Page 1 - GS171101

November 13, 2017 • Issue 17:11:01
From acquiring to facilitating:

How payfacs are changing the

acquiring market – Part 1

Originally Visa and Mastercard rules stipulated a
transaction volume cutoff of $100,000 per brand per year to
qualify as a sub-merchant; in 2016, that limit was raised to
$1,000,000. American Express Co. and Discover Financial
Services followed suit, stated Holli Targen, Partner at the
law firm Jaffe, Raitt, Heuer & Weiss P.C. Each brand has
its own nomenclature, but the term used by Mastercard,
payment facilitator (or payfac) is the commonly accepted
industry moniker.
Targen, an expert in financial technology law, likened
payfacs to acquirers. "It's not that they replace acquirers,"
she said. "They still have to be sponsored." Payfac
relationships also require "a lot of oversight," she added.
"We're not seeing a lot of banks willing to do that." Card
brand rules require sponsors to underwrite payfacs as
master merchants that handle application processing,
By Dale Laszig and Patti Murphy boarding, risk monitoring, billing and reporting for
ayments acquiring has evolved from its original sub-merchants. There also are specific clauses that must
value proposition of simply accepting credit be included in the contracts between master and sub-
merchants that address issues such as liability and fraud,
cards; the game has changed, bringing new
P competition to ISOs and merchant level sales- Targen noted.
people (MLSs). The name change from payment accep- Market-driven growth
tance to payment facilitation reflects a strategic shift from
passive POS transactions to always-on, always-connected Experts point to several advantages to merchants using
commerce. payfacs, including streamlined applications, faster
approvals and automated boarding. Payfacs can tailor
When payment facilitators first appeared in 2012, they chal- card acceptance for select vertical industries, such as
lenged the traditional business model of one-merchant,
one-contract – a challenge facilitated by the card brands.
From the earliest days of card acceptance, Mastercard and
Visa had prohibited the aggregation of card transactions Contributed articles inside by:
from multiple merchants for processing through a single
merchant account. But that changed in 2011 when the card Steven Feldshuh ...................................................................................33
companies created a new category of "master merchants" Jeff Fortney .............................................................................................37
that could provide processing services to smaller "sub- Brandes Elitch ........................................................................................40
merchants."

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