Payment facilitator VS. aggregator: a cheat sheet of differences, similarities, and benefits
There are lots of cogs and gears in the payments cycle and just as many terms used to describe them. When you are still dark on some points about payments, you might often stumble upon the variety of concepts and ideas. One common point of confusion is the difference between certain payment process actors — payment facilitators and aggregators. Keep calm, we are here to assist and enhance your insights in payment process.
Payment facilitators and aggregators are typical participants of payment processing. These terms are often used interchangeably, but in reality, they mean three different concepts. Let’s figure out what is the difference between these three players of the payment industry.
What is a payment facilitator
A payment facilitator (or payfac) can be called a service provider for merchants for it usually organises communication between merchants and acquiring banks. When you want to start accepting payments online, you’ll need a merchant account from a payment facilitator. Depending on processing volumes you’ll choose among two types of merchant accounts — a PSP and an ISO. Generally, those who process less than one million annually, would be looking for a PSP merchant account.
It used to take weeks to get a merchant account, but then payfacs came around and simplified the process by creating a sub-merchant platform.
It involves a payment facilitator that has been pre-approved for one master merchant account with an acquirer. Payfacs are then able to sign-up merchants underneath their master account as sub-merchants, thus expediting the process of enrollment. This model is quite appealing to merchants as the risk is on the payment facilitators, as they hold the master account. Merchants still can get individual merchant accounts, but it can be a very cumbersome process.
Benefits of the payment facilitator model:
- Faster onboarding: getting started is quicker because there are fewer parties involved.
- Better control: you are not dependent on a third party to provide merchant support, controlling the level of service that you provide to your customers.
- Increased revenue potential: since you own more control of the payments process, you will often have a higher revenue share with your payments partner, boosting your bottom line profits!
What is a payment aggregator
A payment aggregator is a service that collects the online funds received on the account of an online store to further transfer them to the accounts of the customer company. It allows for working not only with cash on delivery, but also with popular systems like Visa or MasterCard, as well as virtual currencies and payment systems. Currently, the payment aggregator is the only system that allows you to easily and quickly organise electronic settlements, as well as legalise the circulation of electronic money. That makes it necessary for everyone who does business in the virtual space.
Benefits of payment aggregators:
- Versatility. It combines all possible payment methods into one and eliminates the need to connect each separately.
- Time-efficiency. Payments take place in seconds.
- Cost-effectiveness. The commission for paying with a universal payment aggregator is often lower than when paying through a specific payment system.
- Reports. Merchants can monitor and analyse transactions data according to various criteria.
- Ease of use. The payment interface is simple and intuitive.
The key difference between an aggregator and facilitator is that the latter gives every merchant its own merchant ID within its system and the former uses its own merchant ID to process transactions. Both payment facilitators and aggregators offer similar benefits from the perspective of the end-user. Aggregators usually offer less expensive processing for a low number of transactions due to their simpler model. However, they are not ideal for organisations with high transaction volumes.