Can companies become payment facilitators just because they want to? It depends on the software and the platform that can support the software. With many payment facilitators in the market, it makes sense to not only understand your own requirements, but also to know how customizable the software is.
What are payment facilitators?
Payment facilitator, also known as PayFac, is run as a sub-merchant system, i.e., the merchants do not have or use their own merchant identification number (MID). An MID is a code that is unique to the merchant. PayFac is a model for merchants or businesses to accept payments through the MID of the payment facilitators.
What do payment facilitators do?
PayFacs perform several functions to enable onboarding and processing of merchants.
- Underwriting – It is a critical part for PayFacs to verify and underwrite the businesses to ensure that there are no scams.
- Monitoring – all transactions that come under the PayFacs need monitoring. This ensures that the transactions are compliant with government protocols.
- Funding – Following the proper guidelines legally, PayFacs are involved in paying the income earned by sub-merchants.
- Chargeback – PayFacs are accountable for managing chargebacks along with the acquiring banks.
Benefits of PayFacs
The two main benefits include developing a new revenue stream and the speed with which merchant onboarding can happen. Other benefits include a growing business and an increased bottomline.
PayFac as a solution
Payment facilitators can offer customizable solutions depending on your business’ specific requirements. It can also be scaled up along with a growing business. The ideal payfac solution would allow customers to integrate, and have a modular payment system in place so as to focus on growing the business instead of being diverted into payment processes.
Cloud-based PayFac platform
A cloud-based payfac platform allows companies to embed and monetize payments. It is a technology stack that can be used by enterprises, including e-commerce, ticketing, and retail. PayFacs charge a fee for every transaction.
Finding the right PayFac and the right platform
Choosing the perfect payment facilitator can be easy so long as you know what you are looking for. PayFacs can come with different modules including end-to-end payment platform, and independent interchangeable modules to integrate them into your business needs. The modules of a comprehensive PayFac solution ideally includes merchant onboarding, processing of transactions, billing, risks and compliance, reconciliation, payouts, and analytics.
Choosing the perfect platform that encompasses all the modules in a PayFac solution requires research and an understanding of how the software as a solution (SaaS) can be integrated with your financial solutions. Depending on the size and complexities of your enterprise, you will want to pick and choose either the entire payment software or parts of it.