MAG (Merchant Aggregator)

A merchant aggregator, or MAG, takes card payments for a group of smaller sellers. It does so under its own master merchant deal. It does not set up a separate card contract for each seller. Those sellers are usually called sub-merchants or sponsored merchants. They can start taking cards fast, because they join a deal that is already in place. They are not vetted on their own. In return, the aggregator signs them up, keeps an eye on what they sell, and handles the money that flows out to them.

The model grew out of a plain problem. Card acceptance was built around firms big enough to be worth vetting one by one. That left a long tail of small sellers, market traders and one-person shops with no easy way in. The card networks chose to write rules for the practice rather than fight it. Visa and Mastercard both publish those rules today. They matter, because an aggregator that treats its sellers as invisible tends to find out fast that the networks do not agree.

How The Master Deal Works

The aggregator holds the merchant account and the link to the acquiring bank. Card traffic from all its sellers runs through that one link. The money is then split out and paid on to each seller. Visa says a payment facilitator is a third party that can do two things. It can sign a card acceptance contract with a seller for an acquirer. It can also take in the money from that acquirer for the seller. That is a fair sketch of what the model involves.

Which Label Actually Applies

In Visa's own view, a firm that gathers up sellers is treated as a payment facilitator unless it owns the brand, takes on the sales job and handles disputes itself. A marketplace works a little differently. It brings buyers and sellers onto one branded site and takes payments for those sellers. The labels look dry until questions of blame come up. Then they matter a great deal, because they decide who answers for what when a buyer complains or a seller vanishes.

Volume Limits And When To Move On

Pooling is not meant to last for a seller that keeps growing. Visa's published guidance sets a yearly sales figure of US $1,000,000, or the same in local money. Above that, the seller is meant to sign with an acquirer direct. Limits and the way they are applied differ by network and by region. So it pays to check the rules that apply. Do not assume one figure holds everywhere. Visa's guidance also notes that most acceptance entities have to be registered, which puts the duty on the acquirer rather than the seller.

Why The Networks Must Be Told

Both big networks want the acquirer to register the firm before it starts work. Mastercard states plainly that an acquirer must register a service provider as a payment facilitator, with conduct set out in Rule 7.8 of its rules. Visa asks the acquirer to complete a step first. In that step the bank states it has done a full risk and money review. Skipping it is treated as a breach of the rules, not a piece of missing paperwork.

Vetting Moves, It Does Not Vanish

Visa is clear that all its merchant rules apply just as much to a sponsored merchant. A seller that never filled in a full card application is not let off those rules. The aggregator picks up the duty to know who its sellers are. In practice that means KYB (Know Your Business) checks. It also means ongoing merchant underwriting, rather than a sign-up form taken at face value.

Risk Piles Up Rather Than Spreads

One bad seller inside a pooled book can hurt the whole deal. The chargeback load and the fraud land on the master account. So aggregators watch each seller's chargeback ratio closely. They may hold back funds where a seller looks risky. They also keep the right to cut a seller off at short notice. Some merchant category code groups are shut out of the sponsored merchant model under Visa's rules.

What Sellers Gain And Give Up

The trade is speed against control. A seller joining an aggregator can often be live in hours. There is no separate vetting file and no talks with an acquiring bank. What it gives up is room to bargain on price. It also gives up a clear view of its own settlement terms, and some stability, since the deal sits with the aggregator rather than a bank. A seller can be shown the door on the aggregator's call, not the bank's.

Where Smart Routing Fits In

Pooling sellers and routing payments solve nearby but separate problems. The two get mixed up often enough that finera.'s look at a payment gateway, aggregator and orchestrator is worth a read next to this entry. Pooling is about who holds the card deal. Routing is about which of those deals each payment goes down. A platform can be both, neither, or one turning into the other as its sellers grow.