Vantiv empowers PayFacs to fully leverage the inherent benefits of the PayFac model by enabling them to own the relationship with their sub-merchants and maintain complete control over the customer experience.
To determine whether you are a PayFac, you can ask yourself these questions:
- Does your application or service accept payments on behalf of sub-merchants?
- Are you concerned about onboarding, vetting and managing these sub-merchants?
- Are you distributing funds to sub-merchants to compensate them for sales or services they perform, usually less your own fees and interchange costs?
If these things are true, you have the business challenges of a PayFac. In addition to learning about Vantiv’s APIs and management tools, you may want to consider speaking with a Vantiv Solutions Consultant.
Determination of an Entity as a PayFac According to the Card Brands
A PayFac is often an aggregating entity that holds an agreement with Vantiv to provide payment processing services to a number of its own sub-merchants who are not underwritten by Vantiv and not boarded as separate legal organizations. These sub-merchants often have no contractual relationship with Vantiv (except in cases where sub-merchant volume surpasses card brand thresholds).
A PayFac is required to be registered as a Payment Facilitator (“PayFac”) with both Visa and Mastercard.
An aggregating entity that receives settlement from, and contracts with an acquirer on behalf of sub-merchants while representing itself as the seller of the goods or services to the consumer using its own name and brand to identify the business to the consumer and provides recourse to the cardholder in the event of a dispute, may be viewed as a merchant of record. If any of the aforementioned does not apply, the entity shall be viewed as a PayFac.
Items the card brands may use in their sole reserved right to determine when an entity is a PayFac or Merchant of Record (MOR):
- Which entity name appears on the transaction receipt
- Who owns or takes possession of the goods or services
- Who books the sale of the goods or services as revenue
In addition, there exist cases where an aggregating entity that is a PayFac also has a relationship underneath it with yet another aggregating entity such as a Marketplace and the PayFac desires and has determined such aggregating entity should be a Merchant of Record and therefore an eligible Sub-Merchant of the PayFac. The Card Brand Rules prohibit a PayFac to have another Payment Facilitator as a sub-merchant and thus all sub-merchants must be viewed as the “MOR” and not an additional level of Payment Facilitation.
At Vantiv, we support some of the industry’s most successful payment facilitators, and we can help point you to the most cost-efficient and easiest solution to implement depending on your business needs.
Before we get into code examples, it’s useful to review items developers will need to know when developing applications for PayFacs.