Sub-merchant
Also known as: Sub-participant model, Sponsored merchant, Sub-merchant model
A sub-merchant is a business that accepts cards through a payment facilitator's own acquiring arrangement instead of signing a contract directly with an acquirer. The facilitator is the contracting party towards the acquirer, and the acquirer carries the liability for it under scheme rules.
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Example
A market-stall trader signs up online with a payment facilitator and starts taking cards the same day. The acquirer's contract is with the facilitator, not with the trader.
Some merchants take their first card payment the day they sign up. Behind that speed is usually a sub-merchant arrangement.
Visa's published rules call the business a Sponsored Merchant: "an entity that contracts with a Payment Facilitator and, pursuant to that contract, is able to accept a Card to sell goods or services". The Payment Facilitator is "an entity that contracts with an Acquirer to deposit Transactions, receive settlement from, or contract with an Acquirer on behalf of a Sponsored Merchant". The UK regulator's glossary describes the same pattern: facilitators are intermediaries between acquirers and merchants, and "typically there is no direct contractual relationship" between those merchants and the acquirers.
The rules also decide who answers for whom. Visa's rules state that a Sponsored Merchant "will be treated as a Merchant of its Payment Facilitator's Acquirer", and that the acquirer is liable for the facilitator and its sponsored merchants. That allocation of liability is why facilitators and acquirers vet who they sponsor.
Direct contracts come back with growth. Under Visa's rules, an acquirer must sign a direct merchant agreement with a sponsored merchant whose annual transaction volume exceeds USD 1 million, subject to listed exceptions. The facilitator can keep providing payment services, including settlement.
On the paperwork, the contract names the facilitator, not the acquirer. The statement and payout usually come from the facilitator too, and the merchant service charge is whatever the facilitator quotes.
Merchants often assume a sub-merchant has the same rights and terms as a direct merchant. Your terms are the facilitator's terms, and they sit inside the facilitator's own arrangement with its acquirer. Read them.
Fast to start does not mean the same as direct. Know which one you signed.
