What is a PayFac? Payment facilitators and embedded payments explained

What is a payment facilitator (PayFac)?

A payment facilitator is a merchant of a special kind: it holds one master merchant account with an acquirer and lets many smaller businesses, called sub-merchants or sponsored merchants, accept cards under it. Visa and Mastercard both define the role in their rules, and the PayFac must be registered with each scheme by its sponsoring acquirer.

The model exists because opening a traditional merchant account for a small business takes days or weeks of underwriting. A PayFac takes over that work, so a hairdresser signing up to a booking app can accept card payments within minutes. In exchange the PayFac carries the risk: if a sub-merchant disappears after a wave of chargebacks, the PayFac pays.

How does the PayFac model work?

The acquirer underwrites the PayFac once and lets it underwrite its own sub-merchants within agreed limits. Every payment runs through the PayFac's master account, the acquirer settles to the PayFac or directly to the sub-merchant, and the PayFac keeps the difference between what it charges and what it pays the acquirer.

Scheme rules set limits on the model. Under the Visa Core Rules, a sub-merchant that exceeds USD 1 million in annual Visa volume generally needs its own direct merchant agreement with the acquirer, although the PayFac may continue to provide services and settlement to it.

1. Sub-merchant signs up The business registers inside the software platform and passes identity and business verification.
2. PayFac underwrites The PayFac screens the sub-merchant against its risk policy and the acquirer's rules and sets limits.
3. Payments run on the master account Card payments are authorised and cleared under the PayFac's merchant account with the sponsoring acquirer.
4. Funds are settled The acquirer settles to the PayFac or to the sub-merchant, minus fees and any reserve.

PayFac vs ISO vs PayFac-as-a-service vs marketplace vs orchestrator: what is the difference?

These models are often confused because all of them help a business accept payments without dealing with an acquirer directly. The difference lies in who signs the merchant contract, who underwrites, who carries chargeback liability and who touches the funds.

What are embedded payments?

Embedded payments means a software platform offers payment acceptance inside its own product, so its customers do not have to sign up with a separate payment provider. Booking tools, practice management software, e-commerce builders and invoicing apps all use it: the customer activates payments in settings and the platform earns a share of every transaction.

Becoming a registered PayFac is only one way to embed payments. Most platforms start with PayFac-as-a-service, where a licensed provider handles registration, underwriting, fund holding and payouts while the platform controls the onboarding flow and pricing. The trade-off is margin: the provider keeps part of the spread that a registered PayFac would keep itself.

What does it take to become a PayFac?

Registration starts with a sponsoring acquirer willing to take on the platform's risk. The acquirer reviews the business plan, financials, risk policies and technology, then registers the PayFac with Visa and Mastercard. The PayFac must prove it can monitor sub-merchants continuously, not only at onboarding.

In the European Economic Area there is an extra layer. Receiving and passing on sub-merchant funds is a payment service under PSD2, so a European PayFac either holds a payment or e-money licence or uses a structure where the acquirer settles directly to sub-merchants.

• A sponsoring acquirer and registration with each card scheme
• Sub-merchant onboarding with KYC, KYB and beneficial owner checks
• Underwriting policy, transaction monitoring and prohibited-business screening
• Chargeback and fraud liability, backed by reserves the acquirer sets
• PCI DSS compliance, at Level 1 above 300,000 card transactions a year
• Reconciliation, split settlement and sub-merchant reporting
• A payment or e-money licence in the EEA if the PayFac holds funds

How much does it cost to become a PayFac and how long does it take?

Industry estimates put the path from planning to the first live transaction at 12 to 18 months. Most of the cost is people and systems for risk, compliance and reconciliation, plus capital the acquirer asks you to hold against losses. Scheme registration itself is a small part of the bill.

The figures below are typical ranges cited by PayFac consultants and providers; your acquirer's requirements and your risk profile decide the actual numbers.

When should a SaaS platform embed payments, and which route fits?

Embedding payments pays off when your customers already process money through your product and the payment margin is meaningful. A platform processing €50 million a year that keeps 0.5% earns €250,000; at that size PayFac-as-a-service is usually the better start, because a registered PayFac costs more than that before the first payment.

A full PayFac registration starts to make sense from several hundred million in annual volume, with an in-house risk team and a sub-merchant base whose risk you understand. Below that, choose PayFac-as-a-service for speed, or an orchestration layer if your customers want to bring their own payment provider contracts.

How to add embedded payments through OrsunPay

OrsunPay is not a PayFac and does not hold funds. It is a technical layer that connects a platform or its customers to their own accounts at PSPs, including PayFac-as-a-service providers, through one API, with routing, payouts through the provider's API, webhooks and reporting. The registered PSP remains the merchant-facing licensed party.