While we have no idea if the egg came first or not, we do know how markets function. And the question is: in the world of Internet commerce, or any commerce: what comes first, PayFac or ComFac?
We have discussed a lot about markets, market networks, commerce, supply chains, and so on. We’ve spoken about the economy and jobs, and how everything is linked. We’ve explained the economy in terms of markets and jobs in terms of sellers and buyers.
We’re now going to talk about enabling markets using a new type of platform, what the industry will call Commerce Facilitator. And as we will see, a ComFac comes before a PayFac, and is in effect, a superset.
What is a PayFac?
On this blog, we have repeatedly beaten the cashflow drum. Business is cashflows, we like to say. The question we’re about to examine is: how does this cashflow arise?
For every seller, there must a buyer be.
So one might say, the minute a buyer wants to make a purchase, we’re in business. And this is true, except there are many things that are needed in order to actually precipitate that transaction. Many, many things are needed, for instance, e-commerce software or tax software or logistics software in the case of online retail.
All these services and service providers, come together seamlessly (one hopes!) to deliver the simple experience we’re used to as shoppers.
A Payment Facilitator (PayFac) kicks in as another key service that is needed in order to consumate these transactions, aka money has to change hands, and must be moved, potentially around the world, or maybe just down the street.
So there’s VISA and MasterCard for these things, and PayPal and Paytm, and so many other services, but a PayFac is significantly smarter. Stripe is a PayFac, for instance, and allows programmatic rules on top of basic transactions, allowing them to be split up in various ways, as an example.
And boy, have PayFacs done well for themselves! Being in the money movement business is good money and is a good, liquid business. Today, there are many PacFac companies, and you can learn all about the PayFac industry over at Payment Facilitator.
And who doesn’t know commerce? Trading? Exchange?
The human civilization is a story of markets, after all, and all the ruling civilizations became rules through the creation and control of the world’s greatest markets. China is trying this again with the New Silk Road initative, for instance.
So what does it mean to create a market or a marketplace, and to control one?
If you look at the United States as a market, then it means the rule of law, and the fact that one can rely upon the institutions to work right, commercial as well as legal. If you look at Amazon as a market, then it means Amazon’s rule of law, or if you look at Uber as a market, then it is Uber’s law. And indeed, it is Facebook’s law, or Apple’s law.
Indeed, in the land of the free, the best capitalists are able to create the best marketplaces, and carve out markets that benefit all participants.
Buyers & Sellers
So now we know what it is to create a marketplace, where all the sellers congregate. But to create a running market, one has to have liquidity, which of course, comes from buyers.
Thus sellers only are when buyers are.
This is why it is not enough to create one side of the marketplace, aka to think in terms of supply-side economics, but it is merely a necessary condition. The demand-side economics is the right model, for then the marketplace is in service to this demand.
These customers aka buyers drive the sales aka cashflow.
Of course, a tell-tale sign of someone being a customer is that transaction in your cash register!
Cashflow is the lifeblood of any business, this is not an abstract concept, this is literally so. The business is the cashflow, nothing else. Everything else is the story around it, which is incredibly important, and is the reason for buyers to make that purchase transaction.
So a PayFac takes the money from the buyer and moves it, under the sellers guidance, to the rightful account(s). A modern PayFac such as Stripe is much more powerful than the good ol’ Visa and MasterCard of yesterday, though they’re investing heavily into the FinTech powered solutions that PayFacs represents.
So we’ve seen one major type of Facilitator in this chain of events that begins with the buyer, and ends (hopefully) with the satisfaction of the buyer. Are there any other types of Facilitators?
A Delivery Facilitator such as Ship Station, allows any market to provide delivery options to buyers.
Anyone who facilitates any aspect of the transaction is naturally a Facilitator, for instance, logistics may include warehousing, which may be a 3rd party, acting as a Warehousing Facilitator.
We’re now going to talk about arguably the most important type of Facilitator.
Brokers & Distributors
A broker is a sales person. They do a very important part of the marketplace function, they bring in the buyer. The successful sales person is not a seamy, slimy used car type persona … it is someone who delivers value to the purchaser.
A broker then, at least the most successful ones, are those that satisfy their customers by selling them valuable products and services, knowing that value is in the eye of the beholder.
So a very important Facilitator is the sales person, or the broker, or the distributor who does the same thing but within the B2B community. These Facilitators are incredibly important to the supply chain, and indeed, the transaction chain.
What is a ComFac?
A ComFac then is the underlying engine used by sales people or by brokers and distributors to drive B2C and B2B sales. A Commerce Facilitator is like a PayFac, except one level higher, it begins with the all important task of bringing in a buyer, introducing them to sellers, and indeed, using a PayFac to consumate the deal.
A Commerce Facilitator, or a ComFac, comes first … and is the demand-side economics platform of the marketplace.
Before a PayFac can be, a ComFac must.Amit Rathore, AwakeVC
A PayFac, of course, becomes the supply-side platform in this business of business aka business of transactions. A ComFac is the dual of a PayFac, but is where the whole game begins (and ends) – with the buyer, which is what a ComFac represents.
A ComFac then is a platform that generates the sales, or the orders, that makes the business a real, going business, and the ComFac becomes the reason or the cause for using a PayFac.
Or like I said earlier, which came first? The ComFac!
So is a PayFac a FinTech, yes, obviously, as it deals with money and finance.
Is a ComFac a FinTech?
It is beyond FinTech, it is BizTech, it is the very business that creates businesses.
An AI-powered ComFac is a powerful thing.
It has the data of the entire economy, end-to-end, and drives all transactions across all transaction boundaries, both on the B2B side, as well as the B2C side.
It is headless, making it totally API-driven, embeddable into all aspects of digital life.
And when it becomes awake through the instruments of Siri and Alexa and other assistants, it creates a new immersive engine for Total Commerce.
Welcome to the ComFac era.
And of course, I would be totally remiss if I didn’t mention (and plug!) our own ComFac platform called Shoptype, an end-to-end implementation of the ComFac engine.
Shoptype allows brands, retailers and sellers, distributors and wholesalers, agencies and influencers, and of course ambassadors and customers to connect through this new economic model.
Try Shoptype out today!