How can an e-commerce website become a third-party payment processor or aggregator, and which parties and requirements are involved?
Payments
Asked by Question Bot12/Dec/20151 answer
1 Answer
F
Faisal Khan
Answered 12/Dec/2015
General Application
In order to get setup as a Payment Facilitator it is similar to applying for a regular Internet Merchant Account, except with the significant differences being in the underwriting process (which is inherently quite complex) and to have a minimum infrastructure to be in place. You need to be able to understand the clearly defined rules and responsibility by the card schemes in being an aggregator merchant acquirer (i.e. a licensed PSP or better known as a PF - Payments Facilitator). There are fees for membership associated with the card schemes like VISA and/or MasterCard that is paid directly.
Typical Timeframe for Filing & Approval
Review and approval time-frame can vary depending on the application, the supporting documents and the business plan. Usually 6-8 weeks are taken as a very minimum.
Underwriting
When banks underwrite they are thus guaranteeing payment in case of loss, theft or misuse of the card. Aggregate underwriting as required for payment facilitators is more involved, revolves around many factors and is subject to deeper scrutiny. In many cases, an acquiring bank may require the risk to be collateralized by 100% cash deposits of the processing volume. Although solvency and good credit are essential, strong financials alone are not a good enough reason to satisfy the bank that your business poses no risk to them in underwriting. You could be subject to deposits if you are not able to very strongly demonstrate your experience in the credit card industry, with special emphasis in understanding risk, fraud mitigation, further underwriting for the merchants you would be doing business with, etc.
As part of the business proposal that you submit, if you are able to demonstrate that you have partnered with a company like WePay to provide you a white-labeled payments processing platform, this will count positively towards your review. It shows that you have the core elements taken care of: risk, fraud, control, etc.
Platform Infrastructure
System that is able to manage millions of transactions, customers and Dollar value. Exacting payments between each other, maintain error-free account balances, managing risk and having fraud controls for all the sub-merchants that you as a PSP would like to acquire.
There are many challenges and hurdles you have to be aware of that you need to demonstrate:
In order to get setup as a Payment Facilitator it is similar to applying for a regular Internet Merchant Account, except with the significant differences being in the underwriting process (which is inherently quite complex) and to have a minimum infrastructure to be in place. You need to be able to understand the clearly defined rules and responsibility by the card schemes in being an aggregator merchant acquirer (i.e. a licensed PSP or better known as a PF - Payments Facilitator). There are fees for membership associated with the card schemes like VISA and/or MasterCard that is paid directly.
Typical Timeframe for Filing & Approval
Review and approval time-frame can vary depending on the application, the supporting documents and the business plan. Usually 6-8 weeks are taken as a very minimum.
Underwriting
When banks underwrite they are thus guaranteeing payment in case of loss, theft or misuse of the card. Aggregate underwriting as required for payment facilitators is more involved, revolves around many factors and is subject to deeper scrutiny. In many cases, an acquiring bank may require the risk to be collateralized by 100% cash deposits of the processing volume. Although solvency and good credit are essential, strong financials alone are not a good enough reason to satisfy the bank that your business poses no risk to them in underwriting. You could be subject to deposits if you are not able to very strongly demonstrate your experience in the credit card industry, with special emphasis in understanding risk, fraud mitigation, further underwriting for the merchants you would be doing business with, etc.
As part of the business proposal that you submit, if you are able to demonstrate that you have partnered with a company like WePay to provide you a white-labeled payments processing platform, this will count positively towards your review. It shows that you have the core elements taken care of: risk, fraud, control, etc.
Platform Infrastructure
System that is able to manage millions of transactions, customers and Dollar value. Exacting payments between each other, maintain error-free account balances, managing risk and having fraud controls for all the sub-merchants that you as a PSP would like to acquire.
There are many challenges and hurdles you have to be aware of that you need to demonstrate:
- Credit risk policies and procedures
- AML/BSA policies and procedures
- PCI/DSS
- Audit & Continual Compliance
- Commercial & Contract negotiation
- Integration & Certification
- Understanding Operating Regulations of Card Schemes
- Passing things like MasterCard FMP Review, Amex PSP Review, etc.
- Accounting & Reconciliation
- Risk (Fraud Loss, Chargeback processing & collections, etc)
- Money Transmitter Licensing (if in the US or even abroad).
- Banking
- Localization implementation.