For a long time, payment systems did not cater enough for the small business owner’s needs.
Accepting payments was a painful and costly ordeal as banks were not ready to accept most startups, even limiting the payment avenues accessible by such business.
However, the dawn of new players and solutions that focus on working closely with small and medium merchants has brought new hope.
Still, the newly fangled alternatives vary in terms of merchant protection and approach.
The payment facilitator (PF) model, for instance, is built with the retailer’s safety and security in mind. And implementing it can positively impact your payment experience.
Scrutiny & Enrollment
Payment facilitators are the right approach because card processors closely monitor their dealings with sub-merchants.
Network regulations require the acquiring bank to scrutinize the payment facilitator. The rules also demand that these service providers underwrite and oversee each sub-merchant with the acquiring bank’s supervision.
And what does that mean for small businesses? This strict scrutiny guarantees the thorough inspection of all payment facilitators and protects against facilitators accepting phony merchants. These steps mitigate both fiscal and reputational risks for PFs and the onboarded merchants.
This model is safe because the acquiring bank scrutinizes all would-be payment facilitators. The approach is responsible for underwriting and observing its merchants, and updating them on their individual activity.
Clearance of Funds
This payment model also excels in how it oversees the settlement of finances. Many times, an onboarded merchant’s funds are separated from the facilitator’s funds and stored into a “for the benefit of (FBO) account.
The facilitator generally stays on top of the merchant’s wellbeing by instructing the bank on the timing and route of cash transfer, but the bank controls the funds. Facilitators do not handle retailers’ funds.
This strategy safeguards a business if, for whatever reason, the payment facilitator quits the business. It also ensures PFs do not mix their funds with proceeds from merchant sales.
Lastly, the fact that banks supervise the entire process makes it a safe model for small and medium businesses looking for quick ways to start accepting payments.
The level of scrutiny involved in the payment facilitator strategy plays a significant role in keeping away bad players while protecting the merchant’s business.
Many other payment models take different measures to safeguard the acceptance of money. Every business owner must strive to understand the steps an approach takes to protect its bottom line before implementation.