Visa Rule Change Signals Support for PF Model

As the payment facilitator model evolves, the card networks are increasingly embracing it as a driver of merchant acceptance globally.

A recent rule change from Visa further affirms that PFs are in a solid position.

Visa allows payment facilitators to undertake two critical activities with their sponsored merchants –  sign merchant agreements with them and settle on their behalf.

The network requires acquiring banks to enter into direct relationships with the sponsored merchants once their annual transaction volume reaches a certain threshold. Visa’s rules allow the payment facilitator to continue to receive settlement on their submerchants’ behalf beyond that limit.

According to a Visa bulletin, Visa is increasing this threshold from USD 100,000 to 1,000,000 in the U.S. and Canada.

With the revised rules, Visa also gives sponsored merchants who reach the threshold after the effective date two years to complete the agreement with the bank.

This change is an acknowledgement by Visa that the payment facilitator model is not just about small and micro merchants, said Todd Ablowitz, publisher of and president of Double Diamond Group, which provides consulting services to companies considering the payment facilitator model.

“There are submerchants of our PF customers that process hundreds of millions of dollars,” Ablowitz said.

It is also a sign of Visa’s support for the model, which is important to the growth of merchant acceptance.

“It’s an unequivocal signal of where Visa sees this going,” he said.

Ablowitz described the change as an adjustment of controls based on the continued increase in transparency and understanding of the PF model.

“This rule change makes sure that, at a certain size, the bank takes a more direct role in overseeing what the merchant is doing,” he said.

Aside from the level of control the bank agreement provides, the payment facilitator remains in the frontline position, assuming responsibility for the submerchant’s behavior.

Mastercard raised its own volume threshold from $100,000 to $1,000,000 in 2014. Mastercard’s rules are slightly different from Visa’s, also requiring funding to go straight from the bank to the submerchant rather than to the payment facilitator when the submerchant reaches the annual volume threshold. This requirement created more operational changes for the payment facilitator than the merchant agreement requirement, Ablowitz said. Because this requirement is only for submerchants who process more than $1,000,000 per calendar year of Mastercard transactions, it is not particularly frequent for most payment facilitators.

Visa’s rule change was effective August 31, the bulletin said. The company did not respond to a request for comment by press time.