Payment Facilitator Sponsors: How Do They Fit into The Ecosystem?

When companies begin the process of becoming a payment facilitator, one of the most important relationships they must form is that with a “sponsor”. The sponsor is the entity that enables a payment facilitator’s entry into the payments system. This relationship ultimately allows them to get registered as a payment facilitator, begin onboarding new customers, and allows those customers to begin accepting payments.

A sponsor may be a bank themselves or may be a bank authorized entity that, in either case, will oversee payment facilitators. Since payment facilitators are allowed a great deal of control and autonomy within the payments ecosystem, they first need to form a relationship with these sponsoring entities who are responsible for ensuring the payment facilitator is operating according to applicable regulatory and card brand rules.

What Is the Relationship Between Payment Facilitator and Sponsor?

For a payment facilitator to get up and running, they must first be registered with Mastercard and Visa. This registration can only take place if the payment facilitator has already formed a relationship with and been approved by, a sponsor. Prior to the payment facilitator being registered with Visa and Mastercard, the sponsor is responsible for underwriting the prospective payment facilitator to ensure it has the policies, procedures, and technology necessary to operate effectively as a payment facilitator. Additionally, once the payment facilitator has gone live, the sponsor is responsible for the ongoing monitoring of its operations, ensuring that the payment facilitator remains compliant with all card brand and other applicable requirements.

If a payment facilitator happens to go out of business or cannot offset any losses, fees, fines, or other liabilities generated by either themselves or their customers, the responsibility then falls to the sponsor. This is one reason why it is important for sponsors to monitor their payment facilitators and their financial stability on an ongoing basis. Sponsors must conduct periodic reviews of the payment facilitator’s business and operations, diving into their underwriting and risk monitoring procedures as well as their current financials so that the sponsor can be confident that the payment facilitator is doing its job of protecting the payments ecosystem.

Payment Facilitator Considerations for Selecting A Sponsor

Although not all banking entities choose to sponsor payment facilitators, there are still many options for prospective payment facilitators to choose from. Just as a sponsor needs to know the ins and outs of the payment facilitators they are supporting, a prospective payment facilitator should be interviewing and assessing the capabilities of their different sponsor options.

Given that a payment facilitator will need a relationship with a sponsoring bank, as well as, a payment processor, it is important for the payment facilitator to know which processors the prospective sponsoring banks are integrated to. The chosen payment processor and sponsoring bank must have an integration between each other for a payment facilitator to use them in conjunction with each other. Therefore, it is very common for these two entities to come bundled together as many banks and processors have deep existing relationships.

Beyond technology and integration options when selecting a sponsor, a payment facilitator needs to consider how well the sponsor fits within their own business model and overall goals. Some sponsors are more conservative than others, some are more experienced, some have unique value-add capabilities and so on. Prospective payment facilitators should be evaluating their sponsors based on the criteria that is pertinent to their business and most conducive to their future growth.

Payment facilitators and their sponsors hope to develop deep and long-lasting partnerships, proving to be a mutually beneficial relationship that allows revenues that neither might be able to reach on their own. For prospective payment facilitators, conducting a thorough analysis of the various sponsors will allow you to make the best decision for the future growth of your business. If you would like to learn more about the payment facilitator model or need help with the sponsor selection process contact Infinicept’s team of payment facilitator experts.