North American Bancard provides the tools and support to simplify the transition to becoming a payments facilitator.
If you’re like most providers offering payments solutions and services, you’d probably like to have more control. At RSPA RetailNOW 2023, The Strawhecker Group shared results of a study that confirm that solutions providers would like to have more say over merchant onboarding, processing fees, support, and customer experiences. Solutions providers can gain more control over merchant relationships when they become payment facilitators (PayFacs).
What is the difference between a referral partner and a PayFac?
Solutions providers have several ways to monetize payments. Some independent software vendors (ISVs) who are referral partners integrate with their payment partner’s platform so their users can process payments from within their software. In this case, the ISV receives a percentage of processing fees on those transactions. Other businesses, like independent sales organizations (ISOs) and value-added resellers (VARs) sell the payment company’s solutions and services. They also receive a portion of processing fees. In both cases, however, the partner refers the merchant to the payments company, which has control of the application process, underwriting, approvals, fees, and fund distribution.
Payment company partners who become PayFacs, however, can establish processes and create experiences that contribute to a growing business. They set up a master account and onboard their clients through their merchant identification (MID) number. This allows a PayFac to streamline the process, using digital, automated processes, for example, to perform due diligence to meet Know Your Customer (KYC) and anti-money laundering (AML) laws.
PayFacs also receive funds on behalf of their clients and set the schedule for how to distribute them. Additionally, one of the most important advantages of becoming a PayFac is that these companies control the fees they charge. Because they take on more responsibility, they’re able to capture more processing revenue. Then, they decide what to charge their customers and the percentage they earn from transactions.
Overall, greater control over the merchant relationship allows PayFacs to build stronger relationships with their clients and build a healthier revenue stream from payments.
Requirements for becoming a PayFac.
An ISV, ISO, or VAR that decides to transition to offer PayFac services needs to adapt business operations to support them. For example, the business needs to establish a relationship with a bank that will sponsor it and register with card brands. A PayFac must also pay annual fees to card brands — Visa’s fee, for example, is $5,000 per year. A PayFac must also have enough cash reserves to cover chargebacks and fraud.
Payment company partners that evolve into PayFacs also need to adapt their internal processes. They need adequate staff to manage underwriting, application approvals, reporting, distributing funds, and providing customer support. They also need to implement a system that integrates with the payments gateway they’ll use to have payments go through their MID and that helps them manage merchant accounts and compliance with laws and Payment Card Industry (PCI) requirements.
But, businesses don’t have to do it alone.
The advantages of working with North American Bancard.
North American Bancard is the ideal partner for companies that want to become PayFacs — whether you plan to accept payments on behalf of brick-and-mortar or ecommerce merchants. Our flexible payment facilitator program allows you to choose the level of risk you assume, set your own pricing, and customize funding. We give you the tools for simple and fast merchant boarding, APIs for seamless integration, and user-friendly analytics-based reporting tools. North American Bancard also provides PCI-compliance assistance and sales and marketing support. We even help with your registration fees. Ready to explore the possibilities of becoming a PayFac? Contact us.
