Highline Platform: Payment Strategy & PayFac Analysis

1. Executive Context

The Highline Platform aims to be a "Unified Guest-Centric Platform." A critical component of this experience is the Unified Folio and Charge-to-Account capability. To achieve this while maximizing revenue and minimizing fees, the platform must choose a payment architecture that balances regulatory burden with profit margins.

2. Terminology & Role Definitions

Term	Who They Are	Role in Highline Ecosystem
PayFac (You)	Highline Adventures Platform	The "Master Merchant." You facilitate payments for your customers.
Tenant / Sub-Merchant	The Business Subscriber	Your customer (e.g., a zipline park, hotel, or guide service).
End-User / Payer	The Guest	The person paying for the adventure/service.

3. Payment Architecture Models

Route A: The Referral Model (ISO)

You refer your tenants to a processor (like Clover or Square).

• Pros: Zero liability; zero regulatory burden; no technical integration with the flow of funds.
• Cons: Poor user experience (tenants must leave your app); fragmented data; very low revenue (0.10% - 0.20% "kickbacks").
• Verdict: Not recommended for Highline's "Unified Surface" mandate.

Route B: PayFac-as-a-Service (Recommended)

You use an embedded provider (Stripe Connect, Finix, Rainforest). You "own" the onboarding UI, but they handle the licenses and risk.

• Pros: Rapid time-to-market; high degree of branding control; ability to monetize payments through "Buy Rate" spreads.
• Cons: You take on some operational support for tenants; some revenue is still shared with the provider.
• Verdict: Best for Version 1.

Route C: Full Registered PayFac

You become a regulated financial entity with your own master merchant account.

• Pros: Maximum revenue (you pay raw interchange); total control over underwriting and risk.
• Cons: Massive barrier to entry ($100k+ setup); extreme compliance (PCI Level 1, MTL licenses); requires a dedicated risk/compliance team.
• Verdict: Potential Phase 5 goal once platform volume exceeds $500M/year.

4. Provider Comparison (PayFac-as-a-Service)

Provider	Best For	Pros	Cons
Stripe Connect	Speed to Market	World-class documentation; easiest integration; handles most global compliance.	Expensive flat-rate pricing (harder to markup); support can be ticket-based/slow; "Standard" accounts lack white-labeling.
Finix	High Growth	Wholesale "Buy Rates" (high profit); true white-labeling; clear upgrade path to Full PayFac later.	Slightly higher technical lift; requires more active merchant management than Stripe.
Rainforest	Vertical SaaS	Built specifically for software platforms; low-code/embeddable UI; transparent revenue share models.	Newer player (less legacy trust); footprint is primarily North American for now.
Tilled	Monetization	Aggressive revenue sharing; "PayFac-in-a-Box" model minimizes your liability while maximizing profit.	Limited branding flexibility compared to Finix; pricing can be opaque until negotiated.

5. Revenue Maximization Strategies

1. The "Buy Rate" Spread

Instead of a flat fee, negotiate a "Buy Rate" (e.g., 2.2% + 20¢). You charge your tenants a "Sell Rate" (e.g., 2.9% + 30¢).

• Pros: Direct, passive revenue stream that scales with platform volume.
• Cons: If interchange rates rise unexpectedly, your margin could thin if you use a fixed sell rate.

2. Steering to ACH (Pay-by-Bank)

• Pros: High profit margin (costs pennies compared to dollars); no chargeback risk in the same way as cards.
• Cons: Slower settlement (3–5 days); not all guests are comfortable sharing bank credentials.

3. Fee Recovery (Surcharging)

• Pros: Completely eliminates processing costs for the platform and the tenant.
• Cons: Can be perceived negatively by guests; legal "landmines" in California regarding how it's disclosed.

6. Regulatory & Compliance Summary

1. KYC/AML (Know Your Customer): Mandated identity verification of all business owners (tenants) to prevent money laundering.
2. PCI DSS Level 1: You must ensure your software never handles raw card data. Modern providers use tokenization (e.g., Stripe Elements) to keep you out of "scope."
3. Chargeback Liability: As a PayFac, you are the backstop. If a tenant fails to deliver a tour and goes out of business, the card networks may hold you responsible for those refunds.
4. MTL (Money Transmitter Licenses): Required if you "hold" money. Most PFaaS providers handle this by acting as the licensed entity and using "For Benefit Of" (FBO) bank accounts.

7. Strategic Recommendation

• Phase 1 (The MVP): Launch with Stripe Connect (Custom/Express) for the best developer experience and fastest path to live.
• Phase 2 (The Profit Pivot): Once your volume reaches ~$10M/year, migrate to Finix or Rainforest to move from Stripe's "Flat Rate" to a "Buy Rate" model, doubling your per-transaction profit.
• Phase 3 (Enterprise): Introduce ACH/Direct Bank Pay for group/corporate bookings to bypass the 3% "credit card tax" entirely.