Payment facilitators (payfacs) play a hugely significant role, offering secure platforms which connect small and micro-sized merchants with the world of digital payments.
Having recognised the significance of payfacs, particularly across Central and Eastern Europe, the Middle East and Africa (CEMEA), digital payment leader Visa has launched its new Payfacs Certification programme.
Payfacs act as acquirer’s agents and provide payment services to merchants. Payfacs are particularly useful for acquirers working with merchants who have specialised needs; while they also help banks and financial institutions (FIs) to increase card volumes and reach merchants who previously wouldn’t have had access to an issuer’s payment services.
Traditionally, payfacs have worked directly with acquirers and merchants, with no engagement with Visa. Now, Visa wants to change that – starting with its newest programme.
Via the new certification programme, Visa aims to help payfacs enhance their capabilities, expand their reach, and provide better services to customers across the region.
As the payment leader ramps up its level of involvement with payfacs, it hopes to enhance consumer protection, as well as ecosystem risk management.
To find out more about the Payfacs Certification programme, The Fintech Times asked Simon Dahlman, head of seller value-added services and partnerships CEMEA at Visa, all about the significance of its launch.
How has the role of payfacs evolved?
Over the last few years, payfacs have been stepping up their game to respond to the changing needs of businesses and consumers in an increasingly digital economy. Their ability to simplify payment processing and provide a range of services has made them an integral part of the payment ecosystem.
Both globally, and looking at the CEMEA region, payfacs are scaling at an astonishing pace, bridging the gap between cash and digital transactions.
They are much more than intermediaries in the payment process. They serve as agents of financial institutions, offering small businesses scalable and secure platforms to swiftly adopt digital payments. Such platforms not only minimise the costs of payment acceptance but also improve convenience for both businesses and consumers.
Payfacs are also simplifying the payment process, unifying various payment methods and currencies into one cohesive, user-friendly interface. It’s a lifeline for small businesses, allowing them to rapidly expand and adapt in a market characterised by evolving payment preferences.
Why is now the right time to launch the Payfacs Certification program?
With over 60 million untapped merchants and around 70 per cent of transactions carried out using cash in CEMEA, there is a significant opportunity for payfacs within the region. At Visa, we recognise the increasingly critical role they play in driving financial inclusion, bringing small businesses into the digital economy and, ultimately, fostering economic growth.
Through the Payfacs Certification programme, we can now directly equip them with the resources they need at every step of the journey, providing guidance and a tailored package of support to help their ambition. By adjusting our approach to engaging with payfacs, we also want to improve ecosystem risk management and consumer protection through greater oversight and direct engagement.
Since the launch of the programme, we have received a number of applications and queries which underscores the existing need for support and resources amongst payfacs.
How will the programme impact acquirers?
The programme will benefit acquirers by reducing the cost of onboarding and supporting long-tail merchants. Payfacs enable a more cost-effective and streamlined process for acquirers, resulting in increased efficiency and improved profitability within the acquiring industry.
“Both globally, and looking at the CEMEA region, payfacs are scaling at an astonishing pace, bridging the gap between cash and digital transactions”
Payfacs are particularly useful for acquirers working with merchants with specialised needs, such as farmer’s markets – merchants who traditionally would have only accepted cash.
What does Visa look for before certifying a payment facilitator?
Visa has a comprehensive set of risk and anti-money laundering standards that both acquirers and payfacs must adhere to.
For every application, the Visa certification team conducts an extensive review to ensure that the payfac meets the minimum requirements including merchant underwriting procedures, AML policies, efficient transaction monitoring systems and proactive fraud management systems.
If a payfac satisfies these minimum requirements, they are granted the Visa Certified Status. In addition to that, the certification report provides a detailed assessment of the payfac adherence to risk best practices and their overall risk and AML health, offering guidance on necessary actions to enhance their systems.
How do you expect the Payfacs Certification Programme to impact SMBs across CEMEA?
First, let’s look at how the growth and maturity of payfacs can impact SMBs:
Payfacs can make accepting payments easier and more efficient for SMBs. They simplify the process of setting up a merchant account, which can be particularly beneficial for small businesses that may not have the resources to handle this on their own.
Secondly, payfacs often offer a range of additional services like analytics, fraud detection, and customer support. These can provide valuable insights and security measures for SMBs.
