Payment Facilitator vs Payment Processor: 6 Key Differences

Every month, the average U.S. consumer makes 68 card transactions. It’s also estimated that approximately 108.6 million card transactions take place in the U.S. each day. Clearly, debit and credit card payments have boomed significantly over the past decades, yet most people have little understanding of the intricacies that make up the payment industry.

Today, it’s practically a given that companies need to accept virtual or digital payments, which usually require partnering with a payment provider. Depending on your business model, you may not be certain what kind of services you might need, especially when it comes to payment gateways, processors, and facilitators. 

If you’re a software company looking to offer payment services to your customers, we’re here to clue you in on what payment facilitators and payment processors are, and everything else you need to know about them. By the end of this guide, you’ll have a clear understanding of what a payment facilitator vs payment processor is.


  • Payment processors offer the functionality for merchants to start accepting payments and route them through banks and card networks. 
  • Payment facilitators are essentially service providers for merchant accounts. By opting for a payment facilitator, these companies can group all their services, including payments and invoicing, under one platform.
  • While there is some overlap between a payment processor and a PayFac, there are also some important differences you should be aware of, such as higher fees with payment processors, longer onboarding, and different contractual relationships between stakeholders. That’s why payment processors are usually best for eCommerce or physical businesses since they generally don’t offer payment services among their offerings.

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What’s a Payment Processor?

While there are some similarities between payment processors and payment gateways, they’re not exactly the same. Payment processors are banks or financial companies that take care of card transactions. When a customer uses their credit or debit card, phone, or NFC card to make a payment, the payment processor encrypts and sends all the information between the acquiring bank (the merchant’s bank account), the issuing bank, and the POS terminal.

In short, processors ensure that all information is securely encrypted, approve or deny the transaction, and make sure that funds are withdrawn and deposited correctly. They can be used for in-person and online sales.

Meanwhile, a payment gateway is needed for card-not-present (CNP) transactions, like when customers make a purchase on an eCommerce site. No matter the payment method—bank transfer, credit card, or PayPal—a payment gateway is necessary to encrypt and route all the information via a secure connection. Basically, a payment gateway is simply an online POS terminal.

So to sum it all up: payment processors offer the functionality for merchants to start accepting payments and route them through banks and card networks.

What’s a Payment Facilitator?

A payment facilitator, or PayFac, is essentially a service provider for merchant accounts. If you’re a SaaS company that wants to offer your customers the ability to pay or get paid via your platform—in other words, an integrated payments provider—you’ll need a payments facilitator.

Let’s say you run a company called GoFood!, a platform that connects home chefs to hungry customers. Obviously, you’d want the chefs to get paid for the meals they make and deliver. If you partner with a PayFac, they would provide the businesses with a method of accepting payments from customers via the GoFood! platform.

In this example, the PayFac model makes payment acceptance more seamless and provides the home chefs (or sub-merchants), with the ability to get paid via the payment processor the PayFac uses. Basically, a PayFac is the middleman or payment aggregator, bringing together sub-merchants under GoFood!, the master merchant, and then completing the debit or credit card processing.

It’s important to note that PayFacs generally tend to do more than just process payments for sub-merchant accounts: they onboard, monitor, underwrite, and support them. This makes it easier for the sub-merchants to apply and get onboarded into the master merchant’s payment ecosystem quickly, meaning they can start getting paid faster.

PayFacs are often used by software platforms or SaaS companies offering a range of solutions to customers. This could be anything from HR to digital marketing to healthcare services. By opting for a payment facilitator, these companies can group all their services, including payments and invoicing, under one platform—leading to significant savings when it comes to time and resources!

There are two main options when it comes to choosing a PayFac: a payment service provider (PSP) or an independent sales organization (ISO). That said, some organizations, like Stax, don’t differentiate between the two.

Basically, the payment facilitator model helps smaller businesses and merchants work with just one company that takes care of all their business needs, including payments.

