parties that “do” distribution). The PayFacs also must be mindful that influencers don’t just focus on one region; the internet touches all corners of the globe.

“When you consider that product can be content,” Porter told Webster, for the merchants and the PayFacs, “it’s immediate delivery … and it’s an immediate transaction.”

“The platform is becoming the place where you do business,” he added, “so as a PayFac, it’s absolutely a market that you should be in because it’s the new [small- to medium-sized business (SMB)] path.”