Payment Facilitator Provider
Payment Facilitators [Payfacs] act as Master Merchants that process credit and debit card transactions for their sub-merchants within their payment application. Typically a Payment Facilitator would be a software platform that serves a specific vertical market eg Event ticketing.
These sub merchants/clients skip the traditional merchant account application process, allowing them to enroll and begin accepting customer payments almost instantly. This instant onboarding is a HUGE customer acquisition tool and is how companies like Stripe and Square have been able to grow so significantly. Stripe and Square are considered Super Payment Facilitators as they can board merchants without a specific vertical focus.
The different Payment Facilitator Providers offered by various providers eg Vantiv, Wells Fargo fall into 3 different categories:
1-True Payment Facilitator
Becoming a true Payment Facilitator requires significant financial requirements, compliance obligations and ongoing operational demands. For a thorough overview of these risks/rewards read Payment Aggregation: Is It Right For Me?
For most companies becoming a true PayFac is simply too much: too much time, money, ongoing work and compliance. Figure $150k in costs for development and compliance/due diligence and 6 months of integration testing.
2-Managed Payment Facilitator or Hybrid Payment Facilitator
A Managed PayFac Solution or Managed Payment Facilitator Solution is often a better option as it
offers many of the pros of true aggregation without the significant investments of time and money.
A Managed Payment Facilitator client onboarding simple, provides more ownership of the payment process, and offers a recurring revenue stream from payment fees charged to end users.
Managed Payment Facilitator’s are basically sub Payfacs. A true PayFac assumes all those compliance and regulatory and infrastructure costs, and creates a platform for you to leverage these tools and act as a sub PayFac. The true PayFac in this scenario will have a lot of insight into your clients and their processing. thus mitigating much of the risk that Vantiv for example faces after approving a platform to act as a true PayFac.
3-MarketPlace Solutions
The third option Payment Facilitation Providers offer is MarketPlace Payment Solutions.
MarketPlace Payment Solutions allow platforms to offer MarketPlace participants the ability to accept payments without the need for their own merchant account. Participants quickly and simply enroll in the MarketPlace and begin accepting payments for their goods or services. The MarketPlace Payment Platform becomes the Merchant of Record. This means that is the MarketPlace is Etsy that all sellers on the Etsy platform sell through Etsy. So the end customer ordering from “ABC Jewelry” sees “Etsy” on the credit card statement.
Payment Facilitator Providers typically fall into one of these 3 categories.
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