PayFac as a Service lets a client, usually a software platform or a payment provider, onboard and manage sub-merchants under its own brand, while the provider holds the card-network registration and carries most of the underwriting, compliance and risk work.
This guide explains how the model works, how it compares to becoming a full PayFac, where its trade-offs are and what to check before choosing a provider.
What is PayFac as a Service?
PayFac-as-a-Service (PFaaS) is a model in which a provider registered as a payment facilitator through its sponsoring acquirer gives a client the onboarding, underwriting, risk and funding framework to act like a PayFac without its own registration. The client, usually a software platform, marketplace or payment provider, keeps the brand and the relationship with its sub-merchants.
The term is not used consistently. Some providers market similar offerings as managed PayFac, and some apply the same label to technology-only offerings, where the client registers as a PayFac itself (see the comparison below).
Clients connect to the provider’s system through an open Application Programming Interface (API). The provider configures the setup to the client’s requirements and brands it under the client’s identity. Overall, these preparations take a couple of weeks.
What a payment facilitator does
A payment facilitator (PayFac) is registered with the card networks through a sponsoring acquirer and onboards merchants as sub-merchants under its own master merchant account. Instead of applying to a bank for an individual merchant account, which is slow and expensive for a new merchant, the sub-merchant relies on the PayFac’s existing relationship with the acquirer.
That makes three roles: the PayFac, the sponsoring acquirer and the sub-merchant. The PayFac underwrites its sub-merchants, is liable for their transactions and pays out their funds. Many PayFacs also run the payment infrastructure, fraud checks and reporting their sub-merchants use.
How PayFac as a Service works
The client runs the relationship with its sub-merchants, while the provider and its acquiring partner run the regulated steps behind it. A typical flow looks like this:
- Sub-merchant onboarding. Sub-merchants apply through a unified, automated application in the client’s interface, connected to the provider’s APIs. This makes merchant onboarding quicker and less work than a traditional merchant account application.
- KYC and underwriting. The provider performs the due diligence needed to assess the risk of each new sub-merchant, under the client’s brand. The process is usually automated and much faster than traditional bank underwriting.
- Payment acceptance. Approved sub-merchants accept payments through the gateway, including traditional and alternative payment methods such as credit cards, mobile payments and Buy Now Pay Later (BNPL).
- Authorization and processing. Transactions go through the provider’s acquiring partner for authorization and clearing.
- Settlement and payouts. The provider distributes funds to sub-merchants and manages reserves, fees and chargebacks.
- Additional services. Many providers add tools that raise approval rates and help your sub-merchants run their operations: compliance assistance, fraud protection and chargeback prevention, real-time data analytics and automated billing.
Who typically handles what:
| Responsibility | Typically handled by |
|---|---|
| Brand and relationship with sub-merchants | Client |
| Onboarding interface | Client, using the provider’s APIs |
| KYC and underwriting | Provider |
| Card-network registration | Provider, sponsored by its acquirer |
| Authorization and clearing | Acquirer, through the provider |
| Settlement and payouts to sub-merchants | Provider |
| Chargeback liability | Mainly the provider, as set in the contract with the client |
How it differs from a gateway, processor and ISO
These four roles sit at different points in the payment flow, and one company can hold more than one of them.
| Role | What it does | Onboards sub-merchants under its own account |
|---|---|---|
| PayFac as a Service provider | Lets a client act like a PayFac under the provider’s registration, covering underwriting, risk and payouts | Yes |
| Payment gateway | Securely transfers transaction data between the merchant’s website and payment processors | No |
| Payment processor | Handles the operational side of processing transactions with card networks and banks | No |
| Independent Sales Organization (ISO) | Resells merchant services on behalf of acquiring banks or processors and earns commission on processing volume | No |
A PayFac uses a payment gateway rather than replacing it: the gateway carries the transaction data, while the PayFac manages sub-merchants and their funds. A provider usually has multiple banks and payment processors integrated and may add new integrations on request.
ISOs handle onboarding, sales and support for merchants, but they do not handle financial flows. In the ISO model, the acquiring bank pays the merchant directly. In the PayFac model, the acquiring bank transfers funds to the PayFac, which pays its sub-merchants and keeps a percentage of transaction fees. For more on how ISOs and MSPs work and earn, see how to become a registered ISO or MSP.
