Payment Facilitator: A Comprehensive Overview

With the development of financial technologies, an increasing number of Software-as-a-Service companies are transitioning into fully operational Payment Facilitators.  These entities furnish white-labeled payment processing services and aid sub-merchants in conducting transactions via PayFac’s master merchant account.

The increasing prominence of eCommerce and online payments has resulted in numerous payment service providers offering easily integrable, plug-and-play solutions into an Independent Software Vendor’s or SaaS vendor’s overarching solution. Such services equip ISVs with necessary payment functions without necessitating extra work while opening additional avenues for revenue generation for PayFac.

What is a Payment Facilitator?

A Payment Facilitator, or PayFac, is a merchant payment service provider. Simply put, a PayFac is a company that enables its clients to accept electronic payments through its platform. It operates by having a master merchant account (and a master Merchant ID or MID) via its relationship with acquiring banks. It permits the PayFac to onboard sub-merchants and process their transactions under this MID.

What Does a PayFac Do?

In essence, a PayFac:

Forms a contract with an acquiring bank to process payments on behalf of its merchants.

Uses the master merchant account issued by the acquirer to accept all payments for the sub-merchant.

Directs funds from the buyer to the sub-merchant account.

Thus, a PayFac controls the flow of funds and assumes the responsibility of directly paying out funds to merchants.

The PayFac Model: What’s Involved?

The PayFac model, created to streamline the payment processing for end-users of software platforms, simplifies the enrollment process. It establishes a sub-merchant platform, reducing the merchant account’s approval process duration. Now, instead of waiting for two weeks, it merely takes 24-48 hours for approval. For software companies transitioning into becoming payment facilitators, owning the payment functionality gives them a new revenue stream and the ability to manage payments as a core part of their customer experience.

Incorporating a PayFac within your existing website and systems to monetize payments enhances both your user experience and that of your customers. Payments technology is integrated directly into your software infrastructure, facilitating a seamless user experience for software solution providers and their customers.

The Role of a PayFac Versus a Payment Processor and an Independent Sales Organization (ISO)

Though they may appear similar, there are distinct differences between a PayFac, a Payment Processor, and an ISO.

As the name suggests, payment Processors provide the systems and technology for processing transactions. They maintain Payment Card Industry Data Security Standard (PCI DSS) compliance, and many provide payment terminals and various security solutions.

ISOs, also known as Independent Sales Organizations, act as intermediaries between the sponsor bank and the merchant, facilitating the relationship between the two parties and getting merchants signed up with a merchant account.

On the other hand, a PayFac creates a streamlined pathway to electronic payment acceptance for small and medium-sized businesses. In a conventional onboarding model, a merchant must first apply for a merchant ID (through the ISO) and sign a direct agreement with a sponsoring bank. With a PayFac model, the facilitator already has a bank relationship allowing you to work with them instead of the bank, simplifying the approval process.

The Benefits of Using a Payment Facilitator

Using a PayFac brings a multitude of benefits. It allows the onboarding of new users instantaneously, enabling payment acceptance as soon as 15 minutes after the application submission. In addition to simplifying the enrollment and onboarding process, PayFac offers seamless payment integration solutions.

One significant advantage of a PayFac is the transparent, easy-to-understand fee structure. It encourages businesses to collaborate with a PayFac, eliminating surprise charges and allowing merchants to manage their budgets conveniently.

Moreover, PayFacs are particularly beneficial for small businesses. They can help in such issues as Know Your Customer  requirements, Anti-Money Laundering regulations, underwriting, and application processing.

Merchants can also take advantage of PayFac’s integrated fraud prevention tools, chargeback management services, and the payment processing hardware, software, and APIs they provide.

UniPay’s flexible model allows you to delegate PayFac-related duties to our dedicated team. What we offer:

We provide a comprehensive, ready-to-use white-label platform.

We assist with crucial processes such as merchant underwriting, KYC compliance, background checks, and risk assessment.

We offer a specialized API complete with pre-made forms to expedite merchant onboarding. A merchant can initiate processing when they fill out the form and opt for our payment facilitation services.

We generate clear, brand-specific merchant statements embellished with your company’s logo.

Our platform includes fully automated mechanisms to collect merchant service fees.

We can accommodate various configurations to cater to your specific needs.

We assure fair and transparent revenue sharing. We are ready to share the earnings from payment processing with you, enabling you to profit from both payment processing and payment facilitation services.

We aim to simplify the payment facilitation process for you. It will enabling you to focus on other aspects of your business while we handle the financial aspects.

Final Thoughts

Working with a PayFac opens a new revenue pillar for your business and adds value to your platform. By providing a rapid, hassle-free onboarding process, managing who is approved on the platform, and offering transparent, easy-to-understand pricing structures, PayFacs can significantly enhance your business operations. To make the most out of payment facilitation services, contact us for a consultation or request a demo today.