The payments landscape continues to rapidly evolve, with new players and models emerging regularly. Two lesser-known but increasingly popular roles are payment facilitators (payfacs) and acquirers. Though they sound similar and have some overlapping capabilities, there are several key differences between the two.
| Capability | PayFac | Acquirer |
| Onboards & Manages Merchants | Yes | No |
| Payment Platform/Gateway | Yes | Sometimes |
| Card Network Connectivity | Through Acquirers | Directly |
| Transaction Processing | Yes | Yes |
| Funds Settlement | Yes | Yes |
| Ongoing Compliance | Yes | Partial |
| Value-Added Services | Many | Few |
| Primary Revenue Source | Transaction fees | Interchange fees |
A payment facilitator (payfac) is an entity that provides payment processing services to merchants. Payfacs handle all the steps needed to onboard merchants, manage transactions, deal with regulations, and more – essentially acting as a one-stop shop payments provider.
Key abilities and features of payfacs include:
In essence, a payfac simplifies payments for merchants by being the middleman between them, processors, and other financial institutions.
An acquirer is a financial institution that processes card payments on behalf of merchants. To accept card transactions, a merchant must have a relationship with an acquiring bank that connects to card networks like Visa and Mastercard.
Key abilities and features of acquirers include:
So in simple terms, an acquirer facilitates card payments for merchants. Their focus is on the processing side rather than a full suite of payment services.
Now that we understand these two players better, let’s compare payfacs and acquirers across a few key factors:
As shown above, while acquirers and payfacs both enable payments for merchants, payfacs take a much broader, full-service approach that encompasses everything from onboarding to settlement. Acquirers focus specifically on processing card transactions.
Payfacs simplify payments for merchants by being a one-stop-shop, while using acquirers behind the scenes for accessing card networks. So acquirers can be thought of as vendors to payfacs in some cases.
There is also often confusion between payfacs and related entities like payment gateways and payment service providers (PSPs). Here’s a quick rundown of how they differ:
Payment Gateways enable online transactions by providing the software to connect merchant websites to processing networks. They focus on ecommerce transactions specifically.
PSPs offer payment services either as a gateway or processor. But unlike payfacs, they don’t handle onboarding or total funds management.
PayFacs provide extensive services across the whole payment lifecycle – from onboarding to funding. They are the most full-service model.
So in summary, payfacs offer the most complete payments services solution of these three options. Gateways and PSPs concentrate more narrowly on technology and processing.
Some examples of companies operating as payment facilitators include:
So alongside being processors themselves, payments giants like Stripe, PayPal, and Square allow third parties to leverage their tools, compliance, and capabilities to also function as payfacs.
Also watch the video of PayFac!
Utilizing a payfac over working directly with acquirers or processors provides several benefits for certain merchants and platforms. Key pros include:
Simplicity – Payfacs handle all complex steps across the payments process, letting merchants focus on core business needs.
Compliance – Onboarding, monitoring, security compliance, and regulations are all managed seamlessly by the payfac.
Cost – Payfacs leverage economies of scale to offer competitive, bundled pricing across their suite of payment tools and services.
Innovation – Payfacs continually invest in and integrate the latest payments capabilities and optimize for different industries.
For platforms like marketplaces wanting to embed payments, using a payfac provides tremendous advantages over needing to build in-house expertise across compliance, tech integration, security protocols and more. They handle it all turnkey.
Even for traditional merchants like retailers, utilizing a payfac over working directly through an acquirer simplifies the complex world of payments into a single solution and relationship.
Payfacs provide extensive offerings, but there are some limitations to consider as well compared to working directly with processors and banks:
Vendor Lock-In – Relying entirely on one payfac makes it more difficult to switch providers down the road.
Customization – Payfacs offer more standardized software tools and platforms, with less ability to deeply customize.
Pricing Fluctuations – Payfacs can sometimes adjust rates or fees unexpectedly, which merchants then have to accept.
Direct Card Access – Acquirers offer more direct card network connectivity and may provide larger merchants more customized options.
For very large merchants that want close control over payments or direct interchange pricing, working directly with one or more acquirers allows for more influence, flexibility and minimization of third-party fees. However, it requires significantly more internal resources and expertise.
A PayFac (payment facilitator) manages the full suite of payment processing services on behalf of clients. This includes onboarding merchants, handling compliance, providing software & tools, managing transactions and settlement, and all other aspects of accepting payments.
A payment gateway focuses specifically on enabling online transactions by providing the secure infrastructure to process card payments from ecommerce stores. PayFacs offer a much wider array of services across in-person and online transactions, including everything needed to accept payments.
A payment service provider (PSP) offers some payment capabilities like gateways or processing, but not a full-service solution. A PayFac provides expansive offerings from onboarding to settlement, acting as the main payments provider and manager for merchants.
Well-known companies like Stripe, PayPal, and Square operate as payment facilitators. They offer extensive tools and platforms for businesses to accept in-person and online payments using their unified solution that handles acquiring, processing, compliance, and more on merchants’ behalf.
Also Read: Differences Between ADP And OnPay.
Deciding whether to utilize a payment facilitator Vs. going directly to acquirers and processors depends largely on the size and needs of a merchant or platform.
For small to medium businesses, payfacs provide simplicity and tremendous capabilities not otherwise accessible. The pros tend to outweigh the cons for SMBs in leveraging payfac solutions.
Larger merchants need to evaluate whether the customization and control of working directly with banking acquirers is worth the heavy lifting required for compliance, security, integrations and managing the full payments lifecycle internally.
In general, payfacs are increasingly popular for their ability to handle payments from end-to-end on behalf of clients across industries and business models. The consolidated experience, simplified pricing, bundled tools, and compliance management offset much of the vendor lock-in and lack of customization.
Use this comparison of payfac Vs. acquirer models, capabilities and considerations as a guide in determining the best approach to accepting payments for your needs. Both play important roles in the vast payments ecosystem.
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