sub-merchant
A sub-merchant is a business that accepts card payments under a master account held by a payment facilitator or regulated acquiring partner, rather than under its own merchant agreement with an acquirer. It is onboarded and paid out by the master account holder, within scheme rules.
When a software platform builds payments into its product, each of its customers typically becomes a sub-merchant: identified, verified and set up to take payments beneath one master arrangement, instead of each signing a separate acquiring contract. The card schemes allow this on conditions. Each sub-merchant still has to be identified and checked, carries its own merchant category code, appears by name on the cardholder's statement, and can be suspended on its own if it breaches the rules.
For a platform this is what makes onboarding inside the product possible: a customer can be taking payments after a short in-app flow rather than a separate application to a bank. It also decides who the regulated party is. Under a regulated-partner model the sub-merchant relationship sits with the regulated acquiring partner, which holds the funds; the platform sets its price and owns the customer relationship. Synapto is not the master account holder and does not hold funds.
What to watch: scheme rules put a volume ceiling on how large an individual sub-merchant can grow before it needs its own merchant agreement, and the partner's underwriting may ask more of a large or higher-risk customer at onboarding than the platform's in-app flow expects.
Sources
- FCA, Commercial agent exclusion (CAE): acting for both payer and payee, 17 February 2023