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What is a Payment Facilitator (PayFac)?

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As the payments landscape evolves, businesses seek new ways to accept customer payments.

Enter the payment facilitator (PayFac) model. With a payment facilitator, businesses can quickly and easily get up and running with payment processing, which has plusses and minuses.

But what exactly is a payment facilitator, and how does it work? We delve into the concept of payment facilitation and explore some popular examples of payment facilitators in today’s market. We will discuss what it takes for a company to become a payment facilitator and this model’s potential benefits and risks.

What is a Payment Facilitator?

Payment facilitators, or PayFacs, is a single merchant ID (MID) with a payment service provider and board ‘sub-merchants’ under their own MID, essentially acting as one large merchant account.

Payment facilitators can quickly and easily help businesses accept credit/debit card payments. The payment facilitator has already undergone major risk and underwriting procedures on behalf of its business clients, letting its clients get up and running with payment acceptance in minutes.

As a deeper explanation, a payment facilitator is a regulatory designation for a particular type of payment processing company. This model is a distribution channel implemented by the payment networks (e.g., Visa and Mastercard) to increase the number of companies in the market that accept credit/debit card payments by making it easier to do so.

Payment facilitators may have multiple roles in the payment facilitator market and the broader payment processing market. For example, many payment facilitators started as software companies offering businesses various operational management functions. Such as inventory tracking, appointment scheduling, marketing tools, accounting modules, etc. Offering payment processing for their business client base is a natural next step. Becoming a payment facilitator is a popular approach for these software companies.

Businesses connected to a payment facilitator that exceed $1 million in annual payment processing volume will also need to have a direct agreement with an acquiring bank. As well as the payment facilitator, due to the increased level of risk this volume can bring.

How to Become a Payment Facilitator

This model requires an in-depth understanding of the payments ecosystem and chain of risk. Companies implementing this model successfully should be prepared to invest substantially in technology. Not only technology but talent to support such a significant undertaking. These companies looking to become payment facilitators typically comply with higher PCI security standards, assuming responsibility for sales, support, risk management, credit risk, and complete management of the payment processing services offered through their business.

Companies looking to become a payment facilitator must establish an operational posture. Then to be reviewed and approved by their sponsor bank, processing partner, and technology partner(s) to facilitate the transaction processing service. It also requires registration with governing entities, substantial operational/technological resources, and payment processing competency. Payment facilitators typically assume total financial liability. Meaning that a payment facilitator will take on all credit losses, fraud losses, and responsibility for daily funding of sub-merchants. With these increased responsibilities, the company can earn more of the payment revenue for the volume they are facilitating. Resulting in maintaining greater control of the client experience.

Other models outside of payment facilitation also exist. TSG helps software companies looking to monetize their payment volume by selecting the right monetization model and vendor.

What are Examples of a Payment Facilitator?

Three popular payment facilitators are Square (the payment acceptance brand of Block Inc.), Stripe, and Toast. These entities have seen significant growth in their respective focus areas and are glowing examples of success with the payment facilitation model.

TSG’s reporting shows that Square processed over $189 billion in payment volume in the U.S. alone in 2022. Stripe processed approximately $320 billion, and Toast processed ~$83 billion (Toast only focuses on restaurant businesses).


Historically, Square’s sales staff have been generalists. They relied heavily on more passive marketing channels such as automated pop-ups or email campaigns. However, Square is beginning to verticalize its sales force to attract and land larger merchants, starting with inbound sales in early 2022. These sales professionals can speak to Square’s verticalized software offerings. Also, be able to up-sell merchant clients on more business software solutions beyond payment processing (which TSG has found is key for software companies). Square also recognizes that decision-makers may not see the automated pop-ups, therefore, are working on a blended marketing strategy using AI for more targeted outbound sales calls on select enterprise merchant accounts.


Stripe continues to expand geographically, growing from 35 countries in 2021 to ~50 countries currently. The company has historically focused its offerings on small businesses as a starting point. This has been one of the most successful in the industry in growing their enterprise revenue segment. The company has been increasingly focused on growing its enterprise presence. Along with targeting large enterprise companies with notable wins with the likes of Amazon, Etsy, Instacart, and Wayfair. 


Toast, atypical of many of its similarly sized competitors, derives all material revenue from the North American market. The company’s office locations are also in Canada, the U.K., Ireland, and India; however, Toast has all reported revenue sourced to the United States. Toast is actively hiring for sales positions in Canada and the U.K. specifically. However, this has not yet resulted in reportable revenue.

Over the past three years, Toast has prioritized acquisitions that improve upon the existing Toast all-in-one platform. Recent acquisitions focused on improving reporting & analytics capabilities, employee management functions, and improving its offering to QSRs. As Toast hasn’t had a prior track record of buying direct competition, near future acquisitions will likely be focused on areas within the platform that haven’t been focused thus far on M&A (such as marketing & loyalty solutions) or solutions that would assist in Toast’s eventual attempt at further international expansion.

TSG has seen software companies making 10x more revenue by monetizing payments in their systems than from software license fees alone. The payment facilitator model is just one of several models companies can consider to achieve success in payments.