What is a PayFac? 

A Payment Facilitator is a service that acts as a master merchant, holds one master merchant account with an acquiring bank but then boards other businesses as sub-merchants under its master Merchant ID (MID). 

The PayFac model consolidates funds in a single account, which may alter the processing steps for the merchant. 

When partnering with a PayFac, it’s necessary to understand its fee structure and compliance requirements. 

A PayFac handles the entire payment lifecycle for its sub-merchants and includes the following main functions: 

• Underwriting and Onboarding: Assesses and establishes new sub-merchants for payment acceptance. 
• Transaction Monitoring: Monitors transaction activity and aims to maintain transaction security. 
• Gestione dei chargeback: Administers and resolves payment disputes initiated by customers. 
• Fund Transfers: Handles the settlement and transfer of funds to the sub-merchants. 
• Compliance and Security: Responsible for operations and compliance of sub-merchants under regulations and industry standards, including maintaining PCI DSS certification that protects sensitive payment data. 

The use of PayFacs is associated with changes in the payment acceptance process for businesses, mainly small and medium-sized enterprises (SMEs). 

The main advantages are: 

• Fast Onboarding: Businesses can accept payments often within hours or days, as opposed to traditional models which take much longer. 
• Integrated Services: PayFacs provide fraud protection and chargeback management, which may influence operational workloads and expenses for businesses. 
• Riduzione del carico amministrativo: Payment Facilitators handle complex compliance tasks related to Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. 
• Before choosing a PayFac, businesses should carefully evaluate the fee structure and compliance practices of the service. 

However, there are also cons to consider:

• Regulatory Requirements: PayFacs must be compliant with strict regulations for data protection, fraud prevention, and KYC processes. 
• Expenses for Large Businesses: For larger enterprises, securing a dedicated merchant account may be more cost-effective in the long run, despite a more complicated onboarding process.

PayFacs and traditional payment processors offer distinct models for handling payments. The best choice depends on a business’s specific needs and scale.

The PayFac ecosystem consists of several integrated participants: 

• Payment Facilitators: The core service providers.  
• Fornitori di servizi di pagamento (PSP): Offer technology and services for elaborazione dei pagamenti. 
• Acquiring Banks: The financial institutions that are the designated master merchant accounts for PayFacs. 
• Circuiti di pagamento: Card brands like Visa and Mastercard that govern SaaS card transactions. 
• Technology Suppliers: Companies providing critical infrastructure, including PayFac as a Service (PFaaS) platforms that offer solutions for regulatory compliance and risk management. 

A PayFac processes payments, and its functions can relate to the overall customer experience and merchant development. 

Key qualities to look at closely include: 

• An onboarding process for merchants. 
• prevenzione delle frodi and security tools are utilized. 
• Adjustable customization of payment programs. 
• Smart technology and real-time underwriting tools play a role in the merchant evaluation process.