The Year of the PayFac

April 24, 2023

The Year of the PayFac

Payment Facilitators, also known as ‘PayFacs’, became popular in the 1990s. They were conceived to help small and medium sized businesses accept online payments. The PayFac model allows companies who specialise in payments to reduce the complexity of online transactions and to offer their services to a wide array of Merchants.

Types of PayFacs

A traditional PayFac solution will partner with an Acquiring bank. They will then branch out and develop systems to simplify processes such as onboarding, fraud prevention, and payment processing.

Another type of PayFac takes a more modernised, technology first approach. Payment companies can White Label this technology and resell it as their own. This provides companies with the ability to commercialise payments they take, adding a new revenue stream.

How do PayFacs Work?

In order to function correctly, PayFacs must own a Master Identification (MID) account. If a Merchanted wanted to process transactions on their own, they’d have to apply for their own Merchant Account which requires an arduous application process with many key data points. They’d have to go through an underwriting process, discuss complex pricing agreements, and then integrate with the latest payment technology. This requires in-depth technical knowledge and a lot of manpower to get started.

To put it simply, most small Merchants do not have the time nor the resources to effectively undertake this process. The gap between Small and Medium Enterprises (SMEs) and large enterprises grows. PayFacs challenge this. By carrying out the heavy lifting for the Merchant, the playing field is levelled as SMEs can dedicate their limited resources to maximising revenue by increasing sales.

To learn how Cardstream’s new White Lable PayFac Service can help your offerings, and to view our different Payment Gateway Solutions, please get in contact with us.

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