Managed payment facilitation, where a third party managespayment processing, compliance and settlement for businesses. That enables businesses to receive and disburse payments without constructing their ownpayment infrastructure.
Most managedpayment facilitatorsprovide fraud checks, reporting and customer support tools. This configuration applies to e-shops, service platforms and market places.
To choose the right provider, merchants consider aspects such as costs, technical integrations, and regional regulations. These specifics are discussed in the following sections.
Here is another reason: In the Managed PayFac model you are in essence a sub Payfac. There is a true PayFac that assumes all those compliance and regulatory and infrastructure costs. They create a platform for you to leverage these tools and act as a sub PayFac. They have a lot of insight into your clients and their processing. This level of insight mitigates much of the risk that Vantiv for example faces after approving a platform to act as a true PayFac.
The question then becomes: “Why go down the true PayFac pathway?”
The Managed PayFac model does have a downside. In the true PayFac model a client at that medical office sees “My Medical” on their credit card statement. In the hybrid model if your Master PayFac is YourPay for example you would see “YPY* My Medical” on their statement [descriptor] where YPY* indicates YourPay as master PayFac. This may not be an issue or it may depending on your business model.
Another reason to act as the true PayFac is you own the payment process and that customer. There is no one in between or involved. Certain business may value that.
Contact us to discuss Managed PayFac payment needs.
How is Payment Facilitation different from a traditional merchant account?
Paypal/ Stripe/Square underwrite and provision the merchant accounts themselves and fund their sub-merchant’s payments. MOST importantly, PP, Stripe and Square assume the risks involved in payment processing. These include fraud loss, chargebacks and non payment.
Because of these risks and more [eg money laundering] there is a tremendous amount of money, work, scrutiny and compliance to becoming a true Payment Facilitator.
A traditional merchant account provider will obtain information from the business owner that makes them comfortable enough to assume payment risks. This could include voided check, bank statements, copies of business license, personal license and more. As a Payfac these friction points are removed and much of the customer vetting process is automated via API calls.
Managed payment facilitation means that a single principal, known as a Payment Facilitator (PayFac), manages payments on behalf of multiple sub-merchants under one unified platform. This model enables SaaS providers and digital platforms to provide frictionless payments, particularly for online or recurring payments, without each sub-merchant having to establish their own direct relationship with banks or card networks.
It streamlines compliance, accelerates onboarding, and allows businesses to center on what they do best while professionals address payments’ risk and technical complexities.
A managed payment facilitation enables a SaaS platform or marketplace to be a master merchant. I.e., the platform onboards end-users (sub-merchants) and controls their capacity to receive payments from customers. The SaaS platform partners with a third-party ACH processor to manage the technical side of transferring money across accounts.
This model enables companies to leverage payment capabilities without needing to develop or operate their own payment infrastructure. For instance, a ride-sharing app could allow drivers to process passenger payments without every driver having to have their own merchant services contract. Manage all payment flows, fees, and compliance on your platform.
The key parties in managed payment facilitation are the SaaS provider, the underlying partner bank, and the sub-merchants utilizing the payment service.
The PF is the registered entity with a Master MID. Sub-merchants don’t even have to sign up for their own Merchant IDs–everything flows through the facilitator. The facilitator must obtain money transmission licenses in every country, if local regulations demand.
Banks are transaction originators and manage settlement. Sub-merchants are the merchants or individuals offering products or services, depending on the facilitator for onboarding, payouts, and support. Secondary merchants can be anything from worldwide e-Commerce stores to local service providers.
The transaction chain begins when a customer pays a sub-merchant on the platform. The platform receives the funds, typically by withdrawing money from the customer’s bank account via the ACH network. Transactions are batched, not immediate, so issues such as insufficient funds or incorrect data are identified one to three days later.
The Payment Facilitator monitors all transactions, reconciles deposits, and subsequently disburses funds to sub-merchants. Deposit matching tools ensure your reporting stays clean and precise. Sub-merchant descriptors on statements can be customized, which enhances customer recognition.
Risk managementis native since banks need to rigorously monitor for fraud and compliance. They watch for things like money laundering or unusual activity to maintain security.
Conventional PayFacs typically experience extended and complicated onboarding, with more documentation for every merchant. In managed payment facilitation, batch onboarding and simpler checks mean sub-merchants can start faster.
