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A payfac vs. the right payments technology partner

What are the differences between payment facilitators and payment technology solutions, and how do you know which is right for your business?

Nowadays, more software platforms are realizing the need for integrated payments in their technology. If you are looking to accept payments within your platform, it’s important to learn the differences amongst various payment models and what to take into consideration. In this article, I will dive into the difference between payment facilitators and payment technology solutions so you can see what best suits your business.

What is a payment facilitator?

A payment facilitator, also known as a “payfac” or payment aggregator, is a payment model that has grown tremendously over the past few years. It is when a business is set up as a primary merchant account and provides payment processing to its sub-merchants. One classic example of a payment facilitator is Square. Square provides payment processing for a group of merchants who are referred to as sub-merchants. Payments are processed through the master Square merchant account, then Square is responsible for the disbursements to the sub-merchants under its umbrella.

Many software platforms find this payment model appealing because it provides more control and flexibility over the onboarding flow and user experience. This is what every software platform wants – an easy and quick onboarding experience. Payment facilitators can also control pricing and payout instructions which is less available through traditional acquiring channels.

Becoming your own payment facilitator may seem great, but it is not as easy as you may think. Let’s take a closer look.

The process to become a payment facilitator

Becoming a payment facilitator involves a complex, multi-step process that can take quite some time to get approved. In addition, it is a significant investment to build and sustain. Payment facilitators are responsible for the day-to-day management of payment processing which is why it’s necessary to have the infrastructure and support in place. This means they need to hire payment professionals and technical experts to help. Payfacs are responsible for the underwriting process for each sub-merchant and must complete Know Your Customer (KYC) checks, Anti-Money Laundering (AML) and Sanctions check. They also assume all financial and scheme risk for their accounts and must handle chargebacks, fraud and data breaches. PCI compliance is also a requirement to maintain and payfacs must abide by the government regulations in the regions they operate in. As you can see, payment facilitators have a lot of additional responsibility adding operation overhead beyond their core business.

Consider a payment technology partner

It is important to have a clear understanding of what you are looking to accomplish. There are several payment providers, such as Paysafe, who can provide tools that will give you many of the benefits of being a payfac without actually needing to register as one and take on the additional overhead and responsibility. Your payment technology partner can provide you with online tools and APIs that will give you the ability to onboard your merchants without friction, manage the risk, offload the liability and provide branding and white label capabilities. You can sit back and focus on your core business while your partner does the heavy lifting on everything payments related.

As you evaluate your options, it’s important to consider what makes the most sense for your platform and your business objectives. Build your own solution or select the right partner to achieve many of the same benefits without the heavy lifting.

If you would like to learn more about Paysafe’s solutions designed for platforms, contact us today: