PayFac (Payment Facilitator)
A company that boards many small businesses as sub-merchants under its own merchant account, handling onboarding, funding and risk for them.
What a PayFac is
A payment facilitator (PayFac) is a company registered with the card networks, through a sponsoring acquirer, to accept payments on behalf of sub-merchants. Instead of each business opening its own merchant account, the PayFac boards them under its master account and pays out their sales.
How it works
The PayFac runs KYB checks and underwriting on each sub-merchant under its acquirer's rules. It receives settled card sales, pays out each sub-merchant and covers their chargebacks and losses if they cannot pay.
- 01 · REGISTER A sponsoring acquirer registers the PayFac with card networks such as Visa and Mastercard.
- 02 · ONBOARD The PayFac verifies and underwrites each sub-merchant, then boards it under its account.
- 03 · FUND It receives settled sales and pays each sub-merchant, minus its fees.
| Model | Who the merchant contracts with | Who underwrites and carries risk |
|---|---|---|
| Direct merchant | The acquiring bank | The acquirer |
| Independent sales organization (ISO) | The acquirer, often with the ISO | The acquirer, with some risk shared by the ISO |
| PayFac | The PayFac, as a sub-merchant | The PayFac, with the acquirer still liable to the networks |
Above a network-set annual card volume, a sub-merchant must also sign directly with the acquirer.
When businesses use it
- Software platforms that let their customers take card payments
- Marketplaces and booking sites that collect for many sellers
- Invoicing and point-of-sale apps for small businesses
- Fintechs that use acquiring BIN sponsorship to launch a PayFac program
Cross River sponsors payment facilitators with acquiring BIN sponsorship and underwriting for PayFacs. Subledgers track each sub-merchant's funds, and live transaction data gives transparency into clearing and settlement. See solutions for PayFacs at Cross River.