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Payment Facilitators: The Basics

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedJuly 20222 min read

Whether you’re creating a new ecommerce site or expanding your business online, you’ll need to figure out how to take payments from your customers. One option is to use a payment facilitator, often shortened to PayFac or PF. In this guide, we’ll discuss payment facilitators as a service along with their pros and cons, so that you can make the most informed decision.

What is a payment facilitator?

Payment facilitators are companies that enable customers to accept online payments. They’re ideal for start-ups and small businesses because they allow the business to use the payment facilitator’s infrastructure. This means that rather than opening your own merchant account and waiting for approval, you can get started with selling straight away. Merchant accounts are designed for larger businesses that process high volumes of transactions, with a lengthy application process and fees attached.

Payment facilitators assign each client their own sub-merchant ID registered under the master account. This makes the onboarding process much simpler.

While payment gateways and payment processors connect merchants with banks, payment facilitators are designed with the merchant as the customer. This often takes the place of a retail marketplace like Etsy or an ecommerce platform like Square Online and Wix.

Payment facilitator as a service: how does it work?

So, how does the process work? The payment facilitator opens its own merchant bank account with corresponding merchant ID (MID). It uses this to aggregate payments for its own customers, a smaller group of merchants. These ‘sub-merchants’ don’t need to register their own MID, because transactions are aggregated using the PayFac’s merchant account instead. This streamlines the entire payments process for the merchant, who only needs to partner with the PayFac to get their business ready to sell online.

A payment facilitator takes care of onboarding and managing payments. It’s integrated with its own payment processor to route the sub-merchant’s transactions.

Payment facilitator vs payment processor

While both terms are sometimes used interchangeably, there are significant differences between a payment facilitator and a payment processor. Payment facilitators link sub-merchants to a merchant account and handle the processing with the assistance of an integrated payment processor. By contrast, a payment processor works directly with businesses to process payments on the business’s website or physical point of sale. Onboarding and underwriting services are streamlined and simplified when you use a payment facilitator, though working with your own payment processor gives added flexibility.

Is a payment facilitator service right for you?

Could the PayFac model work for you? It does offer an array of benefits, particularly for the very smallest businesses and sole traders. You’ll be able to start selling products and services straight away with a simple application form, rather than waiting for the lengthy approval process of applying for your own merchant account. Payment facilitators also handle underwriting to save you time, using automated tools for swift evaluation.

Another benefit for individual merchants is that the payment facilitator assumes all risk because they’re the one that owns the merchant account. That means you don’t need to worry about things like PCI DSS compliance – the payment facilitator will do this for you.

Payment facilitators offer plentiful benefits if you wish to accept online card payments, but what about bank debits? GoCardless offers another payments solution for businesses of all sizes, enabling merchants to collect payment directly from a customer’s bank account. It’s free to set up, with a quick and easy approval process that allows you to start collecting recurring and one-off invoice payments. The solution also provides you with high converting payment pages during the checkout experience, so you can customise as needed to suit your growing brand.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.