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Payment Facilitation, or PayFac, has become increasingly popular because of the potentially large revenue stream that comes from the payment fees charged to end-users, as well as the ease and speed with which you are able to board new merchants. Enterprise, ISVs, ISOs, and SaaS companies are best-suited for this type of payment system. Another option is to become a managed payment facilitator, where a full-fledged payment facilitator assumes the compliance and infrastructure costs, while you still retain many of the benefits of a payment facilitator.

There are many different payment solutions to choose from with the tools and technologies your business needs. It’s important to do your research and know what to expect before becoming a payment facilitator. Here are the most frequently asked questions about payment facilitation.

What is Payment Facilitation?

Payment Facilitator (PayFac) is a company that provides payment services. PayFacs gets permission from a real payment company to accept payments on behalf of the merchants and in that process, they decide who they are going to do business with so they can sign up merchants very quickly and charge a fee for each transaction running through the system. Companies with high annual payments volume would be comfortable taking on the liability and freedom of a Payment Facilitator solution. They would be in the flow of funds, able to record the revenue of all processing and be considered the merchant of record as they board merchants. Payment Facilitators are responsible for underwriting and compliance of their merchant portfolio. PayFacs also have full control of the pricing setup, branding, and disbursements of funds. They are a fully registered PayFac with the card brands (Visa & MasterCard).

What is a Managed Payment Facilitator?

Managed Payment Facilitators can take advantage of key features of the payment facilitator model, without the burdens and risk associated with these programs. Managed PayFacs can take advantage of pre-existing PayFac partner relationships without the requirements for registration. This allows them to control the branding, white-label the processing as their own. As a managed PayFac, they do not have the full risk liability, do not undertake 100% of the underwriting risk, or incur registration. They do not have the same reporting requirements by the card brands. The control over the flow of funds is somewhat limited to what the partner allows them to do but time to market is considerably accelerated.

Why are embedded payments important?

Embedding payments into a software platform allows companies to control the payments process from start to finish. Embedded payments can also enable software providers to control aspects of the relationship such as merchant applications and onboarding. This allows one cohesive experience between all payment participants and more of a one-stop shop. Businesses can also monetize the payment processing fees and create a new revenue stream.

What are the advantages of becoming a payment facilitator?

One of the biggest advantages of becoming a payment facilitator is the ability to acquire a new revenue stream. Payment facilitators can earn a per-transaction fee each time a customer or client purchases a product or pay for a service. If your clients routinely process a high number of transactions, becoming a payment facilitator can lead to a measurable income boost.

Another benefit is the convenience of controlling the underwriting and onboarding process. As a payment facilitator, you’ll be able to connect your clients to payment processing products directly. You will control onboarding and underwriting from beginning to end. You can process your merchants’ applications and underwrite them yourself. These clients become sub-merchants under your payment facilitator account.

The ability to offer value-added services is another great benefit. Inevitably, your clients will encounter problems running payments. As a payment facilitator, you’ll be able to help these customers directly. They won’t have to contact a third-party payment facilitator, and you won’t have to draw attention to what you’re able to resolve directly. This increase in service quality is a value-added benefit for your customers that you can capitalize on through your marketing messages. Offering payment processing to your existing clients can enhance customer lifetime value (CLV), loyalty, and trust.

What steps does a business need to take to become a PayFac?

  1. Determine the payment facilitation model that is most suitable for your business
  2. Set up the sponsoring and payment processing relationships to support that model.
  3. Implement new business processes in accordance with the rules and regulations of your banking partners.

Do payment facilitators work with more than one acquirer?

Payment facilitators can work with more than one acquiring bank, depending on the way they set up their business, the payment and payout options they support, and the locations in which they operate.

How do I know which payment processor to choose?

Choosing the right payment processor for your business is critical because there are so many options to choose from. The right payment processor should offer a payment facilitation program that supports working with you, the industry in which you are operating, and your sponsoring bank.

What payment types should I accept as a PayFac?

A PayFac contracts with an acquirer to accept payments on behalf of their sub-merchants. Common payment types include credit and debit cards, and ACH payments.

How long will it take to begin processing payments as a PayFac?

Once you establish a PayFac sponsoring relationship with a bank, Amaryllis payment experts can help you go live in 60 days or less.

What is PCI Compliance?

PCI Compliance stands for the Payment Card Industry Data Security Standard (PCI DSS). PCI Compliance is a set of requirements intended to ensure all companies that process and handle credit card information maintain that information securely. Every payment facilitator is required to follow these rules and maintain proper compliance.

What are the benefits of an automated underwriting system?

An automated underwriting system makes it easy for you to become a PayFac, onboard merchants, and start monetizing payments quickly. Payment facilitators can benefit from an automated system by underwriting merchants at scale and fast. This system can also help your business meet compliance with KYC, AML, and card network rules. Automating the underwriting system will in-turn generate better productivity, smarter fraud detection, and improve consistency in underwriting.

What is the difference between merchant underwriting and merchant onboarding?

The merchant underwriting process begins with the first contact between a merchant and a payment provider. That is the first step toward getting to know who you’re dealing with and completing the KYC process. Merchant underwriting is the process of the underwriter evaluating the merchant’s account to determine if they are legitimate. Merchant onboarding happens once a merchant underwriting application is approved, and includes the steps to configure the merchant account in the payment system, and potentially also through 3rd party systems.

How does automated merchant underwriting help reduce risk?

Automated merchant underwriting uses information from the merchant account application, credit bureaus, fraud services, and other data sources to decide if an applicant is worthy of a merchant account. An automated system will reduce human errors caused by manual underwriting. The Amaryllis Platform uses an automated underwriting management process to ensure everything meets compliance with KYC, AML, and card network rules, all in one place.

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