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Payfac FAQs

Get answers to frequently asked questions on payment facilitation and the Payfactory platform, plus definitions of industry terms.

Embedded Payfac FAQs

Get answers to frequently asked questions on embedded payment facilitation and the Payfactory platform, plus definitions of payment processing industry terms.

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.


A payment gateway, also called a payment platform, is the technology service that allows merchants to initiate Ecommerce (or online), point-of-sale, mobile and MOTO payments for their customers. Shopping carts, practice management software, websites and mobile apps need to accept payments and transmit those payments to the payment network for processing in real time. The payment gateway is the platform by which software transmits transactions to the payment processing network.

A Sub-Merchant (aka Sponsored Merchant) is a business that accepts payments through a payfac.

A member of one or more of the credit card associations, a sponsor bank is a federal or state-chartered bank that provides money-movement and compliance oversight for payment companies.

Split Pay is a payfac feature whereby a single charge to a card can be split up into payouts to multiple vendors. For example, if you purchase a ticket for a concert online, the band has to get paid, the venue has to get paid, there may be a service fee, a ticket fee and even a software platform fee involved. Split pay is how this gets done and is not a feature that traditional payment processing provides.

A Convenience Fee is charged to the cardholder for the convenience of paying through a particular card-not-present payment channel (where it may cost the merchant additional time or money to accept payments this way). For example, companies may charge you an additional fee to make a bill payment online or over the phone. Convenience fees are not charged for in-person transactions and must be a flat amount and not a percentage of the transaction.

A Service Fee is a fee category recognized by Visa rules and is only allowed in the government and education verticals. It can be charged on any card card type (credit, debit, prepaid cards) and any payment channel including card present or online.

A Surcharge is a fee added to a credit card transaction by the merchant to offset credit card processing costs. It’s important to note that credit card surcharges are generally legal but some states have bans or restrictions. Surcharging is also not allowed for debit or prepaid cards. Merchants may charge a surcharge for either card present or card-not-present transactions. Surcharges may be a flat amount or a percentage of the transaction but are capped by card brand rules.

A Platform Fee is where the cardholder pays Payfactory to process a payment to the merchant securely and privately. This service is convenient for the cardholder in that they can pay with any card they like, it is secure in that it is encrypted and tokenized and is private in that the cardholder details (card number, expiration, CVV, etc.) are never exposed to the merchant. Merchants like this because they don’t have to pay any fees to accept the payment. The Platform Fees never go to the merchant; they are paid directly from the cardholder to Payfactory for the convenience, security, privacy and safety of the transaction.

Merchant Onboarding encompasses the processes it takes to enable a merchant to begin accepting payments. With Payfactory, these processes can include an alternative credit review (not a hard pull that shows as an inquiry on the merchant’s credit report), an automated underwriting and provisioning of the sub-merchant account and payment gateway credentials. Onboarding happens after the frictionless online enrollment and “click to agree” process.

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