Steps to becoming a Payment Facilitator are outlined below.
First it’s important to ask why?
The potential for revenue and being able to onboard clients is very attractive but there are many questions that must be addressed in order to embark on the path to becoming a Payment Facilitator.
The vast majority of platforms that aspire to become a true payment facilitator | PayFac or aggregator aren’t good fits for MANY reasons.
You will need:
- Money. You can easily spend $50k+ [easy to spend >100k]
- Payments understanding and especially risk mitigation. Check out What can go wrong with Payment Aggregation? for more info.
- Resources to devote to ongoing compliance and risk [both staff and $]
- User base that has the potential to generate enough transactional revenue to offset costs. Without this forget everything else. You make money from processing fees [ margin between costs and sell rate]. You NEED lots of transactions!
- Register w/Sponsor Bank
- Approval by Sponsor Bank
- Connect with Technology platform. Integrate via API
- Sponsor bank issues PayFac / aggregation credentials
- Go to market
The registration/approval process can consist of:
1- Agent Application (principals representing at least 80% of total ownership must sign)
2- Agent Agreement (3 originals copies signed by the Agent and Sponsored Entity)
3- Underwriting and Business/Principal Validation Write-up)
4- Business Plan/Description (including business history, investor info, volume projections)
5- Articles of Incorporation or Partnership Agreements
6- Evidence (Government-Issued Documentation) of all DBA Names Listed
7- Business Financials (2 years) Financial Statements (including P&L, balance sheet and interim) Start-up: Submit financial projections and opening balance sheet
8- Business Tax Returns (2 years)
9- Bank Statements (3 months)
10- Dun & Bradstreet (D&B) Report (when available)
11- Copy of Driver’s License(s) for all principals with at least 25% ownership and all signers
12- Resume/Bio for all principals with at least 25% ownership
13- Resumes/work histories for staff in the credit
This process can take 6+ months or more depending on your back end provider. We have had clients complete this process in less than a month. It varies based on many factors.
To get a more comprehensive overview of Payment Facilitation and more importantly to decide if it might be right for you take a look at- Payment Facilitation | Aggregation
Again MOST platforms aren’t ready for true payment facilitation BUT you can get most of the benefits without the cumbersome drawbacks if you find the right partner. Good luck.