Breaking Down the Basics: What Exactly Is a Payment Facilitator?

words Al Woods

Payment Facilitator

In the rapidly evolving landscape of e-commerce and digital transactions, the role of payment facilitators has surged in significance. But what exactly is a payment facilitator, and how does it differ from traditional payment processors? In this comprehensive guide, we’ll dissect the functions, benefits, and regulatory nuances of payment facilitators, shedding light on an industry that’s pivotal to the smooth running of modern commerce.

Defining the Payment Facilitator

A payment facilitator, often abbreviated as PayFac, is a term that’s garnered traction in recent years, representing a new approach to payment processing. Unlike payment processors, payment facilitators simplify the process for other businesses, known as sub-merchants, to begin accepting payments. They aggregate transactions from multiple sub-merchants, handle the associated funds, and are adjudged as merchants by the card networks.

This model is rapidly gaining ground due to its ability to drastically reduce barriers to entry for small and medium-sized businesses aiming to accept payments. And, on the Exact Payments website, and other similar ones, you can learn more about how this works with software platforms and all other types of businesses. That way, organizations can get up and running with digital payments quickly, without the typically daunting hoops to jump through.

Role of Payment Facilitators

Simplifying the Payment Process

Payment facilitators leverage technology to streamline the payment process from end to end. By providing a single API integration, they ensure a seamless experience for the merchant, saving them the complexity of integrating various payment gateways and systems.

Merchant Onboarding

One of the pivotal services a payment facilitator offers is a simplified onboarding process for merchants. This encompasses identity verification, compliance checks, and setting up the merchant with the necessary accounts to begin processing transactions.

Managing Risk and Compliance

Risk management is essential in the world of payments. Payment facilitators handle this by not only assessing the risk of individual transactions but also by ensuring that sub-merchants adhere to industry regulations, such as PCI DSS compliance, through stringent oversight.

Benefits of Payment Facilitation

Faster Onboarding

Gone are the days of lengthy approval processes. Payment facilitators boast significantly faster onboarding times, allowing businesses to start accepting payments almost immediately after registration.

Enhanced Payment Security

With the increasing sophistication of fraud, security is a top priority. Payment facilitators are at the forefront, integrating high-level security measures and utilizing the latest technologies to keep transactions safe.

Revenue Opportunities for Businesses

For entities that traditionally do not process payments, such as software platforms, integrating payment facilitation can unlock new revenue streams. This is due to the additional service provided to end-users that the payment facilitator enables.

Key Features of Payment Facilitators

Aggregation Model

The aggregation model is one of the defining features of payment facilitation. It allows the payment facilitator to process transactions for multiple sub-merchants through a single merchant account, thereby reducing the complexity and cost associated with maintaining multiple merchant accounts.

Sub-Merchant Accounts

Every business that signs up with a payment facilitator is given its own ‘sub-merchant’ account. This allows for accounting and settlement processes to occur independently for each sub-merchant while still being managed within the payment facilitator’s overall system.

Underwriting Processes

Payment facilitators have unique underwriting processes tailored to sub-merchants, which are generally less stringent when compared to those of traditional merchant accounts. This is achieved through a combination of automated systems and manual review, where necessary.

Comparison with Payment Processors


While payment processors typically require merchants to have their own merchant accounts which can be set up through an acquiring bank, payment facilitators are equipped to get businesses processing payments without these additional steps, thereby making the process more accessible for smaller entities.

Services Offered

Payment facilitators go beyond the transaction processing services offered by traditional payment processors. They provide a comprehensive payment ecosystem, combining processing, underwriting, and risk management into a centralized platform.

Regulatory Considerations

Compliance Requirements

Payment facilitators must adhere to stringent compliance standards set by card networks and other regulatory bodies. This includes ensuring that all merchants under their umbrella are following the necessary protocols for data security and fraud prevention.

Risk Management Obligations

Given the potential risk associated with aggregating transactions from numerous sub-merchants, payment facilitators must implement robust risk management strategies to prevent fraud, money laundering, and other illicit activities.

Payment Facilitator advice

From simplifying the process of accepting payments to managing the tumultuous world of risk and compliance, payment facilitators play a multifaceted role that is pivotal to the success of businesses navigating the digital payment realm. Understanding the nuances of this service is crucial for anyone looking to capitalize on the benefits it offers while staying on the right side of regulatory frameworks. The world of payments is evolving, and payment facilitators are at the forefront, shaping the industry’s future.


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