Payment Facilitator Vs. Payment Processor: What’s the Difference?

Key Takeaways

• Payment facilitators provide sub-merchant IDs under their master account, enabling faster setup and more payment control compared to traditional processors.
• Payment processors issue individual merchant IDs directly, which typically results in longer onboarding processes but offers more independence.
• Payment gateways create secure connections for online transactions, while payment processors handle point-of-sale terminal transactions with physical cards present.
• Payment aggregators assign businesses to their own merchant ID and charge per-transaction fees, making them ideal for small businesses with lower transaction volumes.
• The choice between payment facilitator vs payment gateway depends on your business model, transaction volume, and whether you need online or in-person payment processing capabilities.

There’s little argument that having the ability to process payments from clients is one of the most important aspects of keeping your business running. There are so many ways payments can be processed, it makes collecting balances owed a more complicated process than it should be. 

Let’s review the roles of payment facilitators and payment processors, what they mean, and the differences between the terms. 

What is Payment Facilitator

When you want to accept credit card payments, you’ll need a third-party service provider. This allows you to accept payments online by providing you with a merchant account. 

What is Payment Processor

A payment processor is an important function for accepting credit card payments from clients. Essentially a processor transfers money to your merchant account or bank when clients swipe or enter their credit card information. 

What is Payment Gateway

The payment gateway creates a secure connection between a client account and your merchant account. When your clients make credit card payments, online bill pay, or make payments using other digital methods, the payments go through a gateway. 

What is Payment Service Provider

A payment service provider (PSP) works behind the scenes ensuring each transaction is handled smoothly. The provider passes the financial data for transactions between the parties involved. 

What is Payment Aggregator

A payment aggregator is a payment collection method involving a payment provider issuing a merchant ID (MID) under its own master account. This allows you to process credit card and online payments without the need for a bank account or other financial services. 

The Difference Between a Payment Facilitator and a Payment Processor 

At first glance, a facilitator and a processor may seem similar but the way they handle payments is quite different. 

• The payment facilitator method provides each client with a sub-merchant ID under the vendor’s master account for quick setup and more control over your payments. 
• A payment processor will issue your own merchant MID to process payments. This can result in a longer onboarding process with extra steps before you can process payments. 

The Difference Between a Payment Gateway and Payment Service Provider

The payment gateway is the literal connection between your account and your client’s account. Since payment data is being collected, a gateway must be a secure connection to ensure the security of both your systems. 

The payment service provider is the processing company that allows you to accept online or credit card payments for services provided. Having a PSP vs. an account with a bank allows you to accept multiple payment types or payments from multiple banks. This gives you more control over processing payments. 

A Payment Gateway vs. Payment Processor

Both transaction types transfer payments between a client and a business, but with one main difference:

A payment gateway processes transactions from eCommerce sites. If your business has an online store that allows clients to purchase goods and services directly through the website, the gateway will allow you to securely accept transactions. This is also the method to use if you accept payments without the physical card being present, such as a digital wallet (Apple Pay®, Samsung Pay®, etc.) saving card information on file or telephone purchases. 

While it transfers payments from a client to your business, a payment processor does so through a point-of-sale terminal. The card must be physically present to swipe (or use the chip). 

A Payment Aggregator vs. Payment Facilitator

The main difference between an aggregator and a facilitator is the type of MID you’ll be assigned. A payment facilitator will provide you with your own MID under the facilitator’s master account. The payment aggregator will simply sign you up under their own MID. 

For small- and medium-size businesses that process fewer transactions, choosing an aggregator model is typically best. It charges fees per payment rather than charging a monthly fee as facilitators tend to do. 

The Bottom Line

Choosing a method for your accounts receivable payment processing team to accept online transactions is a personal choice. There are many pros and cons of each type of method, plus knowing your transaction volume, future plans, and how you want to run your business will play a large role in deciding which method works best for you. 

Whichever method you choose, investing in accounts receivable payment automation software can help streamline the process and ensure all your transactions go through quickly and efficiently. To see why so many customers choose our automation solutions to improve AR processing, contact Gaviti.

Frequently Asked Questions about Payment Facilitators

What types of businesses should consider becoming a PayFac?

Large businesses with high transaction volumes and the technical infrastructure to manage sub-merchants should consider becoming payment facilitator companies. These businesses typically have the resources to handle compliance requirements, risk management, and the ability to onboard multiple merchants under their platform while maintaining regulatory oversight.

How do PayFac platforms help speed up merchant onboarding?

PayFac platforms accelerate onboarding by providing sub-merchant IDs under their master merchant account, eliminating the lengthy bank approval process. This electronic payment facilitator model allows businesses to start processing payments within hours or days rather than weeks, as the PayFac has already established the primary merchant relationship with acquiring banks.

Are payment facilitator companies responsible for compliance and risk?

Yes, payment facilitator companies assume full responsibility for compliance and risk management for all sub-merchants operating under their master account. They must monitor transactions, ensure PCI DSS compliance, manage fraud prevention, conduct due diligence on sub-merchants, and maintain regulatory standards across their entire merchant portfolio to protect against financial and reputational risks.

What are the regulatory requirements for becoming an electronic payment facilitator?

Electronic payment facilitators must register with card networks like Visa and Mastercard, maintain PCI DSS compliance, implement robust risk management systems, and satisfy capital requirements. They must also establish monitoring procedures for sub-merchants, maintain proper licensing in operating jurisdictions, and demonstrate financial stability to handle potential chargebacks and liability exposure.

How does a payment facilitator differ from a traditional acquiring bank?

Unlike traditional acquiring banks that provide individual merchant accounts, payment facilitators operate under a single master merchant account and create sub-merchant relationships. When comparing payment facilitator vs payment gateway functionality, facilitators handle the entire merchant relationship including underwriting and risk management, while traditional banks focus solely on payment processing and require separate gateway providers for transaction routing.

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