Visa Payment Facilitator Rules
Visa's payment facilitator rules set out who is liable, who holds reserves and what a PayFac must check before it signs you.
If you have been told you will sign with a payment facilitator, Visa has a rulebook for that deal. The Visa payment facilitator rules decide who answers for your sales, who holds your money and what the facilitator must check before it signs you. Here is what those rules say, in plain words. Visa wrote them, so they are Visa's rules, not general advice about all card networks.
What Visa calls a payment facilitator
Visa's guide says a payment facilitator is also known as a PayFac or merchant aggregator. It signs sellers and gives them payment services. Visa's guide says the key participants in the model are the acquirer, payment facilitator and sponsored merchant.
You are the sponsored merchant. Visa's guide defines a sponsored merchant as a merchant whose payment services are provided by a payment facilitator. That is how you differ from a direct merchant. A direct merchant has its own contract with an acquirer. You have a contract with the PayFac, and the PayFac answers to the acquirer.
Visa's guide says the payment facilitator framework applies globally across all Visa regions and countries.
How the money moves
Visa's guide says a payment facilitator receives and distributes settlement of transaction proceeds from an acquirer on behalf of its sponsored merchants. The acquirer deposits your sales into the PayFac's account. The PayFac then settles those funds to you.
So your money passes through the PayFac before it reaches you. That is why the rules around reserves and liability matter so much to you.
Who is liable for what you do
This is the part to read twice. 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 also says Visa counts you as a merchant of the PayFac's acquirer. This holds even if the acquirer is not part of your contract.
Visa's rules say a Payment Facilitator or DWO is liable for all acts, omissions, and Cardholder disputes caused by its Sponsored Merchants. So the PayFac takes on your disputes. The acquirer takes on the PayFac. The chain runs uphill, and Visa's guide says it holds acquirers, payment facilitators and marketplaces accountable for the illicit actions of the sellers they onboard.
What the acquirer must do first
Visa's guide says payment facilitators and marketplaces are third party agents that require sponsorship and registration by an acquirer. An acquirer must register the PayFac with Visa first. Visa must confirm the registration before the acquirer sends any transactions. Visa's guide says an acquirer that submits transactions for a payment facilitator it did not register violates the Visa Rules.
The acquirer also has to pass Visa's tests before it can sponsor anyone. Visa's guide says an acquirer must meet minimum Tier 1 capital requirements to sponsor a payment facilitator or marketplace. It must be financially sound, as determined by Visa, and be in good standing in all Visa risk-compliance programs. Visa's guide says acquirers may only contract with payment facilitators or marketplaces located within their licensed jurisdiction.
Visa's guide says due diligence must include an onsite inspection of the payment facilitator's business operations and risk policies. A senior officer of the acquirer must sign every PayFac or marketplace contract.
The IDs in every sale
Visa's rules say every applicable Transaction must contain the Payment Facilitator identifier and the Sponsored Merchant identifier. The PayFac gets its ID from Visa. Visa's guide says payment facilitators must assign their own unique identifiers for each sponsored merchant. That ID is yours, and it travels with each sale.
Visa's rules say a Clearing Record must contain only the Payment Facilitator identifier. Your ID is in each sale, but not in the clearing record.
What the PayFac must check before signing you
Visa's guide says payment facilitators and marketplaces must have sound merchant underwriting policies in compliance with the Visa Rules and the GARS. The GARS are the Global Acquirer Risk Standards, which Visa's guide says are an extension of the Visa Rules.
The PayFac must also follow its acquirer's rules. Visa's guide says payment facilitators and marketplaces must conduct merchant underwriting according to the acquirer's own underwriting policy and merchant acceptance criteria. Visa's guide says the PayFac must then decide on each new seller. It can approve, approve with conditions, or decline.
Visa's guide says the PayFac must collect public and non-public information. It uses that information to check who a new seller really is. The data collection must follow the law. That includes Anti-Money Laundering and Know Your Customer rules. Visa's guide says the PayFac must check the people who own and run your business. It must look for bad background information, as the law allows. The underwriting process should include checks of consumer complaint boards. Visa's guide says payment facilitators should use a terminated merchant file.
Visa's rules say a Payment Facilitator must have a Merchant Agreement with each of its Sponsored Merchants. That agreement is the contract you sign.
Who the PayFac cannot sign
Visa's guide says payment facilitators are prohibited from providing payment services to outbound telemarketers, other payment facilitators, and marketplaces. Visa's guide says an acquirer may deem additional merchant categories as prohibited or restricted, so the list can be longer than Visa's own. Visa's guide says payment facilitators are restricted from onboarding certain types of digital wallets. A PayFac that signs a wallet must check how it will be used. The wallet must not fund a prohibited merchant type.
Visa's guide says a PayFac that serves high-brand risk merchants must register with Visa. It registers as a High-Risk Internet Payment Facilitator. Only a PayFac registered with Visa as a High-Risk Internet Payment Facilitator may sign high-brand risk merchants. Visa's guide says marketplaces are prohibited from soliciting high-brand risk merchants. High-brand risk merchants require an enhanced level of due diligence.
Watching you after you sign
The checks do not stop at signup. Visa's guide says payment facilitators and marketplaces must continuously monitor their sellers for risk exposure and suspect activity. They must watch their sellers' daily sales. They must also keep checking their sellers' websites.
Visa's guide says they should track a few numbers for each seller. That means monthly sales volume, average sale size, and purchase return volume. They should watch dormant sellers that suddenly show a surge in volume, with exceptions for seasonal businesses. Visa's guide says repeated transactions on the same card in short succession should be treated as suspicious activity. They must look into sellers with too many purchase returns. They must also watch for sellers with too much fraud and act fast.
Visa's guide also says sellers' websites must be screened. The screening covers unlawful conduct, laundered transactions and misleading sales claims. Visa's guide says a payment facilitator or marketplace may temporarily suspend a seller's settlement proceeds when funding the seller may result in loss exposure. So a pause on your payouts can be the PayFac following Visa's guide.
Who holds your reserve
Visa's guide says payment facilitators may use merchant reserves as a way to reduce loss exposure. But Visa prohibits payment facilitators from holding and controlling merchant reserves. Visa's guide says reserve funds belong to the sponsored merchant and must be held and controlled by the acquirer.
This is worth knowing before you sign. If a PayFac asks for a reserve, the money is yours and the acquirer, not the PayFac, holds it. Visa's guide also says merchants should be underwritten on their merits, and reserves are not a reason to onboard unreasonably high-risk merchants.
When Visa flags a seller
Visa's guide says Visa holds the acquirer responsible when a risk-compliance program identifies a merchant for excessive fraud, disputes or illegal activity. The acquirer must contact the flagged merchant at once and fix the problem.
Visa's guide says a payment facilitator must add a sponsored merchant terminated for cause to the Visa Merchant Screening Service. That is a database product that acquirers and their designated agents use to list terminated merchants. So if a PayFac ends your contract for cause, you go on that list.
What this means for you
Visa's guide says all Visa merchant requirements apply equally to a sponsored merchant. You follow the same rules as a direct merchant. Visa's guide says a payment facilitator can own the merchant relationship directly without an acquirer being party to the contract.
Expect the PayFac to check who you are and watch your sales. It may pause your payouts if paying you could cause a loss. None of that is the PayFac being difficult. It is Visa's rules reaching you through the PayFac. To see the bank side of this, read about why banks watch payment processors. Phone sellers should also read up on billing authorization.