That translates to greater adoption, particularly for user-heavy, digital-first marketplaces. Cost is lower for ACH than cards, which is great for businesses with lots of small or recurring payments. Sub-merchants don’t have to deal withlicensing or direct bank relationships.
A payment gateway provides real-time credit card authorizations. Managed payment facilitation for ACH operates in batches, meaning you aren’t aware of a payment failure until afterwards.
This may decelerate issue resolution but frequently does so at a reduced expense. It’s the same trade-off as with instant confirmation and reduced fees.
For online platforms, managed payment facilitation delivers value by making payments more seamless, secure and lucrative. Withescalating competitionin the payments world, companies seek to differentiate and delight customers. The managed approach assists platforms in scaling, reaching needs and concentrating on what they excel at.
Integrating payments into SaaS is about more than features—it unlocks a new mode of monetization. Rather than only taking subscription fees, platforms can take a small portion of every payment processed. That’s more revenue per user, giving companies pricing levers to weather pricing pressures and contribute to the bottom line.
Many payment facilitators employ a subscription model, so every merchant pays a fee to be in the payment system. That generates stick, recurring revenue for the platform — not one-offs.
For high-transaction platforms, ACH payments can reduce costs. ACH is cheaper thancard-based payments, so it’s a clever option for businesses with many subscription fees. The cost savings there can be huge, as platforms avoid the hefty fees associated with otherpayment systems.
With managed payment services, you don’t need to worry aboutPCI compliance, merchant management and underwriting, which can cost up to $2 million when establishing payments infrastructure from the ground up.
Consumers want to pay without leaving the platform. With payments built in, users can pay, track and manage from one place. This simplifies things for customers and can drive loyalty, as users tend to remain loyal to platforms that save them steps.
Any slick payment integration, as we describe, can assist platforms in getting new users operational quickly. It eliminates hassle for the platform and its merchants, who don’t have to shop around for their own payment providers.
That is, less friction for new customers and a more inviting experience.
With managed payment facilitation, platforms can accelerate their growth in a competitive landscape. They can introduce new services, enter new geographies and react to changes without having to create their own payments infrastructure from scratch.
This velocity is critical for staying competitive and serving customers.Payment facilitation manages compliance, fraud checks, and settlement — which can stall business growth if done in-house.
By offloading these tasks, platforms can stay nimble and scale.
By outsourcing payments, platforms can invest more time into what they do best—developing new features, enhancing user experience, and scaling their brand. Payment facilitators handle the tough parts: compliance, risk, and daily checks.
Instead, it liberates resources. It prevents teams from getting mired in payment minutiae, so they can focus on the differentiating things about the platform.
For others, this is a clever method to stay up to date with quickly-moving markets.
Handlingcross-border paymentsis no easy task. Once large companies start taking payments in various regions, they encounter rules that vary frequently and from country to country. Both the business and customer are the intention behind each rule. Ignoring these can mean huge fines, lost customer trust or worse, being forced out of some markets.
To remain compliant, organizations must track new regulations, deploy vetted tools and trusted partners.
Global payment facilitationthus requires merchants to comply with many regulations simultaneously. Among these are AML laws, which compel companies to verify who is sending or receiving funds and for what reason. You can have disclosures for cross-border payments in each country.
Payment facilitators need to adhere to the expectations of banks, card networks and regulators, too. Being non-compliant is costly–fines can be up to 4% of global annual turnover or €20 million, whichever is greater.Payment companies, for example, may pay $500,000 on PCI compliance alone, and user errors alone cost $5,000-$100,000.
Staying up to date isn’t optional, it’s a must if you want to keep operating.
Risk in payment facilitation comes fromfraud and chargebacksand system misuse. Unmanaged, these risks can result in direct losses, crippling fines and loss of reputation. Smart risk management begins with understanding the regulations and implementing processes to identify red flags early.
Approved scanning vendors assist in automating certain of these checks, aiding in issue identification and prevention. Ongoing training ensures that employees are able to spot risks and react quickly. Companies need to have around the clock systems monitoring, tracking changes and updating processes as the regulations move.
This reduces the risk of missing an important update or lagging in compliance. Selecting the appropriatepayment processor solutioncounts. The payment space is fractured – certain means are powerful for fraud protection, others for ease of integration.
Businesses should balance these capabilities against their risk profile.
Onboarding new merchants is more than just gathering some key business information. At its heart is a rigorousKYC process. KYC constitutes customer identification, customer due diligence and enhanced due diligence.
