Home Finance Thinking About Becoming a PayFac? Consider Payment Facilitator Compliance First

Thinking About Becoming a PayFac? Consider Payment Facilitator Compliance First

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Think about the prospects of offering customers a seamless payment experience that operates globally and is an added advantage. What I am talking about is a payment facilitator. 

A payment facilitator or Payfac as a service provider layered between the acquiring body and sub-merchants. PayFac provides integrated technology and acquisition services to sub-merchants. 

The goal is to simplify the whole payment process. Besides, the rise of software and online platforms is driving a change in connecting buyers and sellers in new ways. Therefore, PayFac as a service is getting popular with time. 

In the guide below, I will list the pointers for you if you want to become a PayFac and examine its considerations. 

What is a Payment Facilitator?

Today, many platforms help merchants accept payments by providing different online services for companies. And payment functionalities have become a vital part of these platforms. 

A successful payment facilitator is hyper-focused on a specific industry. Let’s understand this by some common platforms and marketplaces:

  • Invoicing platforms like – Freshbooks help businesses offer an invoice to the clients
  • E-com platforms like Shopify help the businesses to sell goods online
  • Booking platform like Mindbbody helps in scheduling different appointments
  • On-demand service like Uber also falls in this category

The platforms above have made payments a core part of the customer experience. 

How will it affect your business?

Once you become a PayFac, you can gain control in three areas – settlement of funds, customer experience, and onboarding. Plus, if you are a Fintech firm, gaining control over this is essential. 

Additionally, as a PayFac, you will gain control over onboarding experience and sub-merchant applications. You can fix any issue with the setup. Control over the settlement of funds is essential. 

Besides, if you are operating an ISV or ISO, you must manage the settlement of funds in the timeline. As a PayFac, you can also gain control as to when to make a payment to a sub-merchant. 

  • Control over the sub-merchant experience will complete access to the data required to address all customer service issues. 
  • When you can’t outsource any business parts – you can quickly solve all the payment issues. 

As a result, your relationship with sub-merchants will improve over time. In addition, as the software is available to them, there is no chance of conflicts. And this will add up to a profitable business. 

Plus, the PayFac model allows the company to reduce the complexity involved in online payments and helps them focus more on core competencies. 

Pay attention to the compliance part

To become a successful payment facilitator, you must have a compliance-first mindset. Unfortunately, most software companies don’t have a compliance program in place. So, they are not able to accommodate the challenges in payment facilitation. 

Once you decide to become a PayFac, you will need to consider many risk factors like –  accessing the account and monitoring different transactions. Besides, the monitoring not only protects the payment system from the risk of financial losses but it guards you against the regularity risk if there is a problematic event.

When you implement a flexible and robust compliance program, it will reduce your reputational and financial risks. Also, it will protect you legally, as most state regulators take compliance seriously. 

The PayFacs that don’t pay attention to merchant portfolios faces significant consequences. PayFac compliance involves several considerations like:

Merchant of Record 

It is the first thing to consider in compliance. MOR is liable to authorize and process card payments. Besides, this name appears on all the shopper’s card statements. 

But payment processing is a small part of the merchant of record. For MOR, shoppers must understand that you are responsible for everything related to the product. This includes – fraud resolutions, tax calculations, financial liability, payment compliance, refunds, customer service, and chargeback. 

Ensure that the customers stay compliant 

With payments, you will need to keep your customers compliant. Some rules drive payment acceptance for merchants, as they fall into these categories. 

  • Data privacy such as GDPR
  • Payment card industry security standards 
  • Payment network policies 
  • IT security 
  • Tax collections 
  • Consumer security 

The benefits of choosing the right payment expert, 

When you partner with the right payment expert, you benefit from integrating with payment platforms while addressing all the compliance requirements. This way is better than attempting to be a PayFac yourself. 

Additionally, you should choose a partner to help you design solutions that appeal to your customers. A plan that allows and scales your business can help you in the long run. 

Think of it this way, even if you don’t have a global merchant base, you will have it in the future. And if your current customers want to expand their sales, it will help them do so.

All your solutions should be feature-rich –  for the payments to add more value. The results will be amazing if it is auto-compliant and built to scale. 

PayFac compliance is a hurdle for an ISV looking to integrate with the platform, and it is not simple to get over this issue. However, you can work with an expert to manage compliance for complete solutions and success. 

Integrated payment solutions offer global payment compliance for customers and monetization of the platform. I have listed all the essential considerations above to become a PayFac. Understand the payment compliance rules and partner with the best. 

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