23 September 2023

Digital Technology Guru

Digital Technology Guru Reviews

The Evolution and Benefits of Payment Facilitators

2 min read
The Evolution and Benefits of Payment Facilitators

The merchant acquiring model has undergone significant changes over the years. From the early days of acquiring banks signing up merchants to accept credit card payments to the introduction of independent sales organizations (ISOs) and payment gateways, the landscape has constantly evolved. Now, a new player has emerged in the form of payment facilitators (PayFacs).

PayFacs are the next step in the evolution of the merchant acquiring model, with a focus on small to mid-sized businesses (SMBs) and the acceptance of digital payments. A recent collaboration between PYMNTS Intelligence and Visa, titled “How to PayFac,” delves into the history, benefits, and responsibilities of PayFacs.

By becoming a PayFac, entities can enhance their customer experience and payment economics. Consolidating smaller merchant sub-accounts allows a PayFac to negotiate better fees with card networks and acquirers. Additionally, PayFacs can capture a larger share of processing fees and offer value-added services, benefitting both the PayFac and the merchants they serve.

Different types of PayFacs have emerged over the years to cater to various needs. Aggregators facilitate transaction processing and other merchant services for SMBs, while business software platforms help merchants integrate payment services into their software to generate additional revenue streams. Connected ecosystem PayFacs have also emerged to assist platforms and marketplaces in navigating the complexity of merchant onboarding, servicing, and compliance.

The PayFac ecosystem is still evolving, presenting immense opportunities for embedding payments into various digital or physical workflows. Appointment software for spas or food delivery aggregators, for example, can enable customers to make payments within their booking or ordering process. These integrations not only benefit end customers but also drive growth for PayFacs and their partners.

Payment facilitators are revolutionizing the world of payments, offering enhanced services and streamlining processes for merchants of all sizes. The PayFac ecosystem continues to evolve, creating new opportunities and shaping the future of payments.

Source: PYMNTS Intelligence and Visa collaboration – How to PayFac