Who is liable for chargebacks under a PayFac?
The PayFac. Visa states that acquirers are responsible for the acts of both PayFacs and sponsored merchants, and acquirers pass that liability to the PayFac by contract. Every sub-merchant’s chargebacks count in the PayFac’s ratio, which is why PayFacs monitor merchants and hold reserves.
In detail
The PayFac. Visa states that acquirers are responsible for the acts of both PayFacs and sponsored merchants, and acquirers pass that liability to the PayFac by contract. Every sub-merchant’s chargebacks count in the PayFac’s ratio, which is why PayFacs monitor merchants and hold reserves.
PayFac vs ISO: the seven differences that matter
PayFac: chargebacks, fraud losses and fines of every sub-merchant roll up to it, and then to the acquirer. The chargeback monitoring programs count the whole portfolio.
What is PayFac-as-a-service, or a managed PayFac?
Most software platforms want PayFac economics without PayFac operations. PayFac-as-a-service (PFaaS) answers that: a registered PayFac or acquirer provides the master merchant account, the scheme registration, the risk program and the funding engine, and the platform runs onboarding, pricing and the merchant experience under its own brand. Mastercard describes the model as one where PFaaS platforms include capabilities to handle the regulatory compliance and risk management burden, and expects hundreds of new PayFac formations a quarter.
Running ISOs and PayFacs on one platform
Many PSPs do both: they sponsor PayFac programs for software platforms and run ISO and agent channels for direct merchants. Keeping one merchant file, one set of acquirer applications and per-program rules is what meta-program management describes.
More detail in our #PayDecoding episode on PayFac vs ISO.