Technological breakthroughs have changed the way we pay for our purchases. Before the remarkable technological advancements in the banking industry and business sectors, payment used to be a very time-consuming activity.
Now, due to the presence of online payment services, paying for your purchases has never been less time-consuming and easier. Interestingly, two well-known systems used for making online payments are the Payment Facilitator and the Payment Processor.
What is a Payment Facilitator?
Commonly referred to as Payfac, the Payment Facilitator is a software that facilitates payments from one customer or business to another. It is simply a service provider for merchants that provides them with merchant accounts that are required to accept online payments using this tool.
The Payment Facilitator uses a sub-merchant platform to provide two types of merchant accounts, a PSP and an ISO. In this sub-merchant model, Payfac has a master merchant account under which merchants are signed up, as sub-merchants.
The primary reason any business should use this Payment Facilitator model is because it can actually enhance the quality of its products using Payfac. The simplicity of having everything under a single software significantly improves the customer experience. Moreover, its sub-merchant platform has made the process of acquiring merchants accounts a lot less time-consuming and easier.
Additionally, merchants using Payfac can boost the original value of their products by being the payment company themselves, and get a greater share of revenue from the payments.
Check out the difference between Payment Facilitator and Payment Gateway.
What is a Payment Processor?
Payment Processors are companies that keep records and regulate information regarding credit card transactions. It is viewed as a transactor for financial calculations that works as a middle-man for credit card transactions between the acquiring bank and the merchant.
In simpler words, the Payment Processor handles transactions for merchants and their acquiring banks. It operates behind-the-scenes to enable the transfer of funds by authorizing transactions on behalf of the financial institutions involved.
Payment Processors are an excellent system that makes sure credit card transactions are done in a secured way, while reaching the important details regarding the transactions to both parties involved.
Moreover, businesses can establish a relatively easy-to-use and safe payment method that is not very time-consuming through this technology. This not only reduces costs related to payment acceptance, but also makes time-to-market for products a lot faster. Additionally, compatibility and PCI compliance are two important things to look at while choosing a Payment Processor.
Payment Facilitator vs Payment Processor
The main difference between these two technologies, the Payment Facilitator and the Payment Processor, is the difference in the organization of merchant accounts. Firstly, in the Payment Facilitator model, all the merchants are sub-merchants under a master merchant account, which allows them to quicker onboarding and more control over customer experience. But for the Payment Processor model, they depend on independent sales organizations to distribute their payment solutions.
Instead of being sub-merchants, each merchant is required to have their own merchant IDs in order to accept payments under the Payment Processor model. Furthermore, in Payfac, merchants are involved directly in terms of regulating transactions. But, on the other hand, ISOs (Independent Sales Organizations) work as the intermediary between merchants and payment processors.
In the Payment Processor system, acquiring bank consists the checking account for the merchant’s business, while, acquiring bank houses the Payment Facilitator’s merchant account.
Both the Payment Facilitator and the Payment Processor are popular online transaction tools that operate in different ways from each other and offer additional benefits that are unique to each. But, both of these payment tools aim to provide business owners with the most efficient payment solutions to maintain their businesses.
