A Payment Facilitator (also known as PayFac) is a company that provides payment processing services to merchants, typically small and medium-sized businesses, enabling them to accept electronic payments from their customers. The payment facilitator acts as an intermediary between the merchant and the payment processors or acquiring banks, making it easier and faster for merchants to start accepting electronic payments.
Payment facilitators often provide a full suite of payment-related services, including payment processing, merchant account setup, risk management, fraud prevention, and reporting. They may also provide value-added services such as invoicing, recurring payments, and virtual terminals.
Payment facilitators have become increasingly popular in recent years due to their ability to simplify the payment process for merchants, reduce costs, and improve the customer experience. Payment facilitators can also provide faster access to funds, as they often have their own settlement and funding processes.
However, it's important to note that payment facilitators are subject to regulatory requirements, such as anti-money laundering (AML) and know your customer (KYC) rules, and must adhere to strict security standards to ensure the safety and security of transactions.
Who Involved in Payment Facilitators?
Several parties are involved in the payment facilitator ecosystem, including:
- Merchants: These are businesses that want to accept electronic payments from their customers. Payment facilitators work with merchants to set up payment processing accounts and facilitate the acceptance of electronic payments.
- Payment processors: These are the companies that actually process the electronic payments. Payment facilitators work with payment processors to provide their merchant customers with access to payment processing services.
- Acquiring banks: These are the banks that facilitate the transfer of funds between the merchant's bank account and the customer's bank account. Payment facilitators typically work with acquiring banks to provide their merchant customers with access to bank accounts for receiving electronic payments.
- Card networks: These are the companies that own and operate the payment card networks, such as Visa, Mastercard, and American Express. Payment facilitators work with card networks to ensure that their merchant customers can accept payments from customers using various payment cards.
- Regulatory bodies: Payment facilitators are subject to various regulations and compliance requirements, such as anti-money laundering (AML) and know your customer (KYC) rules. Payment facilitators work with regulatory bodies to ensure that they comply with these requirements and maintain the safety and security of electronic payment transactions.
How Payment Facilitators Work?
Payment facilitators work by providing a simplified and streamlined process for merchants to accept electronic payments. Here are the steps involved in how payment facilitators work:
- Merchant onboarding: Payment facilitators typically begin by onboarding merchants onto their payment processing platform. This involves collecting information about the merchant's business, setting up a payment processing account, and verifying the merchant's identity and bank account information.
- Payment processing: Once the merchant is onboarded, payment facilitators provide them with access to payment processing services, allowing them to accept electronic payments from their customers. Payment facilitators typically work with payment processors and acquiring banks to provide merchants with access to payment processing services.
- Risk management: Payment facilitators also provide risk management services to help merchants minimize the risk of fraudulent transactions. This may involve fraud detection tools, chargeback management, and other security measures.
- Settlement and funding: Payment facilitators handle the settlement and funding of transactions, which involves transferring funds from the customer's bank account to the merchant's bank account. Payment facilitators typically have their own settlement and funding processes, which can provide faster access to funds for merchants.
- Reporting and analytics: Payment facilitators also provide reporting and analytics tools to help merchants track their payment processing activity, identify trends, and make data-driven decisions to improve their business.
Overall, payment facilitators simplify the payment processing process for merchants, making it easier for them to accept electronic payments and manage their payment processing activity. Payment facilitators provide a range of services to help merchants manage risk, reduce costs, and improve the customer experience.