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Think about it. From cash to checks, to credit cards, then
Insider’sreport debit and prepaid cards, and now online and mobile
payments, the role of banks always has remained central to
on payments: payments. Banks may outsource the mechanics of merchant
acquiring, like signing up merchants and managing
network technologies, but they remain firmly in control of
the payments piece.

Deriving revenues by driving more transactions is
Payfacs need merchant important to banks and their acquiring partners, and
payfacs help on that count. They already have extended
acquirers and vice versa card-acceptance to thousands of businesses that are too
small or unique to appear on the radar of most ISOs and
merchant level salespeople (MLSs).
By Patti Murphy And they stand to expand the market by orders of magni-
ProScribes Inc. tude. Double Diamond Payments Research, a division of
Double Diamond Group LLC, calculated the latest entrants
ayment facilitators, commonly referred to as to the field (this excludes the big three, PayPal, Square and
payfacs, are changing the face of merchant Stripe) will be generating over $500 billion in gross pro-
acquiring. This is not necessarily bad news. cessing volume by 2021.
P Payfacs are "master merchants" that facilitate
payment acceptance on behalf of smaller merchants. They In addition to driving more transactions, collaborating
are authorized by the card brands to aggregate transac- with payfacs also can help banks, acquirers, ISOs and MLSs
tions initiated through these "sub-merchants" for settle- up their customer service games and pursue new vertical
ment through sponsor banks. markets, such as organizations that support crowdfunding
and fundraising initiatives. "With all the hurricane and
Any business with less than $1 million in transactions other relief efforts underway, there are a lot of charitable
per card brand per year can be a sub-merchant under organizations online," Rick Oglesby, President of AZ
Visa, Mastercard, American Express and Discover Payments Group LLC, noted in a recent interview.
rules. The master merchant handles all the heavy lifting
(underwriting, boarding, fraud management, Payment 'Taking the work out of payments'
Card Industry Data Security Standard compliance, etc.)
and typically charges a flat per-transaction fee. Double Diamond, in a recent white paper, provided the
example of RunSignUp, which sells event management
PayPal Inc. is the most obvious and perhaps earliest software to groups that organize benefits like charity races.
example of a payfac. But the market has grown to include Its software provides marketing and enrollment tools,
thousands of firms, largely software companies that website management and reporting, mobile apps and race-
integrate payments acceptance with other business day features, and, by integrating with a payfac, payment
software applications. processing too.

To the casual observer payments may seem like just YouCaring.com is a slightly different twist on that
another business process primed for disruption by theme. It provides a business platform for fundraising
technology giants. But payment acceptance is a much organizations like GoFundMe, Kickstarter, Donors Choose,
harder nut to crack than most technology mavens realize. and FundRazr. One of the payfacs it works with is WePay,
The emergence of payfacs illustrates that even companies a Silicon Valley firm that's being purchased by JPMorgan
with access to the latest and greatest technologies can't Chase & Co. WePay developed a software-as-a-service
find easy workarounds for the systems and processes that application programming interface that independent
support payments in this country. software vendors (like YouCaring.com) can use to integrate
payment acceptance and processing with other business
These systems and processes, managed by banks and services.
their acquiring partners, have evolved and matured for a
century, or more, all the while demonstrating incredible "With WePay, Chase is taking the work out of payments for
resiliency. The emergence of software-enabled payments, both our business clients and the software providers who
rather than threatening the status quo, presents another serve them," Matt Kane, CEO of Chase Merchant Services,
opportunity for banks and merchant acquirers to drive said in an October statement about the acquisition. "We are
greater efficiencies for business customers. powering payments for growth, so businesses can accept
payments instantly, get paid faster and never lose a sale."

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