A payfac, short for payment facilitation or payment facilitator, is a type of merchant services company that provides payment processing in a more flexible and efficient way than a traditional merchant acquirer (also called an ISO or a merchant sales rep). It is based on a merchant acquiring model developed by Visa/MasterCard, and it enables payment acceptance without requiring merchants or Independent Software Vendors (ISVs) to open a traditional merchant account.

Payfacs offer payment processing to business clients, known as sub-merchants or Sponsored Merchants, through their own links with payment processors. They serve as an intermediary, gathering sub-merchant transactions and passing them to payment processors for completion.

Merchant acquiring – which is considered the traditional payment processing model – requires the merchant to go through a process to open an account, which takes time. That’s because a merchant acquirer not only requires a lengthy, signed application and supportive documentation such as voided check, bank letters, financials, bank statements and processing statements, but also goes through a manual underwriting process, which can take days. 

Traditional payment processors will do a hard credit pull to check the merchant’s credit, which will show on their credit report as an inquiry. After approval, a traditional payment processor will produce a VAR sheet with the merchant details that is emailed to the merchant and is then used to manually set up the payment gateway or processing services. This all takes time, effort and money to enable and support merchants.  

With Payfactory, the entire application and underwriting process can happen in minutes, requires no paperwork, does not show up on the merchant’s credit report and automatically provisions all payment gateway services and sends the necessary payment gateway credentials to software providers securely and programmatically. The entire round trip is frictionless. Payment facilitation is the fintech version of payment acceptance.

The payfac model simplifies the merchant account enrollment process and provides an increased level of control to ISVs. Seamless and paperless underwriting is at the heart of this model, accelerating standup times for merchants. The payfac model provides numerous benefits, including: 

1. Near instantaneous approval
2. Fast onboarding
3. User experience control, from merchant enrollment to merchant reporting
4. Simple, flat fee structure
5. True next-morning funding is available for certain industries and customers
6. Transactional and settlement reporting
7. Substantial revenue-sharing with the ISV

Payfacs wrap all of these services into APIs that software companies can integrate to, automating the entire provisioning process into a seamless merchant enrollment experience that can be completed online by a merchant in minutes. This API-centric integration and automation is very different from the traditional payment processing enrollment experience.

Embedded payments is payment acceptance and enrollment built directly into the software systems that businesses use to conduct commerce. In contrast, previous “integrated payment” providers had hosted payment pages and enrollment processes that disrupted the ISV’s brand and experience, in many cases causing enrollment abandonment. By using a payment facilitator, ISVs can allow merchants to easily and securely process payments within their own websites or applications, without having to worry about the technical aspects of payment processing. Some benefits of using payfac embedded payments include:

• Improved user experience: Customers can complete transactions quickly and easily, without being redirected to a third-party payment page.
• Increased security: Embedded payments can be more secure than other payment methods, as payment information is entered directly into embedded payment fields, reducing the risk of fraud or the requirement for sub-merchant PCI validation.
• Customization: ISVs can customize their payment forms and the checkout experience to match their brand and improve conversion rates and reduce checkout abandonment.
• Increased control: ISVs have greater control over the payment process, including the ability to design and deliver a payment experience that is consistent with their customers’ UI and brand.

Ther are several types of payfac implementations.

• Software Platform as the Payfac: Many ISVs are moving towards the value of payfac by actually becoming payfacs themselves. However, this is the most aggressive model typically only adopted by the largest ISVs.
• Payfac Direct Providers: There are some larger providers that now provide payment facilitation as a direct service to sub-merchants that ISVs can integrate to. Revenue share, portability and UX control can be limited and various constraints make growing the business difficult.
• Payfac as a Service (PFaaS): In this hybrid payment facilitation model, ISVs embed the payfac enrollment and payment acceptance services inside their software platforms to get all of the benefits of payfac without the investment, risk/underwriting, infrastructure, people, registrations and audits required to become a payfac.

Learn more about these options in our blog, Payment Facilitators Versus Payment Processors – What are the Differences?

Formed by payments industry veterans, Payfactory enables ISVs and SaaS vendors to effortlessly integrate or embed payment acceptance into their platform.

• Payfactory is the only Payfac as a Service that is gateway-agnostic, which means that you can quickly enable Payfactory on your current payment platform.
• We provide fast onboarding and payouts with restful APIs and competitive rates with no monthly fees, all backed by top-notch customer service.
• Payfactory offers PCI-validated P2PE to provide end-to-end encryption for card data transmission.
• Payfactory offers state-of-the-art tokenization where your software platform stores tokens instead of card data for maximum security.
• Payfactory offers aggressive revenue-sharing and control.

Access our API documentation and sandbox to see why Payfactory is the easiest and fastest way to enable merchant payments.