What is the difference between a PayFac and an ISO?

An ISO resells an acquirer's services: each merchant signs its own contract with the acquirer, and the ISO earns a share of the revenue. A PayFac onboards merchants as sub-merchants under its own master account, controls onboarding and payouts, and takes on the related risk.

Who signs with whom

An independent sales organization resells an acquirer's services. Each merchant signs its own agreement with the acquirer, which underwrites it, settles to it and carries the risk. The ISO earns a share of the revenue and often handles sales and first-line support. A payment facilitator signs the merchants itself, as sub-merchants under its master account with a sponsor acquirer. The PayFac underwrites them, controls onboarding and payouts, and carries the related risk.

What each model gives

• ISO: low regulatory burden, slower onboarding, less control over pricing and experience, revenue share.
• PayFac: fast onboarding, full control over the merchant experience and pricing, higher margin, with risk, compliance and often licensing obligations.

Choosing, and moving

Many businesses start as ISOs to build a merchant base, then become PayFacs when volume justifies the investment in risk and compliance. Some keep both: PayFac for small merchants onboarded instantly, ISO referral for large ones that want a direct acquiring contract. The infrastructure should support both, with onboarding workflows that route a merchant either to the sponsor's sub-merchant program or to a direct acquirer application.