Payment Facilitator Vs. Payment Processor: Which Is Right For You?
There are many reasons that you should accept credit cards. The main reason is that, by doing so, you offer convenience to your customers who may not carry cash. Another primary benefit is that electronic payments are generally more secure against theft than cash payments. Nevertheless, in order to accept credit cards, you need to partner with a company that can provide you with a merchant solution and payment services.
Payment Facilitators vs Payment Processors
There are two types of payment processing companies that offer applications through which you can process transactions: payment processors and payment facilitators. Each offer a different experience to the end user. Payment facilitators vs payment processors are undoubtedly more robust.
The rest of this article explains these differences and will hopefully give you an understanding of which solution is better for your business.
One of the main differences between payment facilitators, or PayFacs, and payment processors lies in the organization of merchant accounts. Under the PayFac model, the payment facilitator can assign a sub merchant id under their own master merchant account to each merchant. Under the payment processing model, each merchant receives their own merchant id. Processors are resellers. Therefore, they cannot assign sub ids under a master merchant id.
Under the processor model, a merchant account is underwritten upfront as the merchant account is approved. However, for a payment facilitator, the underwriting process is continuous because transactions are processed UNDER the facilitator’s master MID. Therefore, underwriting occurs as each transaction is facilitated.
Other than the payment facilitator, the merchant and the cardholder, there is one more party that is involved in the payment facilitator model: the acquiring bank. The acquiring bank plays an integral part in the processing of money from a cardholder’s account to the merchant’s bank account. In essence, the acquiring bank underwrites all transactions by housing the intermediary account from which a facilitator deposits funds into the merchant’s bank account.
Independent Sales Organization (ISO)
A payment processor is also known as an ISO is a third-party organization. They sell payment technologies and merchant services. They aren’t actually dealing with funds or determining the technology. They are constrained to the technologies approved by their technology partners. When I say third-party, I mean that an ISO is an entity that sells another company’s payment solution. A payment facilitator, on the other hand, offers a direct solution in which there are no middle men.
Benefits of Partnering With A Payment Facilitator
By working directly with a payment facilitator, there are a bunch of benefits that you cannot obtain in other merchant solutions.
A payment facilitator is able to sign up merchants more efficiently than an ISO or payment processor because the merchant receives a sub merchant id. Therefore, the payment facilitator can approve an account within a matter of minutes and determine how much information is required for account approval.
A payment facilitator is able to offer a cheaper solution than an ISO/payment processor because of their streamlined payments solution. As a result, the payment facilitator model has less steps and entities in the process. This translates into less costs, which the facilitator can then pass on to you the merchant as a result.
Whereas an ISO sells a payment processing solution that another organization built, payment facilitators sell payment solutions they built themselves. They can also use any technology with their solution, offering added diversity.
As a result, most can support a multitude of payment solutions other than in-person payments. A great payment facilitator will offer a solution that allows a diverse set of payment methods. A merchant should be able to accept payments online, in-person, by invoice, or on the go. The sky is the limit.
Technology Integration & Reseller Partners
Another great benefit of payment facilitators is the flexibility that they have. Flexibility allows a payment facilitator to offer a completely customizable and seamless payments solution to a partner organization.
Payment facilitators are able to offer additional benefits to the merchant, such as instant funding, because they underwrite transactions themselves. Therefore, they have more control over the timing of deposits. However, the benefits to a merchant are endless based on technology developments.
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How We Can Help
We are a payment facilitator offering merchant services to businesses nationwide. Our merchant platform showcases a robust, feature set that allows you to accept payments any way you want. Even better yet, we offer some of the most competitive rates in the industry. Our flat rates start at 2.5% + $0.10 per transaction (compared to Square’s 2.6% +$0.10 per transaction). You can also lower your rate by bundling some of our local marketing products with your payments solution.