Payment Aggregators

Apr 18, 2022

What Is A Payment Aggregator?

If you’re a small business owner looking for a provider that helps merchants accept credit cards, debit cards, and other methods of electronic payment from customers (without charging high transaction fees), the process can be daunting. From the merchant’s side, there are thousands of options when it comes to choosing a reputable credit card processing company.

Some businesses have a preferred provider for processing credit and debit card transactions, but many new and growing businesses don’t. Most businesses eventually end up searching for payment service providers online, only to find they all claim to have the best solution for merchants to accept credit card payments.

Since these companies walk and talk alike, it’s difficult to find data to confirm which provider offers the best benefits. Plus, since most merchants aren’t knowledgeable about the different types of providers in the payment processing industry, it can be a challenge to find providers that offer the right solution set. 

Consequently, instead of finding a partner that wants to simplify your processing and help you easily serve customers, you could end up with one of the providers that promise to help you get started taking credit card payments immediately but ends up being hard to work with later.

These companies often use a payment aggregation model, which also means they aren’t invested in your company’s need to make bank transfers happen, let alone helping you avoid risks and higher fees.

Therefore, it’s often best to avoid a payment aggregator partnership, and instead, go with a full-service payment service provider that works to make your experience easy and supports your business needs. This one step can also greatly reduce your chances of having unexpected problems down the road.

Are Payment Aggregators Risky For My Business? 

How Payment Aggregation Works

You might be asking yourself, “What is a payment aggregator?”

If so, you’re not alone. This term is used regularly in the credit card processing industry, but most merchants aren’t familiar with payment terms like this one.

In short, payment aggregation and payment aggregators (also known as merchant aggregator) refers to the business model third-party payment processors use to provide merchants with credit card processing services.

Is An Aggregator A Payment Services Provider?

These third-party companies are commonly referred to as payment aggregators (or sometimes merchant aggregators) because they use an assigned master merchant services account to process transactions for merchant businesses.

Often, these sub-merchants aren’t even aware their transactions are being processed through the aggregator’s master account, instead of an account set up to directly support their business.

Because a payment aggregator doesn’t technically assign accounts, they aren’t considered a true payment service provider. Merchants also have no influence over the setup and management of their processing privileges, including the costs paid to process payments. 

The aggregation model does offer benefits for merchants who are just getting started, but in most cases, working with a payment aggregator also comes with big disadvantages. In fact, these disadvantages are significant enough to put your business at risk of losing processing privileges, even when you first start processing payments.

This is because payment aggregators are notorious for blocking access to money that comes from customer transactions before a bank transfer happens. An aggregator could also pause access to your processing account without warning with any type of inconsistency and interrupt your company’s ability to continue accepting credit card payments.

And the risk of having this happen increases as your transaction volume grows, so choosing a payment aggregator and working as a sub-merchant isn’t a good option for a business that plans to increase sales.

Are There Benefits To Using A Payment Aggregator?

Since payment aggregators use a master merchant account for processing sub-merchant transactions, they can get you set up to accept credit card payments immediately without an application review or underwriting process.

You’ll be allowed to process credit card payments as long as your transactions, business behaviors, and customer activity cause no risk to the aggregator, but you won’t have a dedicated merchant processing account or the services, solutions, or support you might need to maximize cash flow.

This is because the payment aggregator doesn’t review details about your business model during the application process, so they won’t know if a special solution is needed to make processing credit card payments easier for you. They also won’t be aware of risks that could interrupt your merchant services privileges later.

Since most businesses aren’t aware of these risk factors either, the idea of working with a payment provider that offers instant merchant account approval is tempting.

However, payment aggregators are known for freezing merchant accounts and holding funds without warning when they “suspect” an account problem, to lessen the risk on their master account. It could only take one customer dispute (also called a chargeback) for a payment aggregator to follow with account holds on a merchant’s credit card bank deposits.

If your business deals in e-commerce, it has even more risk, because e-commerce products are typically distributed after an online payment and no in-person customer acknowledgment occurs, which creates a higher chance of the purchase being disputed.

Therefore, if you’re accepting online payments, it’s especially risky to use a payment aggregator and this risk increases as your business processes more payment volume. It’s only a matter of time before a chargeback happens, then your aggregator account is flagged, and your money gets held.

Since all businesses are subject to disputes from customers, this concern is valid for any sub merchant on a master payment aggregator processing account. So, it’s important for every merchant to know upfront that instant credit card processing approval isn’t worth the risk of losing sales or access to bank funds from payment transactions.

Fortunately, you can set up a merchant account with a full-service payment processor that does the legwork upfront to set up your payment processing and transaction data account to enable quick and easy payment processing at the least amount of cost.

