The Payment Facilitator Approach & How it Safeguards Merchants

Sep 17, 2020

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.

Closing Up

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.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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