Payment Facilitator Vs Payment Gateway: Key Differences And Similarities

1.1 Trillion. That’s not a typo; we’re talking about a trillion with a T. That’s the value of eCommerce transactions that took place in 2023 in the U.S. alone, according to a report from Insider Intelligence.  

Now what if we told you that number is expected to grow by 50% by the year 2027?

In a world where we’re spending more and more time online and every click is a potential transaction, it’s no surprise the eCommerce and digital payments sectors are experiencing exponential growth. Each day, it becomes increasingly crucial for every business to accept online payments in order to remain competitive and avoid being left behind. And, in that same vein, understanding the nuances of the different payment systems required to set up eCommerce capabilities is no longer a luxury; it’s a strategic necessity. 

In this article, we’ll dive into the intricacies of two types of players in the eCommerce ecosystem: payment gateways and payment facilitators. You’ll learn the similarities, differences, and when and where to employ each type of solution for your business.


  • Payment gateways and PayFacs are both players in the digital payment process with similar goals in mind: secure and low-risk payments while providing seamless, fast, and positive customer experiences. 
  • The high-level difference is when and how to deploy them as part of the payment process. A payment gateway handles the customer’s relationship with the merchant, an individual transaction at a time. A PayFac, by contrast, handles the bank’s interaction with a number of merchants.
  • Because they handle different parts of the payment process, payment gateways and PayFacs can be used in tandem.
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Payment Processing and the Payment Processor Ecosystem


Before getting into the specifics, let’s take a moment to give ourselves a high-level view of online payment processing. In every eCommerce transaction, payment processing acts as the invisible force that enables transactions to occur seamlessly across the globe. At its core, payment processing involves various players and technologies to facilitate the movement of funds from customers to merchants securely and efficiently. And, as a result of payment processing, businesses are not only able to conveniently accept credit card payments and other digital payments from anywhere across the globe but also verify and process card transactions in mere seconds—as quickly as exchanging cash in person. 

Digital payments only take a few seconds, but they flow through many different layers of partners and technology. Consider the following:

  • Merchants are the sellers, businesses, or service providers seeking payment for their offerings. 
  • The acquiring bank (or issuing bank or acquirer) is the financial institution that enables merchants to accept payments, transferring funds from customers to the merchant’s account. 
  • The payment gateway acts as a virtual bridge, securely transmitting payment information between the merchant, customer, and acquiring bank. 
  • Payment processors are the behind-the-scenes entities that handle the authorization, capture, and settlement of transactions. 
  • Payment facilitators simplify the process for smaller businesses, aggregating multiple merchants under their umbrella and managing payments on their behalf. 

Understanding the roles of these players is essential for businesses, as it empowers them to navigate the complex landscape of different payment systems, make informed decisions, and optimize their financial processes for success in the digital marketplace.

What is a Payment Gateway?

Most simply, a payment gateway is the interface a company uses to collect payment information and transmit that information to the financial institutions and processors involved in the transaction. 

A payment gateway can be the POS system where you swipe your card in-store. Or, in eCommerce and online transactions, this can be as simple as your website’s checkout page. This interface connects to the financial institutions handling the transaction, securely sends your credit card, debit card, or other electronic payment information, and then informs you of the result of the transaction.

How it works:

  • First, the buyer selects a product to buy from your website.
  • Then, the buyer moves to check out and enters payment information, such as credit card information, into the checkout page. This is the payment gateway.
  • When the information is submitted, the payment gateway securely transfers your information to the payment processor or bank. The payment processor or bank will attempt to verify the information to authorize the payment.
  • That transaction is then approved or declined, and the payment processor or bank sends the information back to the payment gateway, where it informs both the buyer and the vendor of the result.

What is a Payment Facilitator (or PayFac)?

A payment facilitator, on the other hand, can be a little more complicated to understand. While a payment gateway handles the “front end” of an eCommerce transaction, many interactions happen in the “back end” of the transaction. 

A payment facilitator, or PayFac for short, acts as a partner to handle a number of these back-end interactions to make this easier for merchants, especially smaller merchants.

Normally, each merchant that offers digital payments must have its own merchant account with the acquiring bank. But the money transfers between the merchant account and the acquiring bank that are involved in digital purchases can be a tangled web of interactions and regulations, slowing down transactions and racking up costly fees. That’s where a PayFac can step in.

How it works:

A payment facilitator acts as a payment aggregator partner to smaller merchants. It manages payments and transactions with the bank for a number of smaller merchants, streamlining the process, decreasing the workload, and mitigating risk.

  • First, instead of going directly to the acquiring bank, a small business can instead enter into a relationship with a PayFac. The PayFac streamlines the onboarding process for the merchant, allowing merchants to start accepting payments very quickly.
  • The PayFac has a master merchant account with the acquiring bank and serves as an intermediary between several individual merchants and the acquiring bank. The merchants then act as sub-merchants and operate under the PayFac umbrella.
  • Each time a transaction is made, it flows from the merchant, through the PayFac’s system, and to the acquiring bank.

In a payment facilitator model, the PayFac benefits the merchants by handling payments, streamlining onboarding paperwork, reducing the workload on smaller merchants, and underwriting transactions to allow a faster and more seamless experience for the merchants’ customers. The PayFac benefits the acquiring bank by assuming the risk for a large number of smaller merchants, continuously monitoring merchants for security and compliance, and ultimately reducing the burden on the bank.

