A Payment Facilitator (PayFac) is a business that helps other businesses process payments without the need for them to set up individual contracts with partner banks. PayFacs streamline the payment processing by allowing businesses to quickly start accepting payments online or offline.
To become a Payment Facilitator, you should start by selecting a sponsoring acquirer and registering with them. Next, achieve PCI DSS Level 1 certification to ensure data security. Depending on your location and business model, you may need a Money Transmitter License, Payment Institution (PI) or Electronic Money Institution (EMI) license. Then, proceed to build your platform, establish connectivity with the acquirer's systems, and set up systems for merchant management and payment processing. Lastly, choose a suitable terminal solution for transactions.
Prominent examples of Payment Facilitators include Square, Stripe, Adyen, and PayPal. These companies facilitate transactions by managing payment processing and compliance for their submerchants.
The duration to become a Payment Facilitator can vary widely depending on several factors including the complexity of your business model, the speed of obtaining necessary licenses and certifications, and the efficiency of setting up the required infrastructure and partnerships.
The main difference between a Payment Facilitator and a payment processor lies in the management of compliance and risk. Payment processors require each business to handle its own risk management and compliance with payment industry standards. In contrast, Payment Facilitators take on the responsibility of underwriting, risk assessment, and ensuring that all their submerchants meet compliance standards.