Spenda Ltd (ASX:SPX) and Fiserv (NASDAQ:FISV) have entered into a two-year Payment Facilitator agreement, whereby Fiserv will provide direct merchant facilities to Spenda’s customers.
The facilities can be deployed for payment terminals, online payments and integrated with Spenda’s Payment products, with the agreement replacing the existing ISO model for the delivery of direct merchant facilities.
It will run in parallel to Spenda’s Merchant on Record services agreements (BPSP & BPA agreements with Fiserv), to provide holistic card processing services to Spenda’s customers.
There are several benefits for SPX in the new arrangement with Fiserv, noting the standing ISO Agreement will stay in place until existing Spenda customers within the current ISO model are migrated to the Payment Facilitator model.
The new Payment Facilitator model will enable Spenda to improve its customer boarding experience and simplify AML/KYC and credit processes. This will:
- reduce duplicate sharing of compliance data;
- enable credit approval for both payments and lending in the same process (assuming customer eligibility);
- reduce Spenda’s compliance costs;
- reduce Spenda’s risk of data breach; and
- reduce the cost of issuing and enable standardisation of customer statements.
“Becoming PayFac certified involves a complex underwriting process, a demonstrated capacity to scale payment volume and sponsorship from Fiserv. The PayFac agreement delivers Spenda significant benefits that will help us go to market faster, increase margin and continue to aggressively scale our business.
“This is a great launchpad for us in 2023 and a fitting end to 2022 which has seen us substantially de-risk our business and take great strides forwards with customers and the fintech industry.”
Commercial impact
SPX expects the new Payment Facilitator agreement to have a material commercial impact, as it introduces new income in the form of volume-based rebates and costs reduction from the current acquiring fees charged.
Spenda will now take on responsibilities for all merchant settlements and the credit risk attached to facility creation.
Through the new agreement, the company predicts an increased NET margin of 30-50% when processing card-based payments.
The savings, along with improved customer service, should enable Spenda to deliver superior product bundling and enable it to pursue larger volume clients that require more competitive pricing.
As things stand, there is no change to existing security held by Fiserv, based on Spenda’s existing turnover and 2023 projections, for both the Payment Facilitator and Merchant on Record models.
Fiserv will continue to review the portfolio of merchants onboarded to the Payment Facilitator model and if there is an increase in turnover or change to the risk portfolio, the company will look at additional security.