# Differentiating Between Payments Businesses 

**Published by:** [jelca thinks](https://paragraph.com/@jess/)
**Published on:** 2022-02-09
**Categories:** payments
**URL:** https://paragraph.com/@jess/differentiate-payments-businesses

## Content

Old ISO businesses were more valued on net revenue, factoring in customer attrition~4-5x net revenues if you are just buying the booksometimes could have bought an ISO for 1-3xValuations todayIf there is an EBITDA people are paying 30-40x EBITDA now if there is high growthif only net revenue, 40-50x net revenues are not unheard of eitherUnit economics of noteMarginsISV: ~50bpsnot unusual to see payfacs targeting larger businesses to price ~10bps above their margins, which are around 30-50+margins should be rather rich if you automate sales and have an attractive value propokay to start low in margins then increase prices over time if you can show you are adding valueCAC$300 is pretty goodHuge focus on customer attrition, something that doesn't really develop for months if not yearsHow long does it take to get to 100k accounts given x% attrition?Can they sustain their growth if they're an early business?DifferentiatorsAre you actually a processor? aka How much of the stack do you own?If you handle authorizations, settlements, underwriting, AML, KYC, etc. then you are the processor even if you are designated payfac because you have a BIN acquiring sponsor in the back. This is the same with Square / Stripe. Owning the merchant agreement and economics is critical.Value prop value prop value prop!!! Basically added services and softwares that demonstrate you can cater to your customers' needs BEYOND payments. Building a payfac is becoming commoditized.If not strong enough, you're just participating in a price war. price compression overall will just be an unknown issue you have to wrestle with.Make sure your value prop can scale with youAs a payfac you also bear tons of risk and potential lossesStandalone device payments = a shrinking market. Integrated payments is now kingpower shifted from those who sell merchant accounts to those who sell softwarecontrolling operational software = controlling paymentssoftware drives decisionsFocus on merchant composition cohorts - where are they are winning? there is probably a payfac that already serves a vertical. why are you better?Why Stripe is fucking expensive but still winsMost integrated players use Stripe Connect Payfac in a box as their backbone

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