When does it make sense to become a payment facilitator instead of renegotiating with my existing processor?

I would first work out how much additional income you can realistically keep, and what you must take on to earn it.

It is easy to look at your processor’s share and assume that removing the intermediary turns that entire amount into profit. Some of it pays for work you may currently barely see: merchant onboarding, risk management, fraud controls, settlement, support and compliance.

Be precise about the role you are considering. An ISO sales relationship and a payment-facilitator arrangement are different. Under Visa’s model, a payment facilitator contracts with an acquirer and sponsored merchants, monitors merchant activity and receives and directs settlement proceeds. The acquirer retains oversight responsibilities. Visa’s payment-facilitator model.

Compare three possibilities: improve the existing commercial agreement, move to another provider offering better terms, or build the capability to take on the payment-facilitator role. Include staffing, systems, insurance or reserves where required, fraud exposure and the cost of moving merchants.

Growth matters, but there is no single volume number that makes the decision for you. An established processor has economies of scale that you may not have initially. Also consider how much customer control and product flexibility you gain.

Before approaching alternatives, review your existing agreement for exclusivity and other restrictions. Then obtain real proposals. I would pursue the more involved model when the additional margin, control and growth justify its operating burden. Otherwise, negotiating a better arrangement can be the more sensible business decision.