Payment Facilitator vs. Marketplace

 In Payfac

What is a Payment Facilitator vs. Marketplace?

When it comes to offering payments through your software, it’s important to choose the right partnership model for your business.  Two models that we hear discussed more and more are payment facilitation and marketplace.  While these two partnership types are becoming more and more popular, there is some confusion on what the differences are. The two have some shared features, but they are ultimately very different models. Read on to learn more about how payment facilitator vs. marketplace businesses differ, and which might be right for you.

Payment Facilitator

A payment facilitator allows sub-merchants under one master merchant to process payments easily, with less hassle. Payment facilitation requires the master merchant (usually the software provider) to take legal and financial responsibility for the transaction that occur under the primary merchant.  Merchants under the payment facilitator model can be both brick and mortar and e-commerce and must have annual Visa sales that do not exceed $100,000 and annual MasterCard sales must not exceed $1 million dollars.


A marketplace allows customers to buy from a variety of sellers and retailers at once. A platform that includes multiple sellers isn’t inherently a marketplace. Instead, a marketplace has to allow purchase from more than one different seller in a single transaction, like you would be able to in a real, physical marketplace. Amazon is a commonly used example of an online marketplace, since you can fill up your cart with items from several sellers and buy them all with only one transaction.  Visa also has their own set of volume requirements for marketplaces.  For Visa, no retailer on the marketplace may exceed $10 million in annual volume or exceed 10% of the marketplace’s annual volume.  For MasterCard,

Differences Between Payment Facilitator vs. Marketplace

These two business types can seem similar at first glance, but there are a few key differences that separate them. With a marketplace, sellers do not need a merchant account. All transactions are processed using one single merchant account, owned by the platform itself.

Merchant accounts need to be underwritten, and are accepted depending on the amount of risk. A marketplace lets retailers avoid this process when onboarding, since only the platform itself needs to be underwritten. With a payment facilitator, underwriting of all sub-merchants is done by the entity acting as the facilitator.

Each model has its benefits depending on if you are a software provider looking to provide simple onboarding and payments to your customers or if you are an ecommerce site looking to offer sellers a simple way to sell their services or goods.

To learn more about payment partnership types and what your best options are, contact us today, Paragon is here to guide you through all partnership models.

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