Starting a Payment Facilitator Business in 2022

Thinking of starting a payment facilitator business but don’t know where to start?

Getting the help of an online payment processing consultant can be the easiest and most cost-effective way to start a payment facilitator business and ensure optimal day-to-day operations of your business.

The global pandemic throughout 2020 and 2021 has accelerated online activities all around the world, including online shopping. This means the demand for secure online transactions has also risen, and many businesses are now looking for easy and secure ways to start accepting online credit card payments. Thus, starting a payment facilitator business nowadays is definitely a lucrative business opportunity.

In this guide, we will explore how an online payment processing consultant can help you start a payment facilitator business, but let us begin by discussing the concept of payment facilitator itself.

What is a Payment Facilitator?

A payment facilitator, as the name suggests, is a business that facilitates another business to receive online credit card payments.

Why is a payment facilitator necessary? Simply put, without the help of a payment facilitator, the process of being approved for accepting online credit card payments can be very challenging and time-consuming. Let us discuss this traditional process first, so we can really understand how a payment facilitator works and its benefits.

How businesses can accept credit card payments online: traditional process

In general, a business must first contact an acquiring bank (a bank certified by credit card networks for processing credit card payments) and apply as a merchant. Only when a business has been registered as a merchant and sponsored by this acquiring bank can they get a Merchant ID (MID), a unique identification number that will allow your business to be identified by the card networks so you can start receiving credit card payments.

The process of being approved as a merchant, however, can be challenging. Before the bank sponsors you, you’ll need to undergo a lengthy underwriting process and thorough audits that can take weeks or even months to complete.

What’s worse, even after all the long process, there’s no guarantee of being approved, as the business will need to meet compliance with strict regulations established by the acquiring bank and the credit card network.

Payment facilitator: a solution

A payment facilitator business will help businesses streamline the above process and eliminate the lengthy underwriting process of accepting credit card payments.

In a payment facilitation model, the payment facilitator is a business that has been approved as a merchant by an acquiring bank and has obtained a special Payment Facilitator ID (PFID)

With PFID, a payment facilitator is authorized to share its ability to accept credit card payments with other businesses, so it can now take other businesses (i.e., online stores) under the PFID as sub-merchants.

A prospective sub-merchant doesn’t need to undergo the underwriting process with an acquiring bank (and, in fact, doesn’t need to contact the acquiring bank at all), and will only need to be approved by the payment facilitator itself, typically with a more streamlined (and often automated) underwriting process, which we will discuss on the next section.

This allows a prospective sub-merchant to start receiving online payments (and start an online business) faster.

The Payment Facilitation Model

The payment facilitation model, as discussed, significantly streamlines the process of accepting online payments, allowing businesses to start processing online transactions in just a few simple steps:

1.  Business (i.e., online merchant) registers for an account on a payment facilitator’s website (or application).
2. The signing-up process is typically fairly simple. The prospecting sub-merchant will only need to provide basic business information like NAP (Name, Address, Phone Number). Sometimes the payment facilitator will ask for a basic financial statement.
3. Validation process. The payment facilitator typically uses an underwriting tool to perform an automated verification of the information submitted by the prospective sub-merchant. If required, the sub-merchant will also perform a manual review.
4. The payment facilitator may approve or reject the application based on the underwriting tool’s assessment.
5. If an applicant is approved, it is now onboarded as a sub-merchant under the payment facilitator’s PFID.

Starting a Payment Facilitator Business: Getting Help from Online Payment Processing Consultants

Since online payment processing is a heavily regulated field, the entry barrier of becoming a payment facilitator is fairly high.

The underwriting process required before you can be approved as a payment facilitator will be even more challenging and time-consuming, and you’ll need to stay in compliance with various state, federal, and industry-specific regulations.

It’s also important to consider the fact that being a payment facilitator means all financial risks of the sub-merchants are now your liability. If, for example, a sub-merchant performs fraudulent transactions, the transactions are your responsibility.

This is where getting the help of an online payment processing consultant is important and can benefit a prospective payment facilitator in:

1. Preparing the necessary infrastructure

To be approved as a payment facilitator, your business is required to prepare adequate infrastructure (i.e., customer-facing application, underwriting tool, etc. ), as well as establish necessary policies and procedures to ensure compliance with the regulations and standards held by the acquiring bank and credit card networks, including but not limited to:

• Policies for handling chargebacks
• Policies and procedures for performing due diligence for each sub-merchant
• Policies about when should anomalous transactions need to be manually reviewed
• Criteria for KYB (Know Your Business) and KYC (Know Your Customer)
• Policies for investigating suspicious transactions

2. Getting approved by the acquiring banks

A professional payment processing consultant can help you through the complex underwriting process of being approved as a payment facilitator. This includes ensuring your business passes the very detailed audit and examination processes.

3. Preparing your human resources

Educating and training your team so they can maintain healthy best practices in running the day-to-day operations of a payment facilitator business is crucial. This is not only important for ensuring customer satisfaction but also ensuring your business stays compliant with the applicable standards and regulations. An online payment processing consultant can help organize and execute a comprehensive training program for your team.

End Words

Getting the help of an online payments processing consultant can help you in starting and running a payment facilitator business.

Not only do payment consultants have a 100% approval rate in helping businesses get approved as payment facilitators, but it will also help you along the way in ensuring your payment facilitator business stays compliant, secure, and profitable.