Q & A: Is becoming a Payment Facilitator right for you?
As a software provider, you have many options for bringing your payments solution to market. One avenue is to become a payment facilitator. But what exactly does it entail? Following are answers to some of the most common questions about payment facilitators, to help you determine if this is the right path for your business.
1. What is a Payment Facilitator?
A payment facilitator is an entity registered by an acquirer to provide payment related services to a group of merchants (known as sub-merchants). Payment facilitators are typically vertically oriented software companies, boarding sub-merchants and facilitating merchant services for them. A payment facilitator assumes all the risk and responsibility of managing payments for their sub-merchants, eliminating the need for those businesses to establish a secondary payment processing account with a payment processor. In that, their software company is also their payment processor.
2. What are the advantages of becoming a payment facilitator?
At the most basic level, payment facilitators simplify the merchant account enrollment and onboarding process by offering a complete white label payment processing solution. This allows them to:
- More easily and quickly board merchants
- Have complete control over their merchants’ processing experience
- Increase merchant conversion and retention
- The ability to better monetize payments, since a payment facilitator defines processing rate and fee structure for their clients
3. What are the challenges of becoming a payment facilitator?
Along with the advantages of becoming a payment facilitator come greater responsibilities. These include:
- Having a thorough understanding of merchant risk and underwriting, and being able to manage chargebacks, fraud, data breaches, and other liabilities
- Being able to build, partner (or acquire) the necessary technology infrastructure for all aspects of processing payments including funding, reporting, and more
- Registering as a PCI Level 1 or Level 2 validated service provider and following required compliance mandates and regulatory rules
Additionally, becoming a payment facilitator may be especially challenging for smaller, start-up businesses that lack the technical resources, time, and funds required to get up and running. So in general, payment facilitators tend to be larger organizations or those that have some experience and knowledge about what’s involved in accepting credit card payments, and have the people resources to dedicate to the task.
4. What steps does a business need to take to become a payment facilitator?
The overall process to becoming a payment facilitator is quite complex, but can be broken down into the following broad steps:
- Find a sponsor/acquirer to work with.
- Complete a comprehensive application and underwriting process with the acquirer, which includes providing information about the company history, business and sales model, sales volume, projected growth, underwriting policy for credit, fraud and risk, KYC (know your customer) policies, etc.
- Work with the acquirer on a pricing agreement.
- Go through a technology integration to certify to the acquirer’s APIs and build (or buy) the payment infrastructure for functions such as merchant applications, transaction monitoring, funding, reporting, statements, etc
- Operationalize internal processes for sub merchant data collection, risk, and fraud monitoring.
- Begin boarding merchants for processing.
5. What payment verticals and environments do payment facilitators operate in?
Payment facilitators are especially suited to low-risk verticals such as education, government, property management, utilities, and nonprofit organizations, and where shopping carts and recurring billing solutions are common. Some examples include entities that accept school lunch and activity fees, neighborhood association dues, and property rental payments.
The majority of payment facilitators operate in card-not-present environments, However, a large, well-scaled organization with a proprietary technology allows payment facilitators to operate in card-present environments as well.
6. How many sub-merchants can a payment facilitator board?
There is no limit on the number of sub-merchants a payment facilitator can board. One of the reasons companies adopt a payment facilitator model in the first place is because they want the ability to get as many sub-merchants up and running to accept card payments as quickly as possible.
7. What type of support do sub-merchants receive?
Support varies widely. It’s completely up to the payment facilitator and depends upon their product and service portfolio as well as their agreement with the acquirer. However, traditionally the software company, not the payment processor, will handle all support for their sub-merchants, with a dedicated relationship manager that handles tier 2 support.
8. Do payment facilitators work with more than one acquirer?
Yes, at the discretion of the payment facilitator. Like an ISV, a payment facilitator has the ability to work exclusively with one acquirer like Vantiv, or develop partnerships with multiple payment processors. It’s fair to note, however, that having multiple processor relationships can make things more complex.
A broad range of businesses and organizations are taking the steps to become a payment facilitator and gain additional control over their payments activity. To find out more about this opportunity for your business, contact us.