Payment Facilitators vs. Payment Processors: 6 Key Differences

While there is some overlap between a payment processor and a PayFac, there are also some important differences you should be aware of (although this isn’t a fully exhaustive list!) Here are the top 6 differences:

The electronic payment cycle

Payment processors directly connect the cardholder’s bank, or the issuing bank, to the acquiring bank, or the merchant account provider. This means the transactions are automatically deposited into the acquiring bank and can usually be retrieved at the end of the business day.

Sub-merchants using a SaaS platform that utilizes a PayFac often receive their earnings on a regular basis, like weekly. This is because most payment facilitators aggregate the payments and pay them out at fixed intervals instead of directly after receiving payment through their payment processor.


As mentioned earlier, payment facilitators are responsible for ensuring compliance, risk management, and generally providing payment support. It’s up to the PayFac to be fully PCI DSS compliant, meaning there’s nothing for SaaS companies or sub-merchants to worry about.

Payment processors must meet PCI DSS standards, but it’s still not a legal requirement to offer all Anti-Money Laundering (AML) requirements and proper due diligence. This could mean that companies using a payment processor need to have an additional security expert on their team, or work with another partner to ensure full compliance. Essentially, the onus of staying compliant lies on the payment processor and their partners, and with constant updates to card networks and the digital payment landscape, this could prove to be challenging.


PayFacs ensure that all sub-merchants are fully onboarded into the SaaS company’s payments ecosystem. Through payment enrollment, a PayFac signs up all sub-merchants under the master account (or software company) and speeds up the process by quickly evaluating the sub-merchant using an underwriting tool. Since the PayFac already has a relationship with the payment processor and the SaaS company, approval takes as little as a few hours.

With payment processors, the merchant has to apply for a merchant ID and then sign with a sponsor bank. Payment processors are best used for individual merchant accounts, as the onboarding process takes up to two weeks and won’t be done via your own software platform, but rather directly with the processor.

Payment methods

Payment facilitators integrate payment processing directly into your platform. For example, Stax Connect uses coding languages like Javascript or Python to integrate payment capabilities right into your platform using the Stax RESTful API. This means whether you want to take mobile payments, card present or CNP transactions, or hosted payments, it’s a piece of cake.

Payment processors, when combined with a payment gateway, can take both card present and CNP transactions, but generally don’t offer a branded or integrated experience, and may offer fewer payment methods.


Payment facilitators often come with transparent and upfront flat-rate pricing. Plus, you’ll start earning more compared to a payment processor since payment processors have to split the revenue with the acquiring bank.

PayFacs may also be able to negotiate lower fees if they work exclusively with one payment processor, further improving your cash flow. All these possibilities can make a substantial difference in the long run when it comes to network fees.

The (contractual) role between the parties

With a PayFac solution, software platforms can directly open a merchant bank account, receive a merchant ID (MID), and immediately begin to aggregate payments for sub-merchants. Because the sub-merchants are under the software platform and the PayFac is facilitating the relationship, these sub-merchants don’t need a unique MID. The PayFac is also responsible for taking care of the different contracts between clients, including the payment processor, software platform, and any users.

Basically, a payment facilitator allows SaaS companies to focus more on providing a great user experience for their customers, with integrated payments being just one part of it.

Meanwhile, payment processors focus on directly connecting a business to its consumers, making it quick and easy to start accepting payments. Payment processors form contractual relationships between their own company and the merchant, not the consumers. This kind of relationship is usually best for eCommerce or physical businesses since they generally don’t offer payment services among their offerings.

Wrapping up on payment facilitator vs payment processor 

If you’re a SaaS business that wants to provide embedded payment processing for your customers, Stax Connect can help.

We offer a fully-managed payments facilitation ecosystem, so you can integrate a fully on-brand payment solution for your customers using our API and start getting paid in as little as 30 days. Plus, we provide the latest security standards and full PCI compliance, alongside dedicated access to our support team and partner success manager. And the best part? All with transparent, up-front pricing. Because with Stax Connect, we make sure you’re set up for success.

Contact us today to learn more about Stax Connect and start monetizing payments.