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Your Guide to Payment Facilitators

Payment facilitators are an important part of the modern payments stack, but what do they actually do?

What is a payment facilitator?

PayFacs, or payment facilitators, are service providers for merchants who want to accept payments. Payments processing has a lot of moving parts, but payment facilitators make it easier to integrate with a payment processor and start accepting payments faster. Many businesses integrate with a payment facilitator like Finix, and others become payment facilitators by building the infrastructure in-house.

Previously there was a large gap between these two payments models, but now companies can take advantage of integrating with a payment facilitator, like Finix, to get the best of both worlds. This allows you to get on the path to owning your payments, without needing the payments volume and extensive process it takes to become a payment facilitator.

The solution, provided by the payment facilitator, simplifies the process of accepting payments for it’s sub-merchants. This payments solution:

  • Streamlines the underwriting process

  • Insulates the sub-merchant from onerous compliance responsibilities

  • Greatly simplifies the funds settlement process so that the effort required for reconciliation is significantly reduced

Typically, it is the responsibility of the payment facilitator to:

  • Negotiate a Payment Facilitation agreement with a Payment Processor

  • Construct a sub-merchant agreement for all your sub-merchants to review and sign

  • Achieve PCI-DSS status with a certified QSA

  • Integrate into a Payment Processor

  • Establish an underwriting Process

  • Onboard and underwrite net-new merchants

  • Migrate over your existing customer base

  • Create applicable organizational changes and allocate internal resources to handle your new responsibilities as a Payment Facilitator

The payment facilitator acts as the payment gateway and integrates directly with the payment processor, making it the merchant in this relationship. The merchants that are then onboarded onto the payment facilitator are then considered sub-merchants. This means that the payment facilitator takes on the majority of the risk, instead of the platform and its merchants.

Learn More About Payment Facilitation

The History of Payment Facilitation

The first payment facilitators only showed up on the payments scene in the late 2000s, but they’ve since become essential to how the payments industry works and are an important part of the payments layer cake. The original PayFacs were companies like Stripe and Square, but there are now hundreds of PayFacs. Before payment facilitators entered the scene it was necessary for merchants to create an account with a merchant acquirer, but the process was (and still is) tedious and time consuming. Payment facilitators make onboarding of merchants much faster and easier, so you can be ready to accept payments much faster.

The History of Payment Facilitation

How to Get Started with Payment Facilitation

If you want to own, manage and monetize your payments, payment facilitation is likely the way to go. Finix provides two models for companies wanting to get started with payment facilitation so that you can generate revenue from your payments as your company grows.

At one point it would have been necessary to build all the infrastructure in-house to become a payment facilitator, but managed payment facilitation has made bringing payments in-house a lot easier. You no longer have to choose between losing control (and a lot of revenue) to an ISO, or investing resources in building payments yourself.

PayFacs reduce the complexity of integrating payments and allow your team to focus on your core product. You get the control over the payments experience and revenue without having to build the infrastructure in-house.

Learn How to Get Started with Payment Facilitation

Demystifying PayFacs

The daily operations of a payment facilitator can be unclear, but once you break it down, the three pillars of payment facilitation are:

  1. Boarding and underwriting: The PayFac does all the compliance checks on new merchant applications and makes sure that they are safe to bring onto the platform.

  2. Transaction monitoring: The PayFac monitors all the transactions that are being processed through the platform to watch for possible fraud.

  3. Funding and reconciliation: The PayFac conducts the settlement process and does payouts to merchants on a pre-set schedule.

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There’s a lot to learn about payment processing. Get all the information you need to make thoughtful decisions about your payments strategy.