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What Are Facilitation Payments?

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedSept 20202 min read

Accepting online payments can sometimes seem trickier than you might expect. One of the easiest ways to get started is to use a payment facilitator. But what are payment facilitators, and what are the advantages associated with them? Learn a little more, starting with our facilitation payment definition.

Facilitation payments definition

Payments functionality is vital for merchants looking to generate stickiness and differentiate their products. Until recently, businesses that wanted to accept electronic payments from customers were required to get a merchant account with a bank or payment processor. Because merchant accounts enable payments for businesses of all sizes, they’re mainly built for larger companies with a significant volume of transactions. As such, they’re not always the best option for small businesses. The application process is time-consuming and costly, and many of the questions required for the application are irrelevant for smaller merchants.

Payment facilitators – often referred to as payfacs or PF – allow merchants to accept payments with their underlying infrastructure. Essentially, each client will be assigned a sub-merchant ID, which is registered under the master merchant account. This gives businesses more control over the experience and allows for a much smoother onboarding process, enabling you to start accepting card payments much more quickly. For smaller companies or micro-merchants, payment facilitators provide a more elegant and efficient way to get up and running with online payments. But how do payment facilitators work? Let’s look at that in a little more depth.

How do payment facilitators work?

Essentially, payment facilitators open a merchant bank account and obtain a merchant ID (MID), which allows them to aggregate payments for a smaller group of merchants (sub-merchants). Sub-merchants aren’t required to register their MID with the bank, as transactions are aggregated under the master MID. This drastically reduces the complexity of accepting online payments for sub-merchants and means that partnering with a payment facilitator can help businesses get up and running more quickly.

Payment facilitator vs. payment processor

Understanding the differences between payment facilitators and payment processors is vital. In short, payment facilitators offer a simplified payment process. Unlike payment facilitators, payments processors work with ISOs (independent sales organisations) to distribute their payments solution. This means that several extra steps are introduced into the onboarding process.

Furthermore, the underwriting process for payment facilitators is entirely different than it is for payment processors. With payment processors, merchant accounts are underwritten upfront. However, with payment facilitators, there’s a continuous underwriting process, which means that underwriting occurs when each transaction is facilitated. This provides added protection from chargebacks and fraud.

When it comes to payment facilitators vs. payment processors, it’s also essential to explore the role of the acquiring bank. Within the payment facilitator model, acquiring banks house the merchant account. This means that all transactions flow into a single account before they’re distributed to the merchants’ business checking account. In other words, it’s a much quicker way to handle credit card payments.

What are the benefits of working with a payment facilitator?

There are extensive benefits associated with payment facilitators. Firstly, the onboarding/sign-up process is far quicker than you’d experience with a payment processor. This is because payment facilitators can approve an account within minutes. It’s also important to note that payment facilitators tend to be a more streamlined payment option, which means they’re less expensive than payment processors. To sum up, payment facilitators eliminate the friction associated with online payments – all you need to do is plug in your credentials, and you can be up and running.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.