Payment facilitator: accepting payments for other businesses

A reseller introduces a merchant to an acquirer and earns a commission. The merchant signs with the acquirer, the acquirer decides, and the money never touches the reseller. A payment facilitator replaces that: it signs the merchant itself, assigns it a sub-merchant identifier under its own master agreement, and takes the proceeds before passing them on.

Checkout.com describes the model as a provider acting between merchants and processors using another company's acquiring license, with the facilitator handling onboarding, acceptance, risk monitoring and parts of the merchant lifecycle. The distinction that matters legally is simple: a reseller sells, a facilitator holds the relationship and the money.

The commercial argument is speed. The facilitator has already been underwritten by its acquirer and registered with the networks, so onboarding a sub-merchant is an identification and risk check the facilitator runs itself, in hours instead of weeks.

The model has a ceiling. The card networks set a volume threshold per sub-merchant above which that business has to move to its own acquiring agreement, because a merchant of that size is no longer a small account on somebody else's contract. A platform that grows a large customer inside its facilitator program should plan that migration before the threshold forces it, since the sub-merchant's identifier, its history and its dispute record do not transfer automatically.

Holding other people's money is the trigger. A facilitator that receives card proceeds and pays them out to sub-merchants is providing payment services under the Payment Services Supervision Act and needs authorization from BaFin, as an acquirer, as a money remittance business, or as both. The same applies in the United Kingdom, where Ryft states that a facilitator handling third-party funds has to be authorized or registered with the Financial Conduct Authority and calls that requirement not optional.

Two routes avoid an own license. A platform can become the agent of an authorized institution and operate under that institution's permission, which BaFin registers and which makes the principal responsible for the agent's conduct. Or it can build so that the money never reaches it: the acquirer pays each sub-merchant directly, and the platform only instructs. The second route limits the business model and removes the licensing question completely.

In the facilitator model the money arrives from the acquirer as one settlement to the facilitator, which then splits it: the platform's commission stays, the rest goes to the sub-merchants on the agreed schedule. Between arrival and payout the facilitator holds money that belongs to its sub-merchants.

That is what safeguarding rules exist for. Those funds have to be held separately from the facilitator's own money, in a segregated account at a credit institution or covered by an insurance or guarantee, so that an insolvency of the facilitator does not consume them. A platform that treats sub-merchant balances as working capital is in breach, and it is the point supervisors look at first.

A facilitator takes over what an acquirer would otherwise do, and the work does not shrink because onboarding is fast. Each sub-merchant has to be identified, including its beneficial owners, and the business model has to be understood well enough to know whether the transactions make sense. Transactions have to be monitored for fraud and for laundering patterns. Disputes have to be managed across the whole portfolio, and chargeback ratios watched per sub-merchant, since a single bad account can push the facilitator's own ratios past a network threshold.

Card data brings a separate obligation: a facilitator handling it falls into the highest PCI DSS validation level and is audited accordingly. Finance Loop covers that standard in PCI DSS 4.0 and the laundering duties in anti-money laundering in Germany and KYC in Germany.

The facilitator question is one case of a larger one: a software company wants to offer a financial service without becoming a bank. Banking as a service answers it for accounts and cards by renting a licensed institution's permissions, and embedded finance is the same idea applied to lending and insurance.

The decision is identical in all three: take an own license, act as the agent of a licensed institution, or design the flow so the regulated activity stays with the partner. Finance Loop covers the neighbors in banking as a service in Germany and embedded finance in Germany.

Only when it may hold payment accounts, which means with its own authorization or under the permission of the institution whose accounts they are. A virtual IBAN is a reference that routes to an underlying account, and the regulated question is who holds that account and in whose name. If the account belongs to the facilitator and the sub-merchant's money sits in it, the facilitator is holding client funds and safeguarding applies.

The practical risk is in the identification. A virtual IBAN in a sub-merchant's name on an account the facilitator controls can make it unclear who was identified for anti-money laundering purposes, and supervisors have pushed back on exactly that construction. Any such setup needs the principal institution's written position on who owns the account and who performed the identification.

Whether it holds the relationship and the money. A processor handles the technical traffic of a transaction and never becomes a party to the merchant's acceptance contract. A facilitator signs the merchant as a sub-merchant under its own acquiring agreement, receives the settlement and pays out, which makes it liable for the portfolio and subjects it to authorization.

Not automatically, and the difference is the transaction. A facilitator enables a payment between one seller and one buyer, each sub-merchant selling in its own name. A marketplace puts many sellers in one storefront and often collects for all of them, which can bring it under a separate exemption or under full authorization depending on how it collects and pays out. The question to answer first is whether the buyer is discharged of its debt when it pays the platform, because that is what makes the platform a payment service provider.