PayFac (Payment Facilitator)
A Payment Facilitator (PayFac) is a business that aggregates merchants under its own master merchant account with an acquiring bank, controlling the payment experience and taking responsibility for sub-merchant underwriting and chargebacks.
In a PayFac model, the platform becomes a "merchant of record" for its customers — aggregating them as sub-merchants under its master merchant account. This gives the platform control over onboarding, pricing, and the payment experience, and allows the platform to capture the margin between its acquiring cost and what it charges sub-merchants.
PayFac economics are significantly better than ISO/agent models because the platform captures the full spread rather than earning residuals. PayFac programs typically generate 40–100 basis points on card volume, versus 10–30 basis points for ISO arrangements.
PayFac obligations are also more significant: the PayFac owns chargeback liability for sub-merchants, must underwrite sub-merchants, and must maintain compliance with card network PayFac requirements. These obligations require operational infrastructure that pure referral models don't.
Most vertical SaaS platforms processing $3M+ monthly benefit from PayFac or a similar direct program model versus remaining on a referral or ISO arrangement.