As fintech continues to grow, many SaaS model companies are transitioning into becoming full-service payment facilitators. As a PayFac or payment facilitator, they take on an active role in facilitating transactions by providing white-labeled payment processing services. These plug-and-play solutions can be easily integrated into a sub-merchants overall solution. This provides ISVs with the payment functions they need without the extra work and provides extra revenue generation for the Payfac.
In the PayFac model, there are three main parties involved: the acquirer, the payment facilitator, and the sub-merchant. The PayFac acts as a go-between for the acquirer and the sub-merchant. Working with a payment facilitator eliminates the need to go through traditional payment companies.
What Does A Payment Facilitator Do?
- A PayFac gets into a contract with an acquired bank to accept payments on behalf of their sub-merchants.
- The PayFac uses a master merchant account to accept all payments for the sub-merchant.
- The acquirer issues the PayFac a master merchant account.
- The PayFac directs the funds from the buyer to the sub-merchant account.
In short, the Payfac controls the flow of funds and assumes responsibility for paying out funds to merchants directly. But what else does a Payfac do, and would it benefit your business to partner up with one?
RELATED: What are The Costs of Being Your Own Payment Facilitator?
Provides a Rapid Onboarding Process
In a traditional onboarding model, a merchant must sign a direct agreement with a sponsored bank as well as apply for a merchant ID. The enrollment and onboarding process often requires a great deal of paperwork and usually takes days or even weeks to complete.
Going through a payment facilitator eliminates the lengthy underwriting process and gives developers more control over their merchant’s overall processing experience. Once their sub-merchants are on-boarded and accepting payments, payment facilitators are then responsible for providing any needed customer service.
PayFac Manage Who Is Approved On The Platform
Because the payment facilitator owns the direct agreement with the bank, their sub-merchants do not get locked into a contract with the bank’s terms. This gives the payment facilitator more flexibility with managing their sub-merchants.
This also means that the Payment facilitators are responsible for screening sub-merchant applicants to avoid allowing high-risk businesses into the system, a process known as underwriting. After a sub-merchant is onboarded, the payment facilitator remains responsible for making sure its payments are legitimate and adhere to card network and government rules and regulations.
On top of that PCI Compliance is also necessary to ensure customer data is safe and secure during payment processing. The Payment Card Industry Data Security Standard (PCI DSS) is an information security standard for organizations that handle branded credit cards from major card schemes.Learn More
Makes Sure Compliance Requirements Are Met
After a sub-merchant is onboarded, the payment facilitator remains responsible for making sure its payments are legitimate and adhere to card network and government rules and regulations. Putting controls in place to track and mitigate high-risk financial activity on an ongoing basis is imperative. Most of the compliance requirements for payfacs are enforced by the card networks and acquiring banks.
Meeting Know Your Customer (KYC), anti-money laundering (AML), and the US Office of Foreign Asset Control (OFAC) is part of the necessary compliance requirements. Payment Facilitators are also required to check sub-merchants against the Mastercard’s Member Alert to Control High-Risk Merchants (MATCH). This lists consists of entities with connections to crime and terrorism.
If these compliance requirements aren’t met the PayFac is 100% liable for all financial risks associated with their sub-merchants, including loss from fraud, failed payments, and even merchants going out of business.
How Stax Connect Helps Streamline Payment Facilitation
Stax Connect allows your business to provide a full payments experience to your customers, including the latest in data optimizations, analytics and reporting, and modern-day payments technology. All without the need to spend millions of dollars in time and money. Stax Connect takes care of all of the extra steps so that you can focus on your customers and your platform.
- Access to Stax’ Dashboard
- Award-winning 24/7 customer support
- No need for custom engineering resource requirements
- Save costs on implementation, with no additional fees
- Easy enrollment allowing you to onboard customers in 20 minutes
- Access to the lowest credit card processing fees, in addition to the ability to adjust customer pricing
- Revenue Sharing
With Stax Connect, you can leverage your newest integrated payments solution as an additional revenue generation engine. We allow platform owners to monetize their payment processing through a custom revenue share.
Learn more about Stax Connect and find out how you can quickly get started on monetizing payments today. We will be happy to answer any questions you have and help you leverage the best all-in-one software payment processing solution for your needs.
RELATED: What’s a Payment Facilitator?