When businesses seek to accept payments from customers, they are faced with two distinct payment processing solutions: the Merchant Acquiring Model (MEAMI) and the Payment Facilitator Model (PayFac). While both these solutions enable businesses to process payments, they operate quite differently from each other.
In this article, we will delve deep into the concepts of merchant accounts and PayFac, exploring their functionalities, processes, and the benefits they offer. Our objective is to provide you with a clear understanding of these two models, helping you make an informed decision on which option best suits your business needs.
Understanding the Merchant Acquiring Model (MEAMI)
In the Merchant Acquiring Model, a business (merchant) applies for a merchant account with a payment processor or bank. Once approved, this merchant account permits the business to accept payments from customers, including credit cards, debit cards, and digital wallets.
How It Works:
Imagine that your business has an active merchant account and is prepared to accept payments. When a customer uses their credit or debit card to make a payment, the payment processor relays the transaction details to your merchant account. The merchant account provider then verifies the availability of sufficient funds with the customer’s card issuer. If funds are available, the merchant account provider transfers the funds to your merchant account. This is the typical process of a merchant account.
Key Functions of a Merchant Account:
Authorization: Merchant accounts enable businesses to authorize debit or credit card transactions, ensuring the availability of funds.
Settlement: After authorization, the merchant account provider facilitates the transfer of funds from the customer’s account to your account.
Chargeback Management: Merchant account providers assist businesses in managing chargebacks, offering support in dispute resolution, documentation production, and charge reversal when necessary.
Fraud Detection and Prevention: Many merchant account providers incorporate fraud detection systems that identify and mitigate potentially fraudulent transactions.
Reporting and Analytics: Merchant account providers grant access to analytical and reporting tools that help businesses track customer behavior, sales trends, and potential issues.
Payment Gateway Integration: Merchant accounts often integrate seamlessly with payment gateways, simplifying payment acceptance.
Advantages of the Merchant Account Model:
No Manual Payout Handling: The merchant account model eliminates the need for manual fund transfers to your bank account. The merchant account provider automatically processes these transfers, providing quick access to funds.
No Wallet Maintenance: Businesses can avoid the hassle of maintaining a separate digital wallet. Merchant account providers typically integrate with payment gateways that support various digital wallets, streamlining payment acceptance.
Efficient Settlements: Merchant accounts ensure real-time or near-real-time settlement of funds, offering rapid access to available funds.
Understanding the PayFac Model and How It Works
Creating a traditional merchant account and onboarding a payment service provider can be a cumbersome process. This is where the Payment Facilitator (PayFac) Model comes into play. PayFac acts as a mediator between the merchant and the payment processor, expediting the process of accepting payments.
In the PayFac Model, a master merchant account is owned by the payment facilitator. Sub-merchants, which are individual businesses or retailers, operate under this master account. The setup process is simplified and accelerated, making it more accessible for businesses.
How It Works:
PayFac allows sub-merchants, typically merchants or retailers, to operate without the need for them to apply for their own merchant identification number. PayFac maintains a master merchant account with the acquiring bank, making onboarding sub-merchants efficient. Sub-merchants can operate under the master merchant identification number, reducing the complexity of the process.
In summary, the PayFac Model offers a more straightforward, convenient, and time-saving approach for businesses. Merchants are relieved from the extensive underwriting process, resulting in expedited onboarding.
Key Functions of PayFac:
Onboarding Process: PayFac streamlines the underwriting process, allowing multiple sub-merchants to operate under one merchant identification number (MID). This helps verify the authenticity of merchants while reducing the complexity of documentation and expediting the onboarding process.
Monitoring: PayFac oversees all transactions conducted by sub-merchants, ensuring compliance with card network and government regulations. Suspicious transactions are investigated and reported as needed.
Chargeback Control: PayFac assists sub-merchants in managing chargebacks, handling the entire process, including documentation production, investigation, and collaboration with the acquiring bank.
Funding and Settlement: PayFac manages the clearing and settlement of funds generated by sub-merchants. This ensures that sub-merchants have quick access to their funds.
Advantages of the PayFac Model:
Effortless Onboarding: Unlike the traditional merchant account, the PayFac Model simplifies onboarding by handling underwriting, KYC, and compliance processes. This streamlines the onboarding process, making it more efficient.
Ease of Accessibility: PayFac manages fund movement throughout the payment flow, providing sub-merchants with easy access and control over their funds.
No Administrative Requests for Fund Transfers: PayFac manages the transfer of funds to sub-merchants, automatically delivering funds without the need for manual requests or initiations.
What’s Next?
Now that you understand how the merchant account and PayFac models work, you can make an informed choice for accepting payments. However, even after selecting the most suitable model, there are still gaps to address. Business operations encompass more than just meeting customer demands; it involves navigating the complexities of payment processing. Managing payments from various locations and currencies can be overwhelming.
This is where Web Technology Expert comes into play. Let’s explore how Web Technology Expert bridges these gaps.
How Web Technology Expert Bridges the Gap:
Web Technology Expert is a payment orchestration platform that facilitates the integration of 30+ payment gateways and 300+ payment methods, both domestic and international. This empowers businesses to expand to various locations. Web Technology Expert eliminates concerns about expensive payment gateways, providing the flexibility to switch to a cost-effective solution in case of issues with a particular gateway. This ensures better uptime and cost savings as each payment can be routed through an affordable gateway.
Merchants can enjoy features like split payments (exclusive to PayFac), easy settlements, reconciliation, and a streamlined payment flow. If you seek to make payment acceptance more efficient, hassle-free, and profitable for your business, Web Technology Expert is the solution.
By leveraging Web Technology Expert, businesses can navigate the intricate world of payment processing with ease and provide a seamless and cost-effective payment experience for their customers.