How to obtain a payment facilitator license

The PayFac market has experienced tremendous expansion, driven by the immense successes of well-known businesses like PayPal, Stripe, Braintree, and WePay. Globally, there will be 2,381 institutions by 2025, up from 1,244 in 2020. Regardless of how profitable the potential may seem, being a PayFac entails many upfront expenditures, new terms, and obligations. So, you should be prepared for the process if you are serious about becoming a PayFac.

What is the PayFac model?

PayFac or a full term, payment facilitator, caters to merchants. Broadly speaking, it is a company that allows its clients to receive payments via the Internet using PayFac’s platform. The majority of firms employing such models are ISOs. Software firms are also showing increasing interest in acquiring this license as they realize the benefits of offering E2E service with their products.

Your submerchants will have an easier time from the front to the rear of a sale once you become a PayFac. As their PayFac, you will relieve them of many hassles, allowing them to devote more time and effort to their enterprises. Your submerchants will no longer need to seek advice from various persons to solve a problem because you will become the sole authority for them. You will give them comprehensive solutions to their needs, which is the benchmark for your clients.

Advantages of becoming a PayFac

Due to facilitation, a platform can collect payments as soon as 15 minutes after a request has been submitted and rapidly onboard new users. A payment facilitator offers many benefits, such as seamless integration options, in addition to expediting the enrollment and onboarding procedure.

One of the pros of employing a PayFac is that all major card types, including ACH, eCheck, and even EBPP, can be enabled through a single interface. These networks and types include Visa, MC, Discover, Amex, and others. Businesses are further encouraged to partner with a PayFac by having a clear cost structure that allows them to better manage their budgets and prevents any unexpected fees.

How to become a PayFac?

The following are the steps you have to complete the process:

  1. Registering your company as a PayFac or buying a ready-made license. Visa and MasterCard charge about $5,000 a year for the registration.
  2. Forming a processing partnership with an acquirer/processor. Your terms and fees are a key component of this cooperation.
  3. Complying with regulations for cyber insurance and general liability insurance.
  4. Creating a software system for managing sub-merchants. You should be able to continuously monitor and support the entire merchant activities with the help of the management system.
  5. Acquiring a system for initial underwriting and background checks (KYC, etc).
  6.  Forming a payment gateway partnership.
  7. Completing PCI Level 1 certification.
  8. Planning the funding for merchants. This is one of the most crucial factors, providing PayFacs an edge over ISO. 
  9. Putting policies in place to guard you against fraud.

Final words

These are, actually, just the basics all PayFacs need to adhere to. So, if you require more detailed advice and tailored suggestions for your case, you are welcome to contact specialists at Eternity Law International. You can consider buying a ready-made license which will save you a lot of time. The lawyers at Eternity Law International will be pleased to assist you, just as they assisted other businesses that are currently operating successfully as white-label or full-service payment facilitators.

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