Payment facilitator (PayFac)

A payment facilitator sits between an acquirer and the businesses that actually take payments. Instead of every business going through a full merchant account application with a bank, the PayFac holds one master account with its sponsor bank and boards each business as a sub-merchant beneath it. The PayFac takes on the obligations that come with that position: underwriting each sub-merchant, monitoring transactions for fraud and card-network rule violations, managing funding and settlement, and absorbing losses when a sub-merchant fails to cover chargebacks.

How it works

A software platform integrates with a PayFac’s API. When one of the platform’s customers (say, a dental practice) signs up, the PayFac runs KYC and KYB checks, applies its underwriting policy, and issues the practice a sub-merchant ID, often in minutes rather than the days a traditional merchant account can take. Card networks require PayFacs to register with a sponsor bank and, above certain volume thresholds, to register directly with the networks themselves.

Why it matters

Who holds the PayFac registration determines who carries the compliance and financial risk. If a provider is a registered PayFac, it answers directly to its sponsor bank and the networks for its portfolio; if it merely resells another company’s facilitation, there is an extra layer between you and the entities that set the rules. When evaluating providers, ask whether they are the registered facilitator, who their sponsor bank is, and how their underwriting and monitoring actually work.

QorPay is a registered payment facilitator of Pathward, N.A., and operates its own processing platform, QorCommerce, so facilitation and processing sit with the same company.