What is the difference between an ISO and a PayFac?

An ISO is a sales agent: it sells an acquirer's services, but the merchant contracts with the acquirer and the ISO never receives funds. A PayFac signs merchants on the acquirer's behalf, can receive settlement and pays out its sub-merchants.

The ISO model

An independent sales organization finds merchants, helps them apply and often supports them afterward. The acquirer underwrites each merchant, signs the contract and settles funds directly. The ISO earns commissions or a share of the margin.

The PayFac model

A payment facilitator onboards sub-merchants under its own master account. It underwrites them within the acquirer's rules, receives the funds and pays them out. It takes on more risk and more operational work, but also more control.

Key differences

• Contract: with the acquirer for ISO merchants, with the PayFac for sub-merchants.
• Funds: never held by an ISO; received by a PayFac.
• Risk: limited for an ISO; first loss for a PayFac.
• Onboarding speed: acquirer-led for ISOs; often faster with a PayFac.

Choosing a model

Some companies start as ISOs and later become PayFacs as volume grows and they want control of the experience.

What it means for payment operators

Whether you operate as an ISO or a PayFac, a white-label platform under your brand gives you the tools for onboarding, merchant management and reporting, and lets you change model without changing your merchants' experience.