What is the payment facilitator model?
A model for streamlining merchant services
In the payment facilitator model, a software provider registers with an acquirer to provide payment services to sub-merchants that utilize their software. By registering as a payment facilitator with an acquirer, the software provider acts as a “master” merchant account provider, boarding sub-merchants under their own account in order to facilitate payment transactions for them. Payment facilitators eliminate the need for individual merchants to establish a traditional merchant account.
Three parties involved
One way to look at the model is a reverse pyramid consisting of three primary entities, with the acquirer at the top of the pyramid, the software provider/payment facilitator in the middle, and the sub-merchants at the bottom.
This illustrates how the acquirer provides the overall structure for the operation, the payment facilitator acts as the go-between for the acquirer and the sub-merchants, and the sub-merchants operate underneath the payment facilitator. While the payment facilitator interacts with the acquirer and the sub-merchant, sub-merchants and the acquirer never interact with each other.
Who’s responsible for what?
Each entity in the payment facilitator model has distinct responsibilities. Here’s a quick (but not all-encompassing) guide:
Acquirer—works with the payment facilitator to get them up and running. This includes administering an application and underwriting process, working out a pricing agreement, and facilitating a payment technology integration. The acquirer is also responsible for monitoring the payment facilitator’s compliance with operating regulations and ensures due diligence when boarding sub-merchants.
Payment facilitator—undergoes a comprehensive process to register with an acquirer including integrating to the payments technology and infrastructure. The payment facilitator assumes all risk and liability for their sub-merchants.
Sub-merchants—sign up with the payment facilitator in order to be able to accept payments from customers. Responsible for meeting the payment facilitator’s terms and conditions of service
Is the payment facilitator model right for your business?
When considering whether to pursue a payment facilitator model for your business, it’s helpful to look at the primary benefits and challenges.
The greatest benefit is the ability to simplify and streamline the merchant account enrollment and onboarding process by offering a complete, white-label payment processing solution. This leads to more control over the processing experience, higher merchant conversion rates, and the opportunity to earn more revenue from credit card processing.
On the flip side, the greatest challenge is the level of responsibility the payment facilitator must assume. This includes greater liability for fraud, chargebacks, and data breaches, the resources to build or purchase payments technology, and the ability to meet compliance mandates and regulatory rules to register as a PCI Level 1 or Level 2 validated service provider.
If you would like to learn more about how the payment facilitator model may work for your business, give us a ring. We’ll walk you through the ins and outs, and if it looks like a good fit, we’ll help you get started.