Each step aids identity verification, fraud identification and merchant regulatory compliance. Forpayfac-compliance, it’s not sufficient to handcheck the paperwork once—continued monitoring is required to detect changes in merchant behavior. Staying on top of paperwork is key.
Any gaps can put a business at risk for regulatory scrutiny, particularly when onboarding merchants in new markets. Teaming up withknowledgeable payment processorscan accelerate this and circumvent pitfalls.
Payment datais top of mind to steal. Defending this information entails implementing robust encryption, establishing secure access controls, and educating employees on secure processing. With most areas having rigid data protection laws, not being compliant can lead to huge fines or loss of customer confidence.
Regular security checks are important. Only work with trusted vendors. Update systems often. Don’t skip audits.
Such a managedpayment facilitation modelrelies on an excellent technology stack — secure, robust and flexible. The right stack is what enables payment facilitators to support complicated payment flows, satisfy compliance requirements, and provide customers witha frictionless payment experience.
A payment facilitator’s core infrastructure is made for speed, safety, and scale. It utilizes cloud servers and solid databases, so the system is scalable as more merchants and payments enter the fold. Our backbone has to handle things like different currencies and local payment options for global needs.
Security is at the core of the platform. With robust encryption, routine scanning and firewalls, it protects sensitive payment data. PCI DSS compliance isn’t an option—it’s baked in from the beginning and updated as rules shift. Performance monitoring tools verify uptime and detect deteriorations in speed, so problems are resolved quickly. For instance, a dashboard could display real-time data on transaction speed, server status and anomalies.
The stack handles onboarding and risk checks for sub-merchants. This includes verifying their identity and business model prior to allowing them to accept payments. These safeguards reduce fraud and maintain the system’s regulatory compliance.
Payment gateways, payout systems, and dispute management features are all within the stack, enabling payment facilitators to provide a comprehensive platform from a single location.
APIsare what make payment facilitation tick with everything else. They allowed the platform to communicate with banks, card networks, local payment providers, and risk management tools. The APIs need to be user-friendly, thoroughly documented, and capable of integrating with numerous third-party services globally.
This flexibility makes it easy for businesses to add mobile payments, multi-currency support, or even connectivity to popular wallets without major changes to the core system. User authentication is a requirement for APIs. Only the correct users can access sensitive information or initiate a payment.
Security here implies secure keys, tokens, and audits. Real-time risk checks run through these APIs, so payments are blocked if something appears off. For instance, a merchant in Asia may opt to accept QR code payments, while one in Europe adds local bank transfers—all executed through the same set of APIs.
Reporting tools assist businesses to visualize the happenings. They monitor sales, display payment patterns and identify risks. These tools draw data from across the stack—transactions, refunds, disputes, and so on.
A solid reporting dashboard displays daily volumes, payout schedules, even compliance checks, all in real time. Sophisticated reporting can detect fraud by monitoring anomalous transaction or refund surges.
By providing intuitive, visual representations of complicated information, they enable companies to make more informed decisions. It’s simpler to handle audit and compliance requirements with granular logs at the ready.
Managed payment facilitation seeks to sort out how businesses receive payments, but it has its own cocktail of benefits and dangers. The monetization paradox is about trying to keep payments straightforward and lucrative while navigating a labyrinth of fees, regulations, and options.
Revenue is what a business earns, but liability is what it owes. For merchants, the distance between these two can grow vast. Payment facilitation can increase revenue by simplifying the addition of new payment types or expansion to additional markets.
Still, the same mechanism can stack up responsibility. Consider compliance, fraud, and chargebacks. In 2019 alone, false declines at checkout caused $20.3 billion in lost revenue. Combine that with the reality that 67% of merchants don’t receive sufficient fraud and chargeback data to identify costs and risks before they become real costs.
A lot of merchants are stuck with payment systems that don’t provideactionable analytics—41% don’t receive the appropriate data to inform business decisions. When liabilities grow faster than income, even a great payment arrangement can become a sinkhole.
Pricing schemesin managed payment facilitation alter the way income generates and expenses accumulate. Some vendors charge subscriptions with companies paying a flat fee per month, others are pay-per-use or tiered.
For international companies, flat pricing can appear straightforward but can obscure additional charges for specific payment methods or geographies. For instance, a merchant may pay 0.50% to 1% per transaction, but that can escalate with cross-border payments or high-risk verticals.