PayFac as a Service vs. becoming a full PayFac
If you want to offer payment facilitation to your merchants, there are two main routes. You can become a full PayFac with your own registration, or launch through a provider that already holds one. The difference comes down to cost, time, control and who carries the risk.
Becoming a full PayFac
Requirements depend on the market and the sponsoring acquirer, but full PayFac status generally involves:
- Registration with the card networks through a sponsoring acquirer, with agreed processing terms and fee structures.
- Licences or registrations where the local regulator requires them, for example Money Services Business (MSB) registration in the US.
- Validation against the Payment Card Industry Data Security Standard (PCI DSS), renewed regularly.
- Underwriting, risk monitoring and sub-merchant funding operations, including reserves, fees and chargebacks.
- Payment infrastructure, built in-house or licensed from a payment software provider.
A full PayFac earns on sub-merchant transaction fees, setup or monthly fees and value-added services, and keeps full control over pricing and underwriting rules. Building the system in-house costs $200K-$1M, depending on its functionality, and it takes 1-2 years before it starts generating revenue.
Technology-only PayFac model
Between the two routes sits a technology-only model, which some vendors call PayFac-in-a-box. The client registers as a PayFac itself and licenses the software for onboarding, sub-merchant management, billing and reporting, such as a white-label gateway platform for payment providers. It gives more control and margin than the provider route, but registration, compliance and liability stay with the client.
| Full PayFac | PayFac as a Service | White-label technology-only model | |
|---|---|---|---|
| Card-network registration | Your own | The provider’s | Your own |
| Sub-merchant underwriting | You | The provider | You, with licensed tools |
| Chargeback liability | You | Mainly the provider, as set in the contract | You |
| Control over pricing and onboarding rules | Full | Within the provider’s terms | Full |
| Processing revenue | Full margin | Shared with the provider | Full margin, minus software licence fees |
| Time to launch | 1-2 years | A couple of weeks | Tech stack: 2 weeks; licensing: 3-6 months |
Benefits and trade-offs of PayFac as a Service
The main benefits for a PSP that launches a PayFac program through a provider are:
Lower upfront investment
Building your own payment infrastructure requires significant upfront investment in technology, security measures and compliance certifications. On the provider route, the provider carries most of these costs.
Reduced operational expenses
The model also lowers maintenance costs. The provider maintains the system’s compliance with payment security standards such as PCI DSS, which reduces your recurring audit, update and yearly certification costs. The provider also handles system updates and technology enhancements.
Fast time-to-market
The system comes pre-built, tested and fully functional, so you can go live within a couple of weeks of integration.
Access to advanced technologies
Clients get access to intelligent routing, cascading, real-time payment analytics, advanced anti-fraud, tokenization and more.
High degree of customization
The model is not fully customizable, but it still offers a high degree of customization. If the system is white-label, you can match it to your branding, including logos, colors and overall design. You can also configure payment features for your sub-merchants’ needs, for example by setting different routes for various transaction types or applying custom risk management and fraud prevention rules.
Revenue that grows with sub-merchant volume
You earn a percentage or fixed fee on each transaction your sub-merchants process, plus monthly fees and charges for value-added services. As your sub-merchants’ volume grows, so does your revenue, less the share that goes to the provider.
Trade-offs to weigh
The provider takes a share of processing revenue and may charge platform fees, so your margin per transaction is lower than a full PayFac’s. You also work within the provider’s underwriting rules, risk policy and pricing terms. Switching providers later means migrating your sub-merchants to a new setup.
When it fits, and when a full PayFac is the better route
The provider route suits you when speed matters more than margin, when your sub-merchant volume does not yet justify a registration of your own, or when you do not want to carry compliance and chargeback liability. A full PayFac makes more sense once your volume is high enough that the provider’s revenue share outweighs the cost of running the program yourself, and when you need full control over underwriting and pricing. The technology-only model is the middle path: your own registration and margin, on software you license rather than build.
What to look for in a PayFac as a Service provider
Before choosing a provider, check the following factors.
