{"id":11113,"date":"2024-08-23T10:34:08","date_gmt":"2024-08-23T10:34:08","guid":{"rendered":"https:\/\/comparedbusiness.com\/uk\/?p=11113"},"modified":"2024-08-26T09:45:25","modified_gmt":"2024-08-26T09:45:25","slug":"what-is-a-payment-facilitator","status":"publish","type":"post","link":"https:\/\/comparedbusiness.com\/uk\/blog\/payment-gateway\/what-is-a-payment-facilitator\/","title":{"rendered":"What is a Payment Facilitator? A Complete 2024 Guide"},"content":{"rendered":"

<\/span>What is a payment facilitator?<\/span><\/h2>\n

A payment facilitator, or PayFac, is a provider that simplifies the process of accepting electronic payments for merchants by acting as an intermediary between the merchant and the acquiring bank.<\/p>\n

Unlike traditional payment processing models, where each merchant must establish a separate merchant account<\/a><\/strong> with an acquiring bank, PayFacs enables merchants to onboard quickly and efficiently under a single master merchant account. The payment facilitator also handles all the technical and administrative complexities of the payment process. . How convenient is that?<\/p>\n

This model reduces the complexity and time associated with traditional payment setups which makes it easier for businesses, especially SMEs in the UK to start accepting payments. <\/p>\n

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<\/span>How does a payment facilitator model work?<\/span><\/h2>\n

The payment facilitator model involves certain parties who work together to ensure a smooth, secure and efficient payment process. <\/p>\n

1. PayFac:<\/h3>\n

Role:<\/strong> The PayFac enables merchants to accept electronic payments (debit card, credit card, digital wallet, etc.) without having to establish their own separate merchant accounts.<\/p>\n

Functions:<\/strong> It onboards, underwires and manages sub-merchants by handling compliance, risk management and the provision of required technology\/infrastructure. <\/p>\n

2. Acquiring bank:<\/h3>\n

Role:<\/strong> Partners with the PayFac to process transactions. It holds the master merchant account under which all sub-merchants operate.<\/p>\n

Functions:<\/strong> It settles the transactions, ensuring funds move from the cardholder\u2019s issuing bank to PayFac\u2019s master account and from there to the sub-merchant.<\/p>\n

3. Payment processor:<\/h3>\n

Role:<\/strong> It\u2019s a third-party company that sits between PayFac\u2019s sub-merchants and card networks to transfer the transaction data.<\/p>\n

Functions:<\/strong> The payment processor handles the technical aspects of transaction processing. This includes authorisation, clearing and settlement. It ensures the payment information is securely transmitted and validated.<\/p>\n

4. Sub-merchant<\/h3>\n

Role:<\/strong> They are businesses (you) that sign up under PayFac\u2019s master merchant account to accept digital payments.<\/p>\n

Functions:<\/strong> Sub-merchants conduct transactions with customers using the PayFac\u2019s infrastructure.<\/p>\n

<\/span>What does a payment facilitator do?<\/span><\/h2>\n

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Following are the basic tasks of a payment facilitator:<\/p>\n

1. Underwriting and onboarding.<\/h3>\n

The PayFac conducts risk assessments and due diligence on sub-merchants before allowing them to join the platform. This involves evaluating the sub-merchant\u2019s business model, financial health and compliance with regulations.<\/p>\n

By doing so, it ensures that only legitimate and low-risk businesses are onboarded. <\/p>\n

2. Providing payment processing infrastructure.<\/h3>\n

It offers the necessary technology and infrastructure to process payments. This includes integrating different payment gateways<\/a><\/strong>, managing transaction flows and ensuring secure data transmission. Their infrastructure is designed to handle various payment methods in the UK such as credit cards, debit cards and digital wallets.<\/p>\n

3. Compliance management.<\/h3>\n

Another important function of a payment facilitator is to ensure that all transactions comply with relevant laws and industry standards in the UK.<\/p>\n

This includes adhering to Payment Card Industry Data Security Standard (PCI DSS) requirements, anti-money laundering (AML) regulations and others. <\/p>\n

4. Transaction settlement.<\/h3>\n

The PayFac allows the settlement of transactions and ensures the funds are submitted to the sub-merchants timely.<\/p>\n

Once a transaction is authorised by the bank, the PayFac manages the settlement process by transferring the funds from the bank to its master merchant account and from there to the sub-merchant\u2019s accounts. <\/p>\n

5. Fraud management.<\/h3>\n

It monitors transactions for fraudulent activity and manages the risks associated with payment processing. If found, it takes preventive measures to mitigate them.<\/p>\n

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<\/span>Benefits of a payment facilitator<\/span><\/h2>\n

Taking the services of a reputable payment facilitator earns you the following advantages.<\/p>\n

    \n
  1. It streamlines the onboarding process for you, allowing you to start accepting payments quickly without the need for lengthy and complex application procedures for multiple merchant accounts.\n<\/li>\n
  2. It handles PCI DSS compliance which minimises the administrative burden on you.\n<\/li>\n
  3. It saves you costs as PayFacs provides the necessary payment infrastructure and fraud prevention tools, without needing you to invest in them independently.\n<\/li>\n
  4. It improves the speed of transaction processing which leads to better cash flow.\n<\/li>\n
  5. PayFacs support a variety of payment methods (just like payment gateways<\/a><\/strong>), enabling your customers to pay with their preferred method. This results in a higher conversion rate and better customer experience.\n<\/li>\n
  6. You gain access to comprehensive reporting provided by PayFacs which allows you to track transactions, analyse sales performance and make better optimisation decisions. <\/li>\n<\/ol>\n

    <\/span>Choosing a payment facilitator <\/span><\/h2>\n

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    An efficient payment facilitator can be crucial for your business’s growth. So you have to be careful when choosing the right one. No problem, we have done that bit for you. Consider the following questions and you\u2019ll get to your dream facilitator.<\/p>\n