What is payment facilitator?

Check out this article to find out what a payment facilitator is

payment facilitator

What is payment facilitator? Source:

According to the payment infrastructure platform Infinicept, payment facilitators are expected to process more than $4 trillion in global gross payment volume up to 2025.

That means these institutions could collectively generate up to $15 billion in transaction revenue during the next five years.

While their impact on the financial market is enormous, payment facilitators face a lot of challenges in their activities. They must comply with card brand rules, various legal regulations when both charging customers and disbursing funds to merchants, and perform regular KYC and AML checks. Any mistake might cost a payment facilitator millions of dollars. Such a great pressure is linked to the nature of responsibilities entrusted to PayFacs.

What’s a payment facilitator

What’s a payment facilitator. Source:

Payment facilitators are merchant service providers that simplify the merchant account enrolment process. In particular, they eliminate the need to establish an individual merchant account. They are registered by an acquirer to facilitate transactions of sub-merchants onboard their sub-merchant platform. Facilitators for short are called “PayFac”.

A facilitator provides merchants with their own Merchant ID under a master account. Usually, a simple onboarding application form and verification are needed to get started.

The acquirer (e.g. Mastercard) administers application and underwriting processes, works out a pricing agreement, and facilitates a payment technology integration. It is also responsible for monitoring the payment facilitator’s compliance with operating regulations.

The payment facilitator, in its turn, integrates with the fintech and infrastructure of an acquirer, in order to register there. The third-party account holders assume all risk and liability for their sub-merchants. Payfacs are responsible for the underwriting process of every entity under their custody. Therefore, they must complete Know Your Customer (KYC) checks, Anti-Money Laundering (AML), and Sanctions checks. They also must handle chargebacks, fraud, and data breaches.

Use cases

When payment facilitators first appeared, they faced a lot of skepticism. However, now the facilitation industry is booming. Not only have PayFacs removed the friction in the application and onboarding process by simplifying it but also they are continuously tailoring it to the needs of businesses they serve.

The simplicity and personalization ultimately challenged the balance of power in the merchant services space. Namely, many more SMEs were able to start operating quicker and without additional fuss. Previously, businesses had to become experts in payments while also taking care of their core operations and products. It was costly and time-consuming. Payment facilitators gave small businesses a chance to compete and prosper.

PayFacs perform several main functions:

  • Underwriting. As they place all the sellers on the one MID, PayFacs should make sure they are not scammers and have nothing to with crime and terrorism. Their proprietary software automates the checks and flags any suspicious activity.
  • Monitoring. Once the seller gets onboard under the sub-merchant account, PayFacs routinely perform all the transactions’ monitoring. A proper transaction should comply with the risk management guidelines.
  • Funding. Payment facilitators pay out the income the sub-merchant has earned. A settlement is usually accomplished in one of two ways. The acquirer or processor can settle transaction funds directly to a sub-merchants account and send the payment facilitator its fees separately. Alternatively, the acquirer or processor can settle the funds to an account owned by the payment facilitator, for the benefit of its sub-merchants. The payment facilitator then distributes the funds to each sub-merchant, net of its fees.
  • Chargeback control. PayFacs are also responsible for the chargeback management. They handle the whole process alongside the acquiring bank, providing the necessary legal documents to make an investigation.


Most of the payment facilitators work as SaaS businesses. PayPal and Stripe are perhaps the most popular fintech organizations in this field.

Broadly speaking, payment facilitators can be divided into three categories:

  • Commerce platform providers like Stripe, which enable digital transactions through the proprietary technology on a white-label basis. The platform owns payment flows and is responsible for paying out funds to its merchants (referred to as sub-merchants) directly.
  • Independent software vendors — or ISVs — that directly offer payment solutions but do not control the underlying technology.
  • Marketplaces or platforms that aggregate a set of sub-merchants, generally serve as the merchant of record and control the flow of funds and payouts to sub-merchants.

The list of payment facilitators registered with Mastercard can be found here.


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