Gateway or Facilitator: What’s the Difference?

Payment Gateway Payment Facilitator (PayFac)
Primary Role Handles customer-merchant transactions Handles bank’s interaction with merchants
Relationship Focus Customer’s relationship with the merchant Bank’s interaction with multiple merchants
Usage in Payment Process Individual transaction processing Manages overall payment process, may have in-house processing and gateway platforms
Pricing Model Subscription-based or flat rate per transaction Revenue-sharing, taking a percentage of each transaction
Integration Options Offers many integration options like API, plugins Streamlined integration solutions, often industry-specific
Compliance Maintains PCI DSS compliance Maintains PCI DSS compliance
Security Focus High-security standards for customer information High-security standards for customer information


Payment gateways and PayFacs are both players in the digital payment process with similar goals in mind: secure and low-risk payments while providing seamless, fast, and positive customer experiences. 

Both payment facilitators and payment gateways are committed to flexibility and security for merchants and customers alike; both support a variety of payment methods while remaining committed to high-security standards, safeguarding sensitive customer information, and maintaining PCI DSS compliance.

But the high-level difference is when and how to deploy them as part of the payment process. 

When to use each option:

A payment gateway handles the customer’s relationship with the merchant, an individual transaction at a time. A PayFac, in contrast, handles the bank’s interaction with a number of merchants.

Because they handle different parts of the payment process, payment gateways and PayFacs can be used in tandem. Regardless of whether or not a company uses a PayFac to manage their payments, they’ll still need to use a payment gateway to collect the information and process payments. It’s a required part of the online payment process. 

On the other hand, a company does not necessarily need to use a PayFac to manage the payments themselves, though they might find outsourcing those payments to a PayFac to be much simpler for their business. 

It’s important to note that a PayFac may have its own in-house payment processing and even payment gateway software platforms for their partners to use. And while some businesses might find this frustrating, others might be relieved not to string together a payment processing software stack themselves.

Some key differences:

As a result of their different roles in the process, you’ll find some key differences in how PayFacs and payment gateways operate. Because they focus on the individual transaction and operate more as individual software platforms, payment gateways frequently employ a subscription-based pricing model or charge a flat rate per transaction. 

On the other hand, because they operate more as a partner, PayFacs commonly employ a revenue-sharing pricing model, taking a percentage of each transaction they process. 

Likewise, as individual software solutions, payment gateways frequently offer many ways to integrate with other solutions to build a payment processing software stack, such as an API or plugins. As a partner, however, it’s more likely that PayFacs offer streamlined integration solutions for smaller merchants, often catering to specific industries.

Decision-Making: Choosing the Right Option for Your Business

When choosing the right payment system for your business, there are a number of factors to consider. 

Business size and transaction volume 

Consider whether the payment solution aligns with the scale of your business and anticipated transaction processing volume. Payment facilitators, for example, follow a model that is specifically designed for smaller merchants and may not be a good fit for larger businesses.

Customization and scalability options

Evaluate the customization options and scalability features offered by the payment solution to ensure it can adapt to your evolving business needs. 

A PayFac, for example, may offer more tailored options for your industry at a high-level, but may be harder to customize the individual details. Because a payment gateway is just a piece of the puzzle, however, it may be easier to build a fully-customized stack around the individual solution you choose.


To take advantage of the enormous growth in the eCommerce economy, understanding the nuances between different payment solutions is a necessity. And the importance of choosing the right payment solution for your business cannot be overstated. Whether you opt for the streamlined approach of a payment facilitator or the individualized service of a payment gateway, your decision will impact not only the operations of your eCommerce capabilities, but also the payment experience of your merchants and customers. Only you can assess which option is the right one for your business. 

FAQs about Payment Facilitator vs Payment Gateway

Q: What is a payment facilitator?

A Payment Facilitator (PayFac) is a model where a business (the facilitator) signs up with a bank or a larger merchant acquirer to provide payment processing services to other smaller businesses or sub-merchants.

Q: What is the difference between a payment facilitator vs payment gateway?

A Payment Gateway is a service that authorizes and processes payments in online and offline transactions. It’s responsible for securely transferring key payment information from the merchant to the acquiring bank and payment processors. 

A Payment Facilitator (PayFac), on the other hand, is a service that simplifies the merchant account enrollment process. PayFacs handle the bank’s interaction with multiple merchants, essentially serving as a master merchant that facilitates payment processing for its sub-merchants. 

Q: What is an example of payment facilitators? 

An example of a Payment Facilitator is Stax Connect. Stax Connect offers a platform for software companies and SaaS providers to integrate payment processing capabilities into their offerings. It enables these companies to become payment facilitators for their clients, allowing them to manage payments seamlessly within their ecosystems. Stax Connect provides the infrastructure and tools necessary for these companies to handle transactions, manage sub-merchant accounts, and ensure compliance, all under their brand.

Q: What is considered a payment gateway?

A Payment Gateway is considered a technology or service that facilitates the transfer of information between a payment portal (like a website or mobile phone) and the Front End Processor or acquiring bank. It plays a crucial role in the e-commerce transaction process, authorizing the payment between the merchant and customer.