Regulatory compliance
Check who holds the card-network registration and which markets it covers. Verify that the provider is PCI DSS Level 1 compliant and protects payment data with strong security measures, such as anti-fraud filters, tokenization, encryption and third-party risk scoring.
References and reputation
Research the provider’s market reputation. Look for reviews and testimonials from current and past clients, and check case studies and news about recent partnerships to gauge reliability.
Pricing structure
Compare pricing structures and fees across providers. Look at the setup fee, monthly or yearly fee, transaction fee, revenue share on your sub-merchants’ volume and any additional charges, such as fees for new integration development. Prefer providers that give a clear fee breakdown from the start.
Available payment integrations
Choose a provider that supports the banks and payment providers your merchants prefer. If you need additional payment methods, check that the provider develops integrations on request.
Features and technologies
List the payment features your program needs and check that the provider has them. As a payment provider, you benefit most from automated merchant onboarding, while your sub-merchants will use real-time payment analytics and billing tools.
How can Akurateco help?
PSPs, acquiring banks and ISOs use Akurateco’s white-label payment platform to run a PayFac program under their own brand. Akurateco is the gateway and technology layer on top of acquirers: it does not process transactions or hold PayFac registration, and the PayFac and its acquiring partner own underwriting liability and the funds flow.
Here are the key services Akurateco provides:
- PCI DSS Level 1 certified payment platform with in-house anti-fraud modules. Akurateco also partners with external risk-scoring providers, including Fraudio, MaxMind and AcuityTec.
- Software-as-a-service, on-premises, or cloud-agnostic deployment.
- Payment features such as intelligent routing, cascading, automated merchant onboarding, tokenization, subscriptions and recurring payments.
- A dedicated payment team that acts as in-house business consultants and technical support.
- Access to 700+ integrations with banks and payment providers via an open API.
- Customization of payment page and admin panel URLs, logos and reports to match your brand.
- Payment analytics with custom reports you can create and download.
- Billing tools to calculate merchant fees, create settlements and run reconciliations.
Conclusion
PayFac as a Service gives payment providers a faster route to offering payment facilitation, at the cost of some margin and control. As volume and in-house capacity grow, a full PayFac or the technology-only model becomes the stronger option.
PayFac as a Service FAQ
What is PayFac as a Service?
PayFac as a Service is a model in which a provider registered as a payment facilitator lets a client, usually a software platform or payment provider, onboard sub-merchants under the client’s brand. The provider handles card-network registration, underwriting, risk and payouts through its acquiring partner, so the client can offer payments without becoming a registered PayFac itself.
What is the difference between a PayFac and PayFac as a Service?
A PayFac holds its own registration with the card networks through a sponsoring acquirer and carries underwriting, compliance and liability for its sub-merchants. With PayFac as a Service, the client uses the provider’s registration instead. It is faster and cheaper to launch, but gives less control over pricing and underwriting and a smaller share of processing revenue.
Is PayFac as a Service the same as PayFac-in-a-box?
No. With PayFac as a Service, the client operates under the provider’s registration. With PayFac-in-a-box, a technology-only model, the client registers as a PayFac itself and licenses the software for onboarding, sub-merchant management and billing. Vendors do not use these terms consistently, so check who holds the registration before comparing offers.
What is an example of a PayFac service?
Stripe is a well-known payment facilitator. Merchants that sign up with Stripe accept payments under its master account without opening their own merchant account, while Stripe handles onboarding, risk management and compliance. Several processors and acquirers also sell PayFac as a Service programs to software platforms and payment providers.
What is the difference between PayFac and PSP?
A PayFac is one type of payment service provider (PSP). Every PSP helps merchants accept payments across payment methods and networks. A PayFac does it by onboarding merchants as sub-merchants under its own master merchant account and taking on their underwriting, compliance and risk. Other PSPs give each merchant its own merchant account or act only as a technical intermediary.
What is PayFac vs ISO?
A PayFac aggregates multiple merchants under one master account and manages payment processing, onboarding and compliance for them. An ISO is an independent organization that partners with a bank or processor to resell payment services to merchants, but it does not manage the accounts or handle the funds directly.
