When you provide a smooth payment experience on your platform that helps customers operate globally, you offer great added value. But beware: If you choose to go it alone and become a Payments Facilitator (PayFac), you become accountable for all the relevant rules and regulations, including payment facilitator compliance.
The benefits of offering integrated payments can be powerful:
- Controlling a better payment experience for your customers’ shoppers
- Modern payment features to help your customers increase sales and reduce costs
- Instant, seamless onboarding for your customers to start selling
- Monetization of payments for your platform
- Simplified global payment compliance for your customers
It’s this last one that is very complex. It is easy to design a payment solution that is inadvertently out of compliance. So the choice of whether to become a PayFac (and become responsible for payment facilitator compliance) or partner with an expert is an important one.
Understanding Payment Facilitator Compliance
To fully reap the benefits of integrated payments, you need to either build a compliant solution or integrate with a payment provider that already complies with the laws and regulations of every country in which your customers operate. And if you choose to build it yourself and become a PayFac platform, you’ll also need to consider the added risk of non-compliance. It’s important to protect yourself and your customers
— and that involves a number of considerations.
Merchant of Record
The first thing to consider is whether you or your customer should be the merchant of record (MOR). The MOR is the party authorized and liable to process card payments – it’s the name that will appear on shoppers’ card statements. However, payment processing is only a small part of what it means to be the MOR.
If you are acting as the MOR on behalf of your customers, shoppers need to understand that you are responsible for everything related to the product or service they purchased, including:
- Financial liability
- Payment compliance & risk
- Fraud resolution
- Tax calculations
- Customer service
While it’s feasible for your software platform to fulfill this service, it’s a significant undertaking and your costs can add up quickly.
Ensuring Your Customers Stay Compliant
When it comes to offering payments, you need to deliver a solution that keeps your customers compliant. Numerous rules and regulations govern payment acceptance for merchants, and they generally fall into these six categories:
- Payment network policies, such as Visa’s rules around free trials
- Data privacy, such as the GDPR in the EU and the UK
- Consumer security, like PSD2
- Payment Card Industry Data Security Standards, or PCI, which regulates control of credit card data
- Tax collection — for instance, merchants need to comply with the Wayfair ruling
- IT security
Taking all these concerns into account is challenging enough for a payments expert, and more so for an ISV looking to become one. Even if you’re an ISV operating within a single state or country, payment facilitator compliance can be daunting. For ISVs looking to serve their customers and shoppers in multiple countries, the burden is even greater. Building a payment solution that addresses the right payfac requirements and geographies requires investment in a dedicated, sophisticated payment compliance team.
The Benefits of Partnering with the Right Payments Expert
The most straightforward way to achieve all the benefits of integrating payments into your platform, while addressing compliance requirements, is to partner with a payments expert, rather than attempting to become a PayFac yourself.
It is important to choose a partner that will help you design a solution that will appeal to your customers and scale with you as you expand your business. Even if you don’t have a global merchant base now, you may in the future — or your current customers may want to expand their sales into new regions. For payments to be a true value-add, your solution should be feature-rich, automatically compliant and built to scale.
Payment facilitator compliance is a major hurdle for an ISV looking to integrate payments into its platform, and it is easy to get in over your head. The best solution for your platform’s long-term success is to work with an expert that can manage compliance for you.