The PayFac Model: A Simplified Approach to Payment Processing

What is a Payfac Model?

Payment Facilitators, or PayFacs, are revolutionising traditional payment processing by enabling a simplified merchant acquisition process. Unlike traditional methods that require businesses to set up a direct merchant account with banks or payment processors, the PayFac acts as a master merchant. It facilitates payment capabilities for other businesses under its management, streamlining the entire process.

Here’s How the PayFac Model Works: 

• Master Merchant Account: A PayFac holds a master merchant account with a licensed card acquirer, allowing it to process payments on behalf of multiple sub-merchants. 
• Simplified Onboarding: The PayFac model significantly reduces the time and complexity of merchant onboarding. Instead of going through a lengthy traditional merchant account application process, businesses can be approved and start accepting payments within 24-48 hours, or faster in some cases. 
• Aggregation of Transactions: The PayFac aggregates transactions from all its sub-merchants and routes them through its payment infrastructure. 
• Risk Management: PayFac assumes responsibility for managing risk and fraud for all sub-merchants, including monitoring transactions and implementing security measures. 
• Fund Settlement: PayFacs receive funds from customers, deduct their fees, and transfer the remaining amount to the sub-merchant accounts. 
• Reporting and Analytics: Many PayFacs provide sub-merchants with reporting tools and analytics to monitor transaction data and sales trends.

Payment Processing Simplified

The PayFac Model is considered a simplified approach because:

• Rapid Onboarding: It allows businesses to start accepting payments much faster than traditional methods. 
• Reduced Complexity: Sub-merchants don’t need to establish their own merchant accounts or navigate complex payment processing setups. 
• Lower Barriers to Entry: This model makes it easier for small and medium-sized businesses to access electronic payment processing capabilities. 
• Focus on Core Business: By handling payment processing, risk management, and compliance, PayFacs allow businesses to concentrate on their primary operations. 
• Unified Payment Experience: PayFacs often provide a consistent payment interface across all sub-merchants, improving the customer experience