A Sub-Merchant is essentially a business entity that opts for a streamlined approach to handle its transactions by partnering with a payment facilitator or payment aggregator. This method is distinct from having a direct merchant relationship with the acquiring bank. In essence, the sub-merchant’s transactions are processed under the umbrella of the master merchant’s account.

This strategic arrangement significantly simplifies the otherwise complex process of establishing payment acceptance capabilities for the sub-merchant. It is particularly beneficial for smaller businesses, which might not have the high volume of transactions needed to justify setting up their own direct merchant account. Moreover, these smaller entities often find the direct application process for merchant accounts daunting and overly burdensome, making the sub-merchant model a more attractive alternative.

By choosing this path, sub-merchants can bypass many of the hurdles associated with payment processing. The payment facilitator or aggregator shoulders the responsibility of managing the merchant account, ensuring compliance with financial regulations, implementing necessary security measures, and settling transactions with the acquiring bank on behalf of the sub-merchant.

For their services, the payment facilitator or aggregator charges the sub-merchant a fee. This fee might be higher than what would typically be paid if the business had a direct account with the acquiring bank. However, for many small and medium-sized businesses, the trade-off is worth it. The convenience, reduced complexity, and the facilitator’s assumption of compliance and security responsibilities often make the sub-merchant arrangement a preferred choice. This is especially true for businesses looking to expand their payment options without taking on the significant overhead and regulatory complexities of direct payment processing.