The payments industry is filled with confusing terms, many of which are used interchangeably. This confusion is compounded by the fact that the industry has changed rapidly in recent years, giving rise to new terms while others fall away.
One important trend is that the industry has shifted away from requiring anyone who wanted to accept digital payments to open their own merchant account directly with an acquirer, which effectively had left payments out of reach for many small and micro merchants.
To better serve these smaller merchants, models have emerged to bring the payments system closer to them. This includes businesses through which one provider serves multiple submerchants, effectively aggregating the merchants along with their transactions and connecting them to the payments system. One such model, of course, is the payment facilitator.
So, what, then, is a payment aggregator?
On occasion, payment aggregators are talked about as though they are a separate payment acceptance model serving small businesses – similar to PFs, marketplaces, or even ISOs. But these models are all defined and governed by rules published by at least one of the card networks. Neither Mastercard nor Visa defines or outlines requirements for a payment aggregator.
As the industry has evolved and absorbed new business types, the terminology has evolved as well. Now, if the term payment aggregation is used, it is more often a general term for the type of payments provider that includes payment facilitators as well as other models.
An example is this article written by attorneys with the payments practice at law firm Venable LLP. The authors say that entities that submit payment transactions on behalf of other merchants are “engaged in payments aggregation and should comply with applicable requirements as a payment facilitator or other approved aggregator type.”
In this usage, the meaning is clear that, while a payment aggregator could be a payment facilitator, it could also be a different type of business, and either way, specific requirements will apply.
If the term is used without this type of context, it’s important to clarify what is meant. The card brands have provided definition around acceptable business models and given each a specific term that will provide the necessary meaning.