Payment Facilitator vs. Payment Processor — 6 Key Differences!
Choosing the right payment setup for your business can feel overwhelming—especially when terms like Payment Facilitator (PayFac) and Payment Processor get tossed around. If you’re confused about how they differ, you’re not alone.
This blog breaks down the 6 key differences between a Payment Facilitator and a Payment Processor in a way that’s simple, human, and packed with insights. Whether you’re launching an online store or expanding your brick-and-mortar business, knowing which model suits your needs can save you time, money, and headaches.
Let’s start with the basics:
What Is a Payment Processor?
A Payment Processor is a company that handles transactions between your business (the merchant), your customer’s bank, and your own bank. They move the payment data securely and ensure the funds land in your business bank account.
They don’t provide merchant accounts directly. Instead, you usually need to work with an acquiring bank to open a merchant account before using a payment processor.
What Is a Payment Facilitator (PayFac)?
A Payment Facilitator is a company that enables businesses to start accepting payments quickly without needing a traditional merchant account. They offer a sub-merchant model—meaning your business signs up under their master account.
This model is faster to set up and popular with small to medium businesses, startups, and SaaS platforms.
Why Does It Matter?
Because choosing the wrong one can affect:
- How quickly you can start accepting payments
- Your compliance requirements
- Your transaction fees
- Your customer experience
- And most importantly—your growth potential
Now, let’s look at the 6 key differences between a Payment Facilitator and a Payment Processor.
1. Account Setup Time: –
🔹 Payment Processor:
To use a processor, businesses must apply for a dedicated merchant account. This process involves underwriting, credit checks, and compliance paperwork. It can take 3 to 7 business days, sometimes more.
🔹 Payment Facilitator:
Payment facilitators let businesses sign up instantly or within hours. Since you’re joining as a sub-merchant under the Payment facilitator’s master account, the onboarding is automated and quick.
Industry Expert says that if speed matters—like during a product launch or peak sales season—Payment facilitators can get you live almost immediately.
2. Onboarding Process and Risk Review: –
🔹 Payment Processor:
You go through a rigid underwriting process. They’ll examine your business model, financials, processing history, and sometimes even your personal credit score.
🔹 Payment Facilitator:
Payment facilitators perform light risk checks upfront. Many use algorithms to assess risk, which speeds up onboarding but may result in sudden account holds if unusual activity is detected.
Over 60% of small businesses prefer simplified onboarding even if it means higher per-transaction fees (U.S. SMB Payments Survey).
3. Fees and Pricing Structure: –
🔹 Payment Processor:
Fees vary depending on your business type and volume. You may negotiate interchange-plus pricing, which can be cost-effective for high-volume businesses. You also pay:
- Monthly fees
- PCI compliance fees
- Statement fees
- Chargeback fees
🔹 Payment Facilitator:
Payment facilitators use flat-rate pricing (e.g., 2.9% + 30¢ per transaction). It’s transparent but usually more expensive per transaction than processors.
Expert Tip: If you’re processing over $250,000/year, a traditional processor might save you more in the long run.
4. Control and Customization: –
🔹 Payment Processor:
With a processor, you can tailor your payment flow, integrate specific features, and use custom gateways. It’s a good fit for businesses with complex or high-risk needs.
🔹 Payment Facilitator:
Payment facilitators offer plug-and-play tools but with limited flexibility. You’re bound by their interface, rules, and limitations.
For SaaS Platforms or Marketplaces:
Some Payment facilitators (like Stripe Connect) offer modular services, but they still control the rails.
5. Compliance and Liability: –
🔹 Payment Processor:
As a merchant, you’re responsible for PCI DSS compliance, fraud management, and chargebacks. You hold your own MID (merchant ID), so you carry more liability—but also more control.
🔹 Payment Facilitator:
The Payment facilitator handles much of the compliance burden. That’s why small businesses love it—they don’t need to stress about security audits or complex rules.
Trust Factor: According to Visa and Mastercard guidelines, Payment facilitators are liable for their sub-merchants’ activity. That’s why they monitor accounts aggressively.
6. Scalability and Long-Term Growth: –
🔹 Payment Processor:
Ideal for scaling businesses. You have your own merchant account and more room to negotiate rates, add features, and manage risk.
🔹 Payment Facilitator:
Great for starting out, but may not suit long-term high-volume needs. As your business grows, you may face:
- Higher fees
- Funding delays
- Sudden freezes on large transactions
Stat Alert: Businesses processing over $500K/year often switch to a processor to gain better rates and reliability.
When Should You Choose a Payment Processor?
✅ You process high monthly volumes
✅ You want lower transaction fees
✅ You need customization and control
✅ You’re prepared for compliance responsibility
When Should You Choose a Payment Facilitator?
✅ You’re a startup or SMB
✅ You want to launch fast
✅ You don’t want to deal with merchant account paperwork
✅ You value simplicity over flexibility
Final Thoughts: Choose Based on Your Business Needs: –
The best payment setup isn’t one-size-fits-all. Here’s a quick recap:
| Factor | Payment Processor | Payment Facilitator |
| Setup Time | 3–7 days | Instant |
| Fees | Lower with volume | Flat, higher |
| Compliance | Your responsibility | Payment facilitator manages |
| Control | High | Limited |
| Scalability | Excellent | Limited after a point |
| Ideal For | Growing businesses | New/small businesses |
Nowadays and beyond, businesses need payment solutions that are fast, secure, and scalable. Whether you’re launching an app, building an eCommerce empire, or running a consulting firm, understanding your payment infrastructure can make or break your customer experience.
Pro Tip: Start with a Payment facilitator if you’re just beginning—but plan your move to a processor as you grow.
Want expert help finding the right payment solution?
Contact our payment consultant at Support@eCheckplan.com or (800) 974-9661, who can analyze your volume, industry, and growth goals to guide you.
