What is a payment facilitator (PayFac)?

A payment facilitator is a company registered with the card schemes through an acquirer that onboards smaller merchants as sub-merchants, collects their card payments and pays them out. It handles onboarding and risk monitoring, and bears the first loss if a sub-merchant fails.

How the model works

The PayFac holds a master merchant account with a sponsoring acquirer. Sub-merchants sign up with the PayFac instead of the acquirer, which speeds up onboarding. Funds settle to the PayFac, which then pays each sub-merchant.

What a PayFac is responsible for

• Onboarding and know-your-business checks on sub-merchants.
• Assigning the right merchant category codes.
• Monitoring transactions, fraud and disputes.
• Paying out funds correctly and on time.
• Covering losses if a sub-merchant cannot pay chargebacks or refunds.

Why companies become PayFacs

Software platforms and marketplaces often become PayFacs to control the payment experience, onboard merchants faster and earn payment revenue.

What it requires

Registration with the schemes through a sponsor, compliance programs, risk management, and technology for onboarding, payouts and reporting.

What it means for payment operators

If you are a PayFac or planning to become one, the platform behind you carries much of this work. A white-label platform with onboarding workflows, merchant hierarchies and payouts lets you launch under your brand without building it all.