Online transactions and eCommerce stores are now possible. EverywhereToday, online shopping is becoming more popular and even more businesses are opting to make online purchases.
The best and most cost-effective way for businesses to accept online credit card payments is to use the services of a payment facilitator. This has resulted in a rise in demand for payment facilitator solutions around the globe, making payment facilitators a lucrative business opportunity by 2022.
Are you still unsure if you should consider starting a payment facilitation business? In this post, we’ll discuss why it pays to be a payment facilitator, and how you can start your own payment facilitator business.
Let’s begin by discussing briefly the payment facilitation system.
What is the Payment Facilitation model?
In a nutshell a payment facilitator is a business which facilitates online payments for other businesses, especially online credit card payments.
To understand the necessity and benefits of a payment facilitation program, we need to first understand the traditional process by which a business can accept credit card payments online. WithoutA payment facilitator can be helpful.
The traditional model
A traditional model requires that a business contact an acquiring bank (a bank authorized credit card networks to process credit cards transactions) and apply (or request) a Merchant ID (MID). The business can also apply to this acquiring bank as a sponsor, known as a “firm sponsor”. merchant acquirer.
This process can be complicated and lengthy. Before the application is approved, the acquiring bank will conduct extensive (and repeated) audits to ensure that the business has all the necessary compliance and infrastructure to process online transactions.
Even after the lengthy underwriting process that can take days or weeks to complete, there’s also no guarantee of being approved as a merchant.
The payment facilitation method
This is the main purpose of the payment facilitation model.
This model uses a payment facilitator to facilitate payments. The payment facilitator is a business approved by the acquiring banks and has received a special Merchant ID, called Payment Facilitator ID (PFID).
The PFID allows the payment facilitator to combine (i.e. share) its online payment acceptance capabilities with other businesses. This allows the payment facilitators to accept other businesses under its PFID. sub-merchants.
Why is it worth being a payment facilitator?
A payment facilitator can aggregate its PFID and allow other businesses (the Sub-Mercchants) to accept online payments. This allows them to avoid the lengthy underwriting process that is required in the traditional model.
As you can see, the payment facilitation method offers a real solution to a real problem. It also has clear benefits for the payment facilitator and sub-merchants.
Benefits of the Payment Facilitator Business
1. Predictable source revenue
Facilitators businesses typically use a flat fee model that makes them revenue on every transaction received by the submerchant.
Online credit card transactions are typically priced at around 2.5% for the payment facilitator, and payment facilitators may make 0.5% in profit by charging 3.5% to their sub-merchants.
So in a payment facilitator business, we can get a predictable and stable source of revenue: the more transaction volume you have, the more profits you’ll make.
2. You will enjoy lower processing costs and greater scalability
The payment facilitation model allows the payment facilitator to attract as many sub-merchants and generate large transaction volumes on a monthly basis.
Due to the large volume of transactions, the payment facilitator may be able to negotiate a lower transaction cost with the acquiring bank and credit card networks. This will result in lower operational expenses.
This makes payment facilitators a highly scalable business.
3. You have more control of your sub-merchants
As a payment facilitator, you have the utmost freedom of establishing policies and implementing underwriting/onboarding/monitoring solutions as you see fit. The sub-merchants have no direct contact with acquiring banks. OnlyAs the payment facilitator, he/she interacts with you.
This can be a double-edged sword, as the payment facilitator will also have to assume liabilities for its sub-merchants. However this will allow for more flexibility and control from start-to-finish.
4. Customers who have a better experience with their customers are more likely to refer others.
The business can become a payment facilitator to provide quality service for its sub-merchants. It ensures a quick and efficient underwriting process so that the sub-merchant can accept online credit card payments in just minutes.
Also, since you are the only party the sub-merchant interacts with, they wouldn’t need to contact another party, including the credit card issuer and acquiring banks, for any issues in the transaction.
This will lead to a better client experience that will ultimately result in more clients and greater retention.
Benefits for the Sub-Merchants
Here are some key benefits for businesses considering using the payment facilitation method to accept credit card payments online.
1. Accept payments immediately
PayFac is without doubt the most beneficial. Model for sub-merchants is the fast and easy underwriting/onboarding process, so you can start accepting online credit card payments almost immediately.
Typically you’ll only need to register for an account on the payment facilitator’s website or platform, undergo a simple underwriting process, and be ready to accept payments within minutes.
2. There is less risk and lower potential cost
In a payment facilitation arrangement, the payment facilitator assumes all of your liabilities. Also, although the fees tend to be higher (since you’ll need to pay the payment facilitator), you’ll only need to pay when the transaction is actually processed, which can be the preferred solution if your transaction volume is still fairly low.
You can use the services of a payment facilitator TheyThey will ensure that their platform is PCI compliant. This will mean that you as a submerchant will also be in compliance with the relevant regulations.
4. Better Security
The payment facilitator is also responsible to establish policies and ensure thorough monitoring to prevent fraud.
In the event that you are chargedback requested, the payment facilitator can also assist you in submitting evidence before the card networks. This makes the whole process more simple and secure for you as sub-merchants.
Becoming a Payment Facilitator
While The process of becoming a payment facilitatorAlthough it does come with its challenges, this is a lucrative industry to explore, especially for those already involved in SaaS.
Utilizing payment facilitation consulting services can help you in preparing your infrastructure and improving your business’s chance of being approved as a payment facilitator by the acquiring bank and the credit card networks.