Payment Facilitators on board in reverse
When you walk into a business, you expect them to accept credit cards. This should be a simple process. You walk in, pay for your goods, and walk out. And the business gets paid by their payment processor in 1-2 days.
Except sometimes they don't get paid. It's not uncommon for a payment facilitator to hold funds for months on end with no explanation. (type in your search bar "why is x payment provider holding my funds to see the nightmares some businesses deal with)
Getting set up to accept credit cards in minutes or hours instead of days is a double edged sword. It's convenient to walk into your local drugs store, pick up a mobile card reader, connect your bank account and take payments.
Payment facilitators, or PayFacs, make this possible. They can onboard quicker than a merchant service provider. This offers certain risks and challenges. They are responsible for:
- complex underwriting (they have to make sure the business is who they say they are)
- risk management (payfacs are responsible for chargebacks/fraud if the subaccount disappears)
- regulatory compliance issues (payfacs are responsible for PCI compliance, monitoring anti money laundering, ect)
If a subaccount accepts payments in any way that seems risky, the payfac will hold your money and investigate. This could take several months, and could destroy a business.
When you set up a merchant account, a merchant service provider assesses the risk prior to processing transactions. Once the risk assement is complete, you can process transactions under the parameters you've set up.
With no interuptions in funding.
Payfacs are a perfect solution for very small businesses. But if you're processing thousands of dollars per month, you should have your own TRUE merchant account. Get underwritten in advance and avoid the risk of having your funds held with no explanation, and often no customer service to call and talk with to get your funds released.