There are costs associated with maintaining PCI compliance, which can run $500,000 for set-up and more than 800,000 annually for maintenance. Choosing the right model is about more than fees—it’s about aligning expenses with actual income, while satisfying customer desire for convenient payment plans.
Hidden costs are a huge explanation for why the monetization paradox exists.Transaction feesare the obvious cost, but there’s more lurking. Regulatory compliance is a big one—72% of merchants say their payment providers don’t offer them timely support when rules change, leaving businesses vulnerable.
Maintenance costs pile up year after year. There’s the price of missed sales when a payment mechanism doesn’t provide customers with the options they desire. Just 37% of merchants offer an extensive list of payment options; however, 56% of consumers will exit if they can’t pay their way.
Each of these concealed expenses erodes margin, which makes it increasingly difficult to transform payment processing into actual top-line expansion.
Payment ecosystems continue to evolve with new technology, new behaviors and new regulations defining the future. Most people now want to pay online or with their phone. This accelerates the expansion of digital payments. Moving forward, these systems will become more complicated.
So there will be more players like payment facilitators, banks, card networks, and fintech firms. They’ll all collaborate to ensure payments are seamless, secure and rapid.
ACH payments are among the future tools. They provide an easy and inexpensive way to manage cash flow, which benefits numerous companies—particularly those that operate on subscriptions or memberships. ACH payments don’t have the same dispute issues as credit cards.
There are just three primary reasons an ACH dispute can arise. This reduces anxiety for both businesses and their buyers. Additionally, recurring ACH payments can run on their own, which simplifies managing NSF / failed payments.
As a bonus, funds from ACH settle ahead of paper checks, so businesses receive their money sooner. Payment aggregation is now a big part of this shift. It enables even more companies to offer merchant accounts that support ACH aggregation.
ACH Payment Aggregators function as master accounts and assist sub-merchants with payment processing. That’s a huge win for software companies and platforms that have to process recurring payments for thousands of users. Partnering with a third-party ACH processor equals less headache.
Businesses reduce overhead and don’t have to concern themselves with addressing compliance or risk internally. Enabling payments in SaaS to help businesses evolve. They can access new users and unlock new monetization paths.
ACH APIs simplify avoiding manual steps, eliminating errors, and automating payments. For recurring billing, ACH typically trumps credit cards on fees, saving a ton over time.
Payments will have to follow where people want. More folks want to use their own favorite way to pay, so systems have to be prepared for that. E-commerce and mobile shopping will continue to drivereal-time paymentsand instant settlements.
Simultaneously, additional checks such as AML and KYC will be required to ensure payments remain secure and legitimate. There could be more deployment of innovations such as blockchain, which can assist in making payments more rapid, secure and cost-effective.
Managed payment facilitation keeps it transparent for buyers and sellers. Powerful tech, simple policies and worldwide reach enable companies to get funds flowing — quickly and securely. Great payment support does much more than check a box. It assists companies in establishing trust, complying with local regulations, and unlocking new avenues for expansion. A tool kit with real-time checks, open data and smart updates keeps risk low and value high. Big brands and small shops both take these steps to stay sharp and build strong ties. To capture payment trends, firms must select tools that match their individual timing and strategy. Discover what works, experiment with new tools, and monitor customer preferences.
Managed payment facilitation is when a third party hosts payment processing on behalf of a business. This model streamlines onboarding, compliance and transaction management for businesses.
It simplifies operations, accelerates onboarding and guarantees compliance. You grow your business, your experts handle payments and risk.
Managed payment facilitation are up to date with global regulations such asanti-money laundering and data security. They aid merchants in fulfilling compliance needs in various regions.
Contemporary payment platforms leverage APIs, secure cloud infrastructure, and sophisticated fraud tools. These innovations provide secure and fast payment processing.
Businesses often generate income via transaction fees, service charges, or value-added offerings. This creates new revenue sources while offering trusted payments to consumers.
Key trends are real-time payments, more automation and expanded access to wallets. These innovations seek to accelerate, secure, and democratize payments.
Full-blown Payment Facilitation involves assuming all payment, fraud and compliance risk. Essentially you are pivoting to become a payment company. Managed Payment Facilitation enable a platform ton instantly onboard users and generate payments revenue without the expense and risk of traditional Payment Facilitation. The draw back is that margins are not as attractive
There is one BIG questions that decides if you should become a Managed PayFac: Do you HAVE to have instant onboarding to attract users?
This varies with volume but if you price at the 2.9% and 30 cent common in the market, you can generate .3->.5% per transaction
