Payment Facilitators’ Role in the Payment Space

Payment Facilitators play a unique and vital role in the payment space. They enable merchants to quickly begin processing payments without going through a longer onboarding process and can be easily added to an existing system. 

What Does Payment Facilitator Mean?

Payment facilitators, also known as payfacs, are one of many actors in the payment space. They enable businesses and organizations to accept electronic payments. These can occur on various platforms, including e-commerce, invoicing, fundraising, booking, travel and ticketing, retail, and on-demand businesses. 

Origins of Payfacs

Payment facilitators became prominent during the 1990s to ensure that companies could more easily accept online payment options. This was especially important as banks catered their services primarily to large businesses. This allowed payment facilitators to enable smaller firms to make the most of new payment solutions.

How Do Payment Facilitators Work?

With a payment facilitator, they take on the setup and maintenance of the necessary payment systems allowing merchants to focus on what they do best rather than trying to figure out the payments space themselves. 

Payment facilitators open a merchant account and enable merchants to access that merchant account and begin accepting payments. This allows merchants to refrain from acquiring their own merchant accounts and merchant IDs. As a result, merchants do not need to build their own gateways or maintain a relationship with acquiring banks. 

Since the payment facilitator holds the merchant account, they take on most of the responsibility and risk. Because of this, the payment facilitators have to control who has access to their platform from onboarding onward. This means they need strong Know Your Customer procedures to ensure only legitimate vendors are accessing the system. 

Additionally, the system requires constant monitoring to ensure that no illegal activities, such as money laundering or illicit financing, occur. The facilitator also must ensure that all the merchants on its platform are accepting payments in a manner that meets PCI compliance standards

Payment facilitators have much more control over their system as merchants use the payfac merchant account. This enables payfacs to be highly selective about the merchants they work with and how they interact with the system. 

Role of Banks and Card Networks

Whatever acquiring bank the payment facilitator works with will have their own requirements for merchants that are added to the system. While there are many requirements, this enables payment facilitators to offer straightforward payment solutions to merchants by taking the hassle out of the process. Many requirements are enforced by card networks and acquiring banks, but different regulations depend on the country. 

Payfac vs. Payment Processor

Payment processors play a vital role with payfacs as they settle transactions from the merchants under the payfac. The payment processor ensures that all transactions are handled correctly. The payment processor acts as the go-between for the bank and card networks and the merchant. They are responsible for transferring payment information from customer credit cards to the customer’s bank. 

Payment processors enable merchants to be connected to card networks and banks rather than merchants having to do all this work themselves. The primary distinction between a payment processor and a payment facilitator is the onboarding experience. With a payfac the onboarding process is much easier as the merchant does not need to open their own merchant account

But with a payment processor, the merchant will still have a direct relationship with the acquiring bank as the merchant has their own merchant account instead of working with a payment facilitator, which allows the merchant to use the payfac’s merchant account.

Benefits of Using Payfacs

Integrated payment solutions offered by payment facilitators are more popular now with the rise of entirely digital payment options. As a result, more and more transactions are conducted yearly without needing physical cards or terminals. This need for a simple online payment option makes payfacs more appealing as they can easily integrate into existing software. 

Payment facilitators can earn significant revenue as they take much of the risk and responsibility for the transactions on their system. Some software platforms may choose to rent payment infrastructure from the payfac to have greater control over the customer experience, and this makes more sense for platforms that experience high card volume

Businesses also benefit from working with payfacs as payfac takes on much of the responsibility for fraud protection. This enables companies to save time and money on fraud prevention efforts. The payment systems of payment facilitators are also designed to be integrated well into larger existing systems. This is especially useful for websites as businesses can have the payfac input a payment solution directly into their website. 

With the pandemic driving up digital transactions, more verticals than ever are moving to digital-only payment. These include everything from medical bills to utilities and even government services. Payment facilitators are ideally suited to meet these opportunities for digital payments. Government agencies, medical offices, and utility companies can easily use payment solutions offered by payfacs without having to spend time building out their own system.

Payfac Options

There are various payment facilitators out there for companies to choose from. Below are some of the more popular ones. 


Stripe is geared primarily towards e-commerce solutions for payments. With Stripe, companies can create customized payment solutions for their website. Stripe also supports a wide variety of payment options for customers to choose from. 


Square is another popular payment facilitator as it prioritizes speed. It is effortless to set up a payment system with Square quickly. Like Stripe, Square allows companies to accept various payment options from customers securely. 


WePay, which JPMorgan Chase operates, conducts a considerable amount of payments annually. This is understandable as WePay offers a flexible API that maximizes customer experience and provides tools to enhance risk management for small businesses


While payment facilitators enable merchants to process payments quickly, this comes with considerable risk for the facilitator as it takes on much liability and compliance responsibility. However, this does mean more significant revenue for the payfac and the ability for new verticals to add digital payment options easily. 

Merchants also must consider whether a payfac or a third-party payment processor makes more sense for their business. In conclusion, payment facilitators provide merchants with a convenient means of starting to accept digital payments.

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