The global COVID-19 pandemic has forced many people to become increasingly online: everybody is doing and attending virtual events, children are attending online classes, and more and more people are relying on online shopping and online transactions. 

As a result of this phenomenon, many businesses are now looking for ways to start accepting online payments on their websites and applications, and one cost-effective, viable solution for this is to use the service of a payment facilitator. 

But what actually is a payment facilitator? What’s the benefit for your business? Can you become a payment facilitator? 

In this article, we will answer these questions and all you need to know about a payment facilitator.

What Is a Payment Facilitator?

What Is a Payment Facilitator?
A payment facilitator, or a PayFac, is an organization that facilitates other businesses to start accepting online payments. 

To really understand the benefit of using the service of a payment facilitator, we have to first discuss the typical way a business can start accepting online payments. 

How Businesses Accept Online Payment: Standard Process?

To start accepting online payment in a traditional way, the business (or technically called a merchant) must first partner up with an acquiring bank or a credit card acquirer. To do so, this merchant must open a merchant bank account and then apply for a Merchant ID (MID) from the said acquiring bank. 

However, the process of getting approved can be very complex, involving a lengthy underwriting process, and even then, there’s no guarantee of being approved. 

The business applying for a Merchant ID must establish its credibility while also maintaining a healthy relationship with the acquiring bank and other parties that might be involved, and in practice, this can be easier said than done. 

This is where payment facilitation comes in.

The Payment Facilitation Model

Due to the challenge and time constraints of the traditional process discussed above, using the service of a payment facilitator is there to streamline the process. 

In a payment facilitation model, the payment facilitator is a business (technically a merchant) that has been approved for its Merchant ID (MID), and is also authorized to facilitate other businesses to receive only payments by aggregating or sharing this Merchant ID. 

The business that is facilitated by a payment facilitator is treated as a sub-merchant, and the sub-merchant can start receiving online payments without needing to undergo the lengthy underwriting process with an acquirer bank. The sub-merchant only needs to undergo an underwriting process with the payment facilitator, which is typically much faster. 

Benefits of Using The Service of a Payment Facilitator

Benefits of Using The Service of a Payment Facilitator
For a business looking to start accepting online payment, using the service of a payment facilitator will offer the following benefits: 

1. More lenient responsibilities

In a payment facilitation model, the payment facilitator assumes total responsibility with the acquiring bank, while the sub-merchant will not be directly in a contract with the bank. This can provide more versatility for both the sub-merchant and the payment facilitator. 

2. Faster onboarding

As discussed above, using the service of a payment facilitator will allow the sub-merchant to bypass the lengthy and complex underwriting process they’d otherwise need to undergo in a traditional processing model. 

3. Simplicity

In a payment facilitation model, the payment facilitator can simply charge transparent and simple transaction fees (at a flat rate) so the sub-merchant won’t need to pay any hidden fees or fluctuating rates. This can provide more predictability for both the payment facilitator and the sub-merchant.

How To Become a Payment Facilitator

How To Become a Payment Facilitator
To become a payment facilitator (PayFac), the business must be approved by a processing bank (i.e. Fiserv) and must sign a direct agreement with this bank. Even then, you are going to be routinely audited to maintain this license. This is where professional payment facilitation companies can help you in the following areas: 

1. Get approved as a payment facilitator

The underwriting process for being approved as a payment facilitator can be lengthy and complex. You’ll need to undergo very detailed audits and various examinations, and you can’t get help from the acquiring bank due to a potential conflict of interest.

This is where getting the help of a professional consultant with a 100% approval rate can significantly help.

2 .Education and training

Your business is going to be audited and examined regularly once you are approved as a payment facilitator. It’s necessary to make sure your team stays compliant with the standards and regulations. 

A consultant can help organize regular training for your existing and future team, including familiarizing everyone with payment-related vocabularies to enable your team to communicate effectively as a payment facilitator. 

3. Policy implementations

Before you can be approved as a payment facilitator, your business must implement various company-wide policies to ensure compliance with the credit card networks and relevant regulations. Consultants can help set up these policies, as well as additional policies to regulate your sub-merchants to protect your business. 

Closing Thoughts

A payment facilitator facilitates other businesses to more easily and quickly be able to start receiving online payments. The payment facilitator will share its Merchant ID with other businesses, treating these businesses as sub-merchants that operate under the payment facilitator’s ID. 

While the process of becoming a payment facilitator can be lengthy and difficult, it is definitely a lucrative business opportunity with massive potential for profits.