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Differences: Payment Facilitator, Payment Processor and Payment Aggregator
04October

Differences: Payment Facilitator, Payment Processor and Payment Aggregator

Written by Shannon LeDuff, in Category Latest Articles

Within the payment processing industry, you will find there are numerous terms and definitions for products and services. In many cases these terms are used interchangeably even though they actually refer to different types of services. In this blog we will discuss the key differences between a payment facilitator, payment processor and payment aggregator and how they affect you. 

Payment Facilitator vs. Payment Processor

The biggest difference between a payment facilitator and payment processor are scale. A full scale payment processor creates a merchant account for a business and forms a formal relationship between that business and the bank that handles payments. 

By contrast, a Payment Faciliatator or Payfac has one account for themselves, but allows smaller businesses to work through their merchant account. This brings the cost of payment processing down to an affordable level for small businesses through a partnership. Perhaps the most striking detail is that Payfacs tend to be software based such as ISVs, SaaS, etc. These digital platforms can easily integrate Payment Faciliatator services into their business model as long as they meet all compliance regulations. 

Payment Facilitator vs. Payment Aggregator

When it comes to comparing Payfacs and Payment Aggregators, the difference is how the accounts are funded. With Payfacs, funding is offered internally and is usually offered based on the volume of expected transactions by the small business. While Payfacs and Payment Aggregators both use the shared-account model to offer more affordable services to small businesses, payment aggregators are backed up by a larger Payment Processor.With PayFacs, funding is offered internally and is usually offered based on the volume of expected transactions by the small business. While PayFacs and Payment Aggregators both use the shared-account model to offer more affordable services to small businesses, payment aggregators are backed up by a larger Payment Processor.

Payment aggregators offer services to low volume businesses by sharing resources across multiple small businesses knowing that all of these businesses will be somewhat slower to earn their money back. Since Payment Aggregators are an extension of payment processors, they rely on the same hardware-based solutions as the processors themselves, and are not as fluid as Payfacs with their software solutions. 

Essentially, all three of these models are used for managing payments. However, each one serves its own niche in the marketplace. Payment processors are the big dogs in the game and provide merchants with a dedicated account and service agreement that is unique to them.

They typically catered to the larger customers who require a high level of service and attention. Both Payment Aggregators and Payment facilitators were designed to work with smaller companies who do not need as much attention. They differ only in the way they fund the accounts and how they are marketed.