What is the Payments Facilitator Model?

What is a Payments Facilitator?

Payment facilitators have emerged to become a service in the finance industry that is revolutionising the merchant services space. A payments facilitator, otherwise known as a PayFac, essentially allows any entity to offer merchant services on a sub-merchant platform. A PayFac can then help onboard those service-providers so that they can use the master MID of the Payment Facilitator (rather than having to try and seek their own MID) as the PayFac is sponsored by the bank. 

This allows the Payment Facilitator to operate in an incredibly efficient manner, as they are able to underwrite merchants continuously as they keep on processing transactions for them. This is much preferred to underwriting the merchant upfront before the services can be carried out, as this takes much more time and can hold things up. 

What Do Payment Facilitators Do?

Payments Facilitators hold a number of different roles that ultimately help streamline merchant services in the payments ecosystem. The role of a Payment Facilitator typically includes:

  • Transaction Monitoring. Once the PayFac has onboarded the merchant, they become responsible for monitoring all processed transactions and ensuring that said transactions adhere to financial and governmental rules and regulations.
  • Underwriting & Onboarding. Before a PayFac can onboard a merchant, they must first vet them in order to minimise allowing any untoward merchants into the system, this is known as underwriting. Once the Payment Facilitator has underwritten the merchant and they are satisfied with the fact they will act with good faith, the PayFac can onboard the merchant.
  • Chargeback Monitoring. A chargeback occurs when a customer disputes the charges applied to their account and the bank issues their money back. When a PayFac is involved, they are responsible for the recovery of funds along with the acquiring bank and can even be liable to cover the costs if funds are unusable to be recovered from the merchant. 


How Do Payment Facilitators Work in the Payments Ecosystem?

In order for a Payments Facilitator to operate smoothly and effectively, they must work very closely with a number of key players in the payments ecosystem. It is this level of cooperation that has allowed Payment Facilitators to emerge and play such a key role in the merchant services space. These key partnerships include:

  • Submerchants. PayFac customers are more commonly called Submerchants.
  • Acquiring Banks. The merchant account where a PayFac will hold the funds will be with the acquiring bank.

Payment Processors. A PayFac will use a payment processor to authorise transactions and route these to the appropriate card network.

For more information on how Imburse Payments can help you access the global payments ecosystem, integration-free, contact us today where our team of experts will be more than happy to answer any questions. 

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