Payment Facilitator (PayFac)
A company that enables merchants to accept payments under its master merchant account.
What is Payment Facilitator (PayFac)?
A Payment Facilitator (PayFac) is a type of merchant services provider that processes payments on behalf of multiple merchants under a single master merchant account. Instead of each merchant getting their own merchant account, they become sub-merchants under the PayFac. Companies like Stripe, Square, and PayPal operate as PayFacs. This model enables instant onboarding—new merchants can start processing immediately without traditional underwriting—but typically at higher rates and with less control than a direct merchant account.
Why It Matters
PayFacs democratized payment acceptance for small businesses and startups. The trade-off is clear: simplicity and speed versus cost and control. PayFac pricing is typically flat-rate (e.g., 2.9% + $0.30) regardless of interchange, which benefits some merchants but costs others more. As volume grows, transitioning to a direct merchant account often makes financial sense.
Related Terms
Merchant Account
A bank account that allows businesses to accept credit and debit card payments.
ISO vs PayFac
Two different business models for providing payment processing services to merchants.
Underwriting
The risk assessment process for approving merchant accounts and setting terms.
Payment Aggregator
A company that processes payments for multiple merchants under a single merchant account.
Frequently Asked Questions
ISOs (Independent Sales Organizations) resell merchant accounts from acquiring banks—each merchant gets their own account. PayFacs aggregate merchants under one master account.
Consider switching when processing $10,000+ monthly. At this volume, interchange-plus pricing through a direct account typically beats PayFac flat rates.
Aggregation risk—if the PayFac has issues or considers your business risky, they can freeze or terminate your account quickly. Direct accounts offer more stability.
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