Aggregator
A payment service provider that enables multiple merchants to process card transactions under a single master merchant account rather than each merchant having their own dedicated merchant account, common with services like Square, Stripe, and PayPal.
Payment aggregators (also called payment facilitators or PayFacs) simplify merchant onboarding by allowing businesses to begin accepting payments within minutes rather than days or weeks required for traditional merchant account approval. The aggregator maintains a master merchant account with acquiring banks and sponsors sub-merchants under this umbrella account. From the card network's perspective, all transactions process under the aggregator's merchant ID, not the individual business's identity.
The aggregator model offers several advantages for merchants including instant or same-day account approval without extensive underwriting, no monthly fees or minimum processing requirements in many cases, simple pricing structures (though often higher effective rates), integrated payment processing with e-commerce platforms, and minimal technical complexity with hosted payment pages and simple API integration. This makes aggregators particularly attractive for small businesses, startups, occasional sellers, and businesses with simple processing needs.
However, the aggregator model carries trade-offs including higher effective processing rates compared to dedicated merchant accounts (often 2.9% + $0.30 per transaction or higher), increased risk of account holds or terminations as aggregators manage risk across all sub-merchants, funds may be held during risk reviews affecting cash flow, limited customization and control over payment processing, and potential for entire account suspension if the aggregator determines a business violates terms. As businesses grow and processing volumes increase, many eventually transition from aggregators to dedicated merchant accounts to reduce processing costs and gain more control over their payment processing. The breakeven point typically occurs between $50,000-$100,000 in annual processing volume, though this varies by business type and negotiated rates.
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3D Secure
An authentication protocol for online card transactions that adds an additional verification layer between the cardholder and issuing bank, shifting fraud liability from merchants to card issuers when properly implemented.
ACH Payment
Automated Clearing House payment is an electronic bank-to-bank payment method that transfers funds directly between bank accounts through the ACH network, typically used for direct deposits, bill payments, and recurring transactions.
Acquirer
A financial institution that processes credit card payments on behalf of merchants, maintains merchant accounts, and facilitates the settlement of funds from card-issuing banks to merchant bank accounts.
Address Verification Service (AVS)
A fraud prevention tool that compares the numeric portions of a billing address provided during a transaction against the address registered with the card-issuing bank, returning match result codes to help merchants assess transaction risk.
Annual Fee
A yearly charge assessed by payment processors for maintaining a merchant account, typically ranging from $50 to $300 or more, billed once per year in addition to other processing fees.