Payment Facilitator vs Payment Processor
A processor moves your transactions. A payment facilitator holds your merchant relationship and the duties that come with it. Here is how the roles differ.
You sign with one of these roles when you start taking cards. They sound alike. They are not the same job, and the difference decides who you answer to when something goes wrong. Here is a plain look at payment facilitator vs payment processor.
What each role does
A payment processor moves your sales through the card system. It takes the charge, sends it through the system, and moves the money where it needs to go. It works for you, but it does not own your merchant relationship.
A payment facilitator does more than that. Visa's guide says a payment facilitator is also known as a PayFac or merchant aggregator. It signs merchants itself and provides their payment services. Visa's guide says the key participants in the model are the acquirer, payment facilitator and sponsored merchant.
Visa's guide says a sponsored merchant is a merchant whose payment services are provided by a payment facilitator. If you sign with a facilitator, that is you.
Who holds the merchant relationship
This is the real split between the two roles.
With a processor, ask who signs your merchant agreement.
Visa's guide is clear on the facilitator side. Visa's guide says a payment facilitator can own the merchant relationship directly without an acquirer being party to the contract. Visa's guide says payment facilitators enter into payment services contracts with sponsored merchants in order to provide payment services.
So read your contract before you sign. If the paper names a facilitator and not a bank, you are a sponsored merchant.
How settlement flows
The money takes a different path under each role.
Visa's guide says an acquirer deposits settlement funds directly to the payment facilitator, which then settles those funds to its sponsored merchants. Visa's guide says a payment facilitator receives and distributes settlement of transaction proceeds from an acquirer on behalf of its sponsored merchants.
Your money passes through the facilitator's hands before it reaches you. That is normal in this model, not a red flag by itself.
FinCEN's advisory says payment processors use their own deposit accounts at a financial institution to process transactions.
Who is liable for what
Visa's rules spell out who is on the hook.
Visa's rules say a Payment Facilitator or DWO is liable for all acts, omissions, and Cardholder disputes caused by its Sponsored Merchants. Visa's rules say acts and omissions caused by a Sponsored Merchant will be treated as those of the Payment Facilitator.
It goes one step higher. Visa's rules say acts caused by a Payment Facilitator or a Sponsored Merchant are treated as those of the Acquirer. Visa's guide says acquirers are responsible for the acts of both payment facilitators and sponsored merchants.
Visa's guide says Visa treats a payment facilitator's sponsored merchant as a merchant of the payment facilitator's acquirer. Your actions climb the chain. The facilitator answers for you. The acquirer answers for the facilitator.
That chain is why a facilitator watches you so closely. Your chargebacks become its problem, and then the acquirer's.
What a facilitator must do for you and to you
Visa's guide says payment facilitators and marketplaces act as gatekeepers to the payment system and must ensure only qualified and responsible sellers get access. That gatekeeping lands on you in specific ways.
Visa's guide says payment facilitators and marketplaces must have sound merchant underwriting policies in compliance with the Visa Rules and the GARS. So yes, a facilitator underwrites you.
Visa's guide says payment facilitators and marketplaces must continuously monitor their sellers for risk exposure and suspect activity. The watching does not stop after you are approved.
Visa's guide says a facilitator or marketplace may hold back a seller's pay for a time. This is allowed when sending the money could cause a loss. Your money can be held back if the facilitator sees risk in sending it.
Visa's guide says a facilitator must report a sponsored merchant to the Visa Merchant Screening Service. This applies when the merchant is terminated for cause.
Visa's guide says all Visa merchant requirements apply equally to a sponsored merchant. You do not get lighter rules for signing with a facilitator.
Where reserves live
Reserve funds do not sit with the facilitator.
Visa's guide says reserve funds belong to the sponsored merchant and must be held and controlled by the acquirer. The money is yours, but the acquirer's hands hold it.
This is worth asking about up front. If someone tells you a reserve applies, ask who holds it. Under Visa's model, the answer should be the acquirer.
Business types a facilitator cannot serve
Visa's guide says payment facilitators are prohibited from providing payment services to outbound telemarketers, other payment facilitators, and marketplaces.
If you make outbound sales calls, this matters. Visa's guide says a facilitator may not serve outbound telemarketers. Phone sellers should also read up on billing authorization.
Marketplaces are in the same spot. Visa's guide says payment facilitators and marketplaces are third party agents that require sponsorship and registration by an acquirer. A marketplace cannot use a facilitator to get paid.
Why banks watch these accounts
Under Visa's rules, the acquirer answers for merchants a facilitator signs. That is why the acquirer watches hard.
Visa's guide says acquirers must maintain ongoing oversight to protect the Visa payment system from undue risk. Visa's guide says an acquirer must monitor and periodically review or audit payment facilitators and marketplaces for risk exposure.
The bank side has its own concerns. FinCEN's advisory says third-party payment processors are financial institution customers that provide payment processing services to merchants and other businesses. FinCEN's advisory says payment processors use their own deposit accounts at a financial institution to process transactions. That is why banks watch payment processors so closely.
How to tell which role you are signing with
Ask these questions before you sign anything.
- Does the contract name a bank, or only the company in front of you?
- Are you called a sponsored merchant anywhere in the paperwork?
- Who sends your pay, the acquirer or the company itself?
- Who holds any reserve, under the terms you were given?
- Does the company underwrite you, or pass you to a bank that does?
- If you sell by phone or run a marketplace, can this company serve you at all under its own rules?
The answers tell you which role you are dealing with. Neither role is the right pick for every business. Visa's guide says the Payment Facilitator Model helps increase electronic payment acceptance for merchants without a traditional acquiring relationship. But it puts a gatekeeper between you and your money. Read the chain before you sign it.