Payment Facilitator versus Payment Processor : What’s the Difference
A Payment Processor offers businesses the ability to accept debit and credit cards and in some cases ACH transactions from it’s customers. These businesses can range from a pizza joint to a dance studio to WalMart's.
Each businesses completes an application and is underwritten on the merits of the business and the owner. Typically bank statements, formation documents and potentially more documentation is required and the approval may take 2-5 days or more.
That business “owns” the merchant account and their end customer will see their business name on the descriptor [ bank statement for charges]. The vast majority of the time when a business charges $100 they receive a $100 deposit and then in turn receive a monthly invoice for processing fees.
A Payment Facilitator takes on the role of the Master Merchant.
The primary benefit to becoming a Payment Facilitator is that you can quickly and easily enroll your application users and enable processing of credit, debit card and in some case ACH transactions. The Payment Facilitator decides who gets processing capabilities. There are “Super” Payment Facilitators like PayPal and Square that enable a wide variety of businesses types to leverage their solution.
A more common example is a SaaS application that is looking to remove sign-up friction for their app.
As an example: A SaaS offers an invoicing solution eg QBooks. Businesses that want to leverage their invoicing solution complete a simple application and 15 minutes or so later they are approved and set up to accept customer payment. For our example let’s say the business name is “Best Landscapers”. They applied and are now approved and ready to bill/invoice there customers using the QBooks platform.
They email their customer an invoice for $100, that customers clicks to secure payment page and makes payment. Best will not be funded the entire $100. The payment fees are taken from this so they might see $96.80 assuming a 2.9% and 30 cent processing fee.
QBooks would receive a portion of the $3.20 fee being assessed. The amount will vary but a typical amount could be 40 cents.So you have two attractive components: first the ease of enrolling a new client and second a revenue stream from every payment processed.
In summary the Payment Facilitator versus Payment Processors distinction is primarily differentiated by the end customer on-boarding process and the funding + descriptor differences.
Trying to decide if the Payment Facilitator role is right for your business? Maybe a Payments Partnership is the better fit. Let’s have a conversation and see what is your best fit.