WHAT IS A PAYMENT FACILITATOR (PAYFAC)?

Having a secure way to accept payments is a necessity for any online business. And when it comes to taking credit card payments, you have two main options. The option to do  is to open a merchant account with a bank and the second is to use the payment facilitator model (PayFac).

Technology has fundamentally changed how businesses, acquiring banks, and card networks work together. The increasing rise of software platforms has accelerated the great change: resulting in increase of  these platforms are connecting buyers and sellers in new and innovative ways, adding payments functionality, and creating new purchase experiences.

What Is the Payment Facilitator Model?

In simple terms, it’s a model for streamlining merchant services. Payment facilitators removes the need for individual merchants to establish a traditional merchant account. PayFacs are essentially huge organisations that have sufficient infrastructure and compliance in place to process payments. They also have the capacity to deal with the risk involved in moving money. The payment facilitator model was established as a way for small businesses to accept online payments more easily and hassle free.

In the payment facilitator model, a software provider registers with an acquirer to provide payment services to sub-merchants that shall make use of the software. After registering as a payment facilitator with an acquirer, the software provider role is to act as a master or main merchant account provider, boarding sub-merchants under their own account in order to provide payment transactions for them.

Who are the main players in the model and what are their jobs?

There are three main roles involved: The acquirer, the payment facilitator and the sub-merchant.

The acquiring bank: The bank that processes the customer’s credit card payments for the merchant and to provide the overall structure for the operation

The payment facilitator: the payment facilitator acts as the go-between for the acquirer and the sub-merchants.

Sub-merchant: The business that accepts card payments operate underneath the payment facilitator.

What do PayFac do?

Payfacs start a merchant bank account and then receive a merchant ID (MID) to acquire and aggregate payments for a group of smaller merchants, called sub-merchants. Payfacs have embedded payment systems and register their master or main MID with an acquiring bank. Sub-merchants, on the other side, are not required to register their unique MIDs—instead, transactions are aggregated under the payfac’s master MID. The main purpose is to reduce the complexity that sub-merchants would face setting up online payments on their own by eliminating the need for them to establish and maintain relationships with an payment gateway, acquiring bank and other service providers.

Is the payment facilitator model meant for your business?

The key advantage of the PayFac model is the capability to simplify and streamline the merchant account enrolment and onboarding process by offering a complete, white-label payment processing solution.

This finally results in more control over the whole processing experience, greater merchant conversion rates, and a lot of opportunity to earn more revenue from credit card processing.

The Advantages of the PayFac Model:

One of the main advantages of the PayFac model is that it fast tracks the onboarding process. As a Payment Facilitator you have all the right to set-up sub-merchants quickly and hassle free, which streamlines new client acquisition since they don’t have to fill out a plenty of paperwork which is quite stressful or provide documentation in order to set-up their account.

Have more questions about PayFac. Call Paypound now. We are here to help you.

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