PayFac (Payment Facilitator Service)

Payment Facilitator (PayFac)

A payment facilitator is a company that extends its customers the ability to accept electronic payments by utilizing their existing infrastructure. 

In recent years, more companies have become payment facilitators as a way to generate more revenue. 

How Does it Work?

A payment facilitator handles all the administrative maintenance relating to the businesses they are servicing. This includes the onboarding process and security of the infrastructure. 

A payment facilitator operates under one merchant ID (MID) and issues sub-merchant IDs to the businesses that will utilize their infrastructure to process credit card payments. 

Traditionally, each business would need to establish its account with its merchant ID. 

Operating within the structure of a payment facilitator streamlines and expedites the process. 

What Sets it Apart? 

Besides the difference in merchant IDs, there is another difference to note.

The underwriting process is fluid. A payment facilitator is constantly assessing risk and fraud with each transaction while a traditional payment process usually only goes through the underwriting process initially. 

Payment facilitators often deploy sophisticated software programs to accomplish this. 

This results in being able to enroll businesses almost immediately versus weeks or more.

Who Can Offer PayFac Services? 

Payment facilitators must go through a long process to establish themselves.

First and foremost, they must gain the sponsorship of an acquiring bank. To do this, they must present a strong business plan and pay a fee. 

After a sponsor is established, they must complete several other requirements before they can begin conducting business. 

This includes showing PCI compliance and becoming licensed by the card networks. These each come with their costs. 

Before beginning the process of becoming a PayFac, a company needs to analyze whether or not the initial investment of time and money will pay off in the long term.