Lastly, as payfacs continue to grow and mature, they’re likely to develop even more advanced and tailored solutions. This means SMBs can expect to see more customised offerings that cater specifically to their needs, helping them to manage their finances more effectively and potentially grow their businesses.
So, in a nutshell, the certification will help payfacs gain a stronger business foundation which will in turn bolster SMBs across the region.
What will be the key drivers away from the use of cash and toward the digital economy across CEMEA?
Small businesses are increasingly recognising the numerous advantages of accepting digital payments.
One key driver is efficiency; digital payments eliminate the need to count cash, prepare bank deposits, and physically go to the bank, thereby saving significant time and resources.
Safety is another major factor as digital payments reduce the risk of theft or loss associated with handling cash. The money is directly transferred to the business’s bank account, and its movement can be easily tracked and managed.
“the certification will help payfacs gain a stronger business foundation which will in turn bolster SMBs across the region”
Moreover, customer expectations are shifting towards digital payments. As more consumers prefer this method, businesses that do not adapt risk losing customers to competitors that do. Additionally, digital payments can expedite transactions, resulting in shorter checkout lines and more satisfied customers.
Lastly, the comprehensive suite of products and solutions provided by companies like Visa, including fraud management tools, gateway capabilities, ecommerce-in-a-box solutions, low-cost acceptance technologies, and authorisation optimisation, further enhance the security and efficiency of digital transactions. These factors collectively make a compelling case for small businesses to start accepting digital payments.
What is the biggest problem that the certification programme was introduced to solve?
Looking at CEMEA specifically, it is a region of tremendous potential and home to a staggering two billion people. Within this vibrant tapestry of diverse cultures and economies lies a $3trillion opportunity – an astonishing 75 per cent of spending in the region is still done in cash.
Why? The answers lie in the region’s demographics and digital readiness.
The region boasts a young, tech-savvy population, ready to adopt the benefits of digital conveniences. Notably, Africa, especially sub-Saharan Africa, is home to a youthful majority, with 70 per cent of its population under 30. Similarly, in the Middle East and North Africa, individuals between 15 and 24 years of age constitute nearly a fifth of the population.
This burgeoning demographic is poised to redefine commerce in the coming years. Yet, despite their keenness for digital solutions, there remains a trust deficit in the digital payment sphere. This is the gap that payfacs, are primed to address.
Which regions within CEMEA represent the biggest opportunity?
In the Sub-Saharan Africa region, the penetration of Payfacs started growing earlier compared to other regions with South Africa, Nigeria, and Kenya, in particular, having the highest number of payfacs.
In the CISSEE region, we’re seeing tremendous growth in Payfacs recently, particularly in Kazakhstan and Ukraine.
The MENA region is also showing significant growth, with Egypt, Pakistan, and Kuwait emerging as highly competitive markets for Payfacs.
What can you tell us about the benefits available for certified Payfacs?
Payfacs stand to gain significant advantages through the Visa certification process, with various certification tiers reflecting their standards and reliability. Successful certification grants them the title of ‘Visa Certified Payment Facilitator’, and those with exceptionally high standards can apply for two extended tiers: ‘Visa Ready Payment Facilitator’ and ‘Visa Trusted Partner’.
These optional premium statuses offer Payfacs a range of benefits, including extended Visa support and special offers on Visa products and services.
“Within this vibrant tapestry of diverse cultures and economies lies a $3trillion opportunity – an astonishing 75 per cent of spending in the region is still done in cash”
Even the basic certification tier allows Payfacs to ensure compliance with local regulations and meet Visa’s requirements on risk management, anti-money laundering, and other crucial areas. Premium-tier certification opens the door to dedicated technical support, facilitating the scaling process and potential progression to becoming acquirers through Visa’s Acceptance Fast Track programme.
Certified Payfacs, regardless of their tier, gain access to a wealth of resources, consultancy, acquiring development programmes, participation in Visa events, discounts on Visa products and managed services, educational on-demand training, and live educational sessions on topics such as risk and anti-money laundering.
Furthermore, Visa is committed to supporting payfacs by providing remediation plans for those at risk of certification failure. These plans come with recommendations on how to enhance controls, infrastructure, policies, and processes as payfacs continue to scale and uphold Visa’s high standards. This holistic approach ensures that payfacs can thrive while maintaining the integrity and security of the payments ecosystem.