As someone who frequently navigates the payment landscape, I’ve often found myself wondering about the differences between a payment facilitator vs payment gateway. Both play crucial roles in processing transactions, but they serve distinct functions that can greatly impact how businesses manage payments.
In this article, I’ll break down the key differences between payment facilitators and payment gateways, explaining their individual roles and how they work together to enhance the payment experience. Whether you’re a business owner looking to optimize your payment systems or just curious about the technology, this guide will offer valuable insights into these essential components. Let’s dive in!
What is a Payment Facilitator?
A Payment Facilitator is basically a third-party payment service provider for merchants that operates through a sub-merchant model. It provides merchants with merchant accounts, using which merchants can facilitate and accept their own payments.
What that means is, instead of needing to get your own merchant account, you can actually join a Payment Facilitator and accept payments as a sub-merchant. A Payment Facilitator, commonly known as, a Payfac, has one master merchant account under which all the merchants join as sub-merchants.
The easy-to-use and instantaneous nature of the Payment Facilitator makes it such a popular choice among merchants. Firstly, it has a very quick and easy onboarding process that requires just an onboarding application and verification, which is a lot less time-consuming compared to other methods.
Moreover, a Payfac provides a secure payment acceptance provider that transfers the risk from merchants to the Payment Facilitators. Furthermore, using this model, merchants can improve the quality of their products and be involved in the payment process. Additionally, having everything related to payment under one platform provides a much better user experience.
Check out the difference between Payment Facilitator and Payment Processor.
What is a Payment Gateway?
According to Investopedia, A Payment Gateway is a technology used by merchants to accept debit or credit card purchases from customers. This can include both online transactions and physical transactions done through card-reading devices. A Payment Gateway establishes connection between the paying customer’s bank account and the merchants bank.
This facilitates the movement of information between the two parties involved, so that the transfer of funds from one account to another can go through. It is a merchant service that is provided by the actual service provided and plays an integral role in carrying out the transaction.
The top-class security offered by Payment Gateways make it such a convenient choice for independent businesses that want to avoid credit card fraud. Additionally, it encrypts customer data in a way that makes sure that their data is secure. This in turn increases customer satisfaction and trust to make the payments.
For merchants who already have set up a website or an account, Payment Gateways are the best option for accepting payments and require low maintenance. Furthermore, merchants are allowed to customize their checkout pages, using which they can improve the customer experience.
Payment Facilitator vs Payment Gateway
The Payment Gateways are tools through which information is reached about the transaction and are a service provided by the service provider. The Payment Facilitator, on the other hand, is a service provider itself that provides payment service to merchants under a sub-merchant platform.
Merchants using Payment Gateways are merchants that have their own merchants accounts or websites, but Payment Facilitators are used by merchants, under which they operate as sub-merchants and don’t require their own merchant account or website. Additionally, payment options offered by Payment Gateways are restricted, but Payment Facilitators can provide multiple payment options.
It is essential for us to know about both Payment Gateways and Payment Facilitators in order to fully understand the mechanics of credit card transactions. Both of these tools represent two different ways, by which online transactions are conducted.
