Should I be a Payfac?

Should I be a Payfac? This is becoming a more common question in the payment space as more people want to tap into the incredible potential of payment facilitation. Understanding the challenges and benefits of payment facilitation before making a final decision is critical.

How Does a Payfac work

Before deciding to be a Payfac, it is vital to understand what it means to be a Payfac. A Payfac dramatically improves the merchant onboarding process for payment processing. They accomplish this by taking on greater liability and onboarding and underwriting merchants. 

Onboarding Merchants

This allows businesses to skip getting their merchant account with a bank. This can quickly become a very long and drawn-out process. Opening a merchant account is especially difficult for smaller businesses that lack the resources to wait for an account to open. Payfacs fill a helpful role by dramatically streamlining this process for smaller merchants.

Essentially the merchant will become a sub-merchant that processes payments through the Payfac merchant account rather than getting their account. With the overall merchant account under the Payfac, it is responsible for preventing fraud. This is an important consideration if you ask yourself if I should be a Payfac. 

Working with Acquirers

Any Payfac will need to work with acquiring banks to facilitate merchant transactions. Payfac will need to get a master merchant identification number from an acquiring bank in order to allow merchants to process payments. The fact that Payfac and not the merchant controls this is why merchants can be onboarded so quickly onto a Payfac payment system


Answering the question Should I be a Payfac comes with many important considerations. It may not make sense for some companies to become a Payfac, even if it initially seems preferable. 

Is My Company The Right Kind of Company?

Companies focusing on specific fields and verticals are better suited to becoming a Payfac. They understand that specific vertical very well and can build a payment solution that appeals to merchants within that vertical. 

Does a Partnership Make More Sense?

Many software that pursue becoming a Payfac run into a viable alternative, partnerships. With partnerships, software companies can offer embedded payments within their software. But they are not responsible for underwriting and can be very hands-off. This allows software companies to focus on what they specialize in rather than focusing on payments. 

With a partnership, a software company can easily create a seamless payment experience without having to go through all the effort to be a Payfac. It is essential to analyze the quality of customer experience and ease of onboarding of a payments partner. These two factors are critical to a successful partnership.

Can I be Adaptable Enough?

The payment space is very complicated and can shift rapidly. Additionally, there are numerous compliance standards that a Payfac would need to maintain. It may be impractical for an existing software company to devote many resources to properly building its own payment solution. This requires extensive in-house development that could detract from the ongoing operations of the company

Do I Have the Time?

When asking yourself if I should be a Payfac, you must understand that this process is time-consuming. You will need approval from both card networks and acquiring banks. This will require you to demonstrate that your company can competently handle compliance standards, mitigate fraud, and onboard and underwrite merchants. Meeting all of these standards can be incredibly time-consuming for many companies and is often impractical. 

Should I be a Payfac Later Instead of Now?

Software companies that are considering being a Payfac can wait to do so. With the considerable investment involved in the process, it makes sense to move more slowly with this transition. A good stepping stone would be partnering with a payments provider and allowing your company and development team to learn and understand the nature of embedded payments. 

With this background knowledge, your company will be much better informed about the realities of enabling payments. This makes it easier to implement the Payfac transition later on as you have built up expertise

Pros of Being a Payfac


With merchants not needing to open their own merchant accounts, this means the onboarding and underwriting process can occur much faster. This means that merchants can begin processing payments and makes the Payfac more appealing to merchants. This quick turnaround can lead to higher sales as merchants want convenience.

Control over Payments

Another incentive that causes many to ask themselves if they should be a Payfac is their level of control over the entire payment process. This allows Payfac to determine every aspect of how the merchant interacts with the system. Such levels of control enable a seamless payment experience for sub-merchants and allow Payfac to control when funds are given to sub-merchants. 


Payfacs offer so many additional services aside from payments. This wide spread of services dramatically increases merchant retention, which generates far more revenue in the long run. Additionally, by having so much control over the payment system, Payfac can set transaction fees that best suit its needs without having to gain the approval of third parties. 

Cons of Being a Payfac

Sponsorship and Compliance

When asking if I should be a Payfac, it is essential to remember the central role of acquiring banks. Every Payfac needs the sponsorship of an acquiring bank to onboard sub-merchants. This requires Payfac to meet the acquiring bank's standards, which can be pretty extensive. Without the sponsorship of the bank, Payfac cannot do business. Additionally, Payfac must ensure its payment system and every sub-merchant are fully PCI compliant. 

Higher Liability

As merchants do not get their own merchant accounts, the Payfac takes on the most liability. If fraud occurs, Payfac is responsible for the actions of every single sub-merchant on its system. This is one daunting aspect of addressing if you should be a Payfac. 

Higher Costs

Providing merchants with a comprehensive service and meeting all the compliance standards of banks creates significant costs for Payfacs. Additionally, many resources are required to get the system up and running. While these higher costs can be offset with higher revenue, you must ensure you can handle them when asking yourself if you should be a Payfac

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