In this guide we’ll explain what a Payfac is and how it works in practice, how it differs from a payment processor and from an ISO, and where Payfac-as-a-Service or hybrid models fit. We’ll weigh up the benefits and challenges, outline when to work with a Payfac versus when to become a Payfac, and show how to pair Payfac-led payment acceptance with flexible terms to keep cash flowing.
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A payment facilitator (Payfac) is the fast lane to accept electronic payments without opening a separate merchant account the old-fashioned way. Instead, you’re used as a sub-merchant under the Payfac’s master merchant account, so you can begin accepting payments (cards, wallets, online) quickly while the Payfac handles the technical side of taking payments. For UK SMEs and software platforms, that can mean less friction at the point that you go-live and a cleaner experience for customers.
Let's start with the basics. A Payfac is a company that lets other businesses accept electronic payments - usually card payments and online payments - under its umbrella. Instead of each business going through the lengthy process of opening a traditional merchant account, the Payfac creates a master merchant account and onboards sub-merchants beneath it. The Payfac manages merchant onboarding, runs KYB/KYC (Know Your Customer/Know Your Business) and anti-money laundering (AML) checks, sets up payment gateways, and handles risk management, fraud prevention, funding, chargebacks and ongoing monitoring. All these fiddly bits are taken care of.
From a Supplier’s perspective, the attraction all comes down to speed and simplicity. You complete a lighter payment facilitation process, start accepting payments quickly, and manage payments inside the payment facilitator’s platform - often with options to add local payment methods, wallets, and mobile payment options alongside cards. Behind the scenes, the Payfac connects to an acquiring bank and the card networks, routes authorisations to payment processors, and processes transactions end-to-end so you can process payments without stitching together multiple vendors. The money then lands in your merchant bank account.
A payment processor moves data between the acquiring bank, issuing bank and card schemes; it’s the technical rail that processes transactions. A payment facilitator is a commercial, compliance and onboarding layer on top: it aggregates merchants under its master merchant account, handles risk and payment services like onboarding, settlement timing and chargeback workflows, and exposes the tools to manage payments. In short: processors focus on moving packets; Payfacs focus on letting businesses provide payment services quickly and safely.
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An ISO (Independent Sales Organisation) typically sources merchants for acquirers and payment processors, helps them pick payment solutions, and may provide value-added services. Crucially, an ISO does not bring merchants under its own MID; each merchant opens their own merchant account. That means the ISO doesn’t underwrite or hold primary liability for chargebacks.
A Payfac underwrites and onboards sub-merchants beneath its umbrella and takes on more responsibility for compliance, monitoring, disputes and funding. The experience is faster and more unified for the merchant, but Payfac carries more operational and regulatory weight.
For most UK SMEs that simply want to begin accepting payments, a Payfac-powered experience is usually smoother: faster onboarding, one contract, unified reporting, and has modern payment acceptance features baked in. ISOs can be a fit when you want direct relationships with an acquirer, bespoke pricing, or niche hardware - but expect slower time-to-live and a heavier lift on setup.
There are three broad approaches you’ll hear about in the payment industry:
A well-implemented payment facilitator model can transform payments from a cost centre into part of your product.
You can streamline payment acceptance with faster sign-up and fewer systems to wire together. Onboarding, payment gateways, payment processing, risk and funding live in one place, which improves your customer experience and time-to-revenue. If you’re a platform, you can embed payments and create new revenue streams by sharing in payment processing fees or offering additional services (e.g., payouts, bank transfers, reporting). Unified data across online transactions and in-person flows helps you spot issues, support customers, and expand payment methods (cards, wallets, local payment methods) as you grow.
Aggregation makes the Payfac responsible for ensuring compliance with payment industry standards, AML, sanctions and ongoing monitoring. Chargebacks and fraud roll up to the umbrella, so risk tooling and policies matter. Funding schedules can be standardised rather than bespoke. And while Payfacs simplify entry, advanced customisation or unusual use-cases can still require deeper work with the provider.
For most SMEs and platforms: yes, significantly. A Payfac centralises KYB/KYC, handles card scheme rules with the payment processor(s) and acquirer, and exposes a tested onboarding process that cuts weeks down to minutes. That said, “reduced complexity” doesn’t mean “no complexity” - high-risk categories and edge cases still need proper underwriting, and you’ll want clarity on who owns what in risk management and disputes.
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If you’re a UK Supplier that wants to accept payments quickly with a clean UI and sensible payment processing options, working with a Payfac (directly or via a PSP that uses a Payfac under the hood) is the pragmatic path. You get modern payment services, faster go-live, and fewer vendors to juggle.
Becoming a Payfac makes sense only when payments are central to your business model - typically for ISVs, marketplaces or platforms with sufficient scale to justify the cost of licensing, compliance staff, risk capital, scheme certifications and 24/7 monitoring. Ask three questions before you head that way:
For many growing businesses, a middle path - Payfac-as-a-Service or a hybrid Payfac - delivers the control you want without taking on a full regulatory footprint from day one.
Payments are only half the story, though. If affordability slows deals, you don’t need to stretch terms (and strain cash flow). For businesses looking to simplify payments and improve cash flow, iwocaPay’s B2B BNPL solution can work alongside Payfac models to offer flexible terms.