How Payment Aggregators Handle Processing Fees

Another unique difference between payment aggregation and using an aggregator, versus a full-service payment provider, is how they handle the fee you pay for processing.

Since sub-merchant transactions are channeled through a master account, the transaction fee is the same. This is true, regardless of the merchant, or the transaction fee type, meaning most sub-merchants end up paying higher fees for processing sales transactions, even if they qualify for lower fees. 

While this might not be important to merchants when they first start processing, data shows a growing merchant will have transactions that qualify for lower processing fees, which will lower their processing cost. 

This is another reason to work with a full-service merchant account provider. You want to have full control over the cost of your processing fees and funds while your business grows.

A full-service processor will help you get started with a merchant account that has the right transaction solutions and payment methods (i.e. online, mobile, in-person, etc.) to ensure you’ll only pay the necessary processing fees to maximize your money.

And, you’ll have a dedicated processor who monitors your transaction funds and merchant services activity to identify ways to minimize higher fees and increase your profits.

How Payment Aggregator Relationships Work

Since sub-merchants aren’t assigned an actual account with a payment aggregator, there’s no motivation for a business relationship. Moreover, third-party providers using payment aggregation don’t spend time upfront getting to know your business and won’t be concerned about freezing your account or holding funds.

Additionally, with no dedicated payments support team to call, advocating for your business if something like this happens is nearly impossible.

In short, a payment aggregator won’t be invested in getting your bank funding back online quickly or helping you get back on track to accept credit card payments.

Alternatively, a full-service merchant service provider offers committed customer support should anything unexpected happen.

Avoid The Pitfalls Of Working With Payment Aggregators

Build A Long-Standing Partnership

It’s important for every merchant to understand, that any merchant account company could legally hold your money and freeze or close your merchant account without notice and without cause.

While this sounds ominous, it doesn’t have to be. You can decrease your odds of an account shutdown simply by taking a few key steps:

  • Instead of the payment aggregators, choose a full-service merchant service provider that reviews your business model and sales process during the application process.
  • Work closely with your provider to help them identify the best payment strategies and solutions for your business to accept credit cards.
  • Follow your provider’s guidance on steps you should take to protect your merchant and payment gateway accounts over time.

Remember, processing credit cards means you AND your provider are putting trust in your customers to make good on purchases, so your risk is also your provider’s risk. Especially, in the case of e-commerce.

Plus, customers who buy your product on a credit or debit card have six months from product delivery to dispute their charge. Therefore, your merchant account provider is responsible for those charges if your business closes during that period.

This is one reason payment aggregators have little tolerance for one chargeback and don’t care about building relationships with sub-merchants.

On the other hand, a full-service provider that supports the online, mobile, and in-person payment acceptance methods an aggregator won’t, can put your business in a better position to manage risk.

Hire An Experienced Merchant Account Provider

If you’re processing more than $30,000 a month with a payment aggregator, a sound payment strategy and relationship is critical.

Remember, the only way payment aggregators can protect themselves is to hold your money or close your account before bank transfers happen. This can be devastating for a business that needs money in the bank to cover expenses.

By working with a provider that reviews your business model, sales process, and operation to help you avoid risk, you’ll take precautions to properly set your business up for accepting payments with a lower chance of running into issues later.

More Than One Merchant Account

Depending on your transaction volume, it may also be important to distribute your transactions over more than one processing account.

Not all processors can do this, but multiple merchant accounts are one key benefit of working with Easy Pay Direct. Our payment gateway automatically distributes transactions through multiple accounts, reducing your chances of unexpected account holds and closures.

This gives businesses a way to continue processing credit and debit cards, even if something unforeseen impacts one account.  It’s also handy if another processing company decides they no longer want to work in your industry, which is a common problem.

We’re Here To Make Processing Payments Easy

If you want to do business with a payment service provider that will understand your business and make accepting credit and debit cards as easy as it can be, Easy Pay Direct is here to help!

It doesn’t matter if you’re new to processing payments or selling $30,000 a month, Easy Pay Direct will help you set up the right payment strategies to protect your cash flow and process e-commerce payments online.

And, if your business is processing over $250,000 a year, you’ll want the assurance of working with the right processor and banking partners. Let our team of Certified Payment Specialists support you by assessing your business.

Easy Pay Direct specializes in assessing risk for all merchant types, offering quick approval and transaction technology to help reduce risk. We have full-service merchant solutions and a proprietary payment gateway that connects to over 250 pre-integrated shopping cart solutions to make e-commerce selling easy for any online merchant.

Learn more about Easy Pay Direct or apply for your merchant account today by calling 800.805.4949, or visiting us online.

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