PayFac (Payment Facilitator)

A Payment Facilitator, commonly referred to as a PayFac, is a type of merchant service provider that streamlines the process of setting up merchant accounts for businesses. This model allows businesses to sign up as sub-merchants under the umbrella of the PayFac's own master merchant account, rather than undergoing the lengthy and often complex process of establishing a direct merchant account with a bank or traditional payment processor.

By acting as an intermediary, a PayFac takes on much of the administrative burden associated with payment processing, including underwriting, fraud monitoring, chargeback management, and compliance with payment card industry (PCI) standards. This simplification makes it easier for smaller businesses or startups to accept electronic payments without the need to navigate the regulatory and financial complexities typically involved in obtaining a merchant account.

The PayFac model offers several advantages:

However, while PayFacs offer significant convenience, they also come with certain considerations, such as potentially higher processing fees and less control over the payment processing environment compared to direct merchant accounts. Businesses should evaluate their specific needs and the terms offered by a PayFac to determine if this arrangement is the best fit for their payment processing requirements.