Discover the key differences between Payfacs and ISOs in payment processing.

Two key players in payment processing are ISOs and Payfacs. Understanding the difference between an ISO and Payfac is important for merchants looking for a payment solution for online and/or in-store payments.

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https://www.rapyd.netWhat is a Payfac?

A Payment Facilitator, or Payfac, is a company that simplifies the merchant account setup process. They aggregate transactions from multiple merchants under their own master merchant account. This model is ideal for small businesses looking for a quick and easy way to start accepting payments.

What is an ISO in Payments?

On the other hand, an Independent Sales Organisation (ISO) is a third-party company that partners with acquiring banks to offer payment processing services to merchants. ISOs act as intermediaries between merchants and payment processors, providing personalised services and support.

Key Differences Between Payfacs and ISOs

Payfacs streamline the onboarding process for merchants, while ISOs offer more personalised services.

Payfacs aggregate transactions under their master account, whereas ISOs work with acquiring banks to set up individual merchant accounts.

Becoming a Payfac involves a different process than becoming an ISO, with varying requirements and responsibilities.

How to Become a Payfac or ISO

To become a Payfac, companies need to meet specific criteria set by payment networks and undergo a thorough underwriting process. 

Becoming an ISO requires establishing partnerships with acquiring banks and complying with industry regulations. Typically, becoming an ISO is a faster and more straightforward process. 

Choosing Between a PayFac and an ISO: What’s Best for Your Business?

Deciding between a PayFac and an ISO depends on the size and specific needs of your business. Here’s a breakdown to help you choose:

Onboarding Speed:
Need to get set up fast? PayFacs often offer instant onboarding. Their onboarding process is fast since they handle everything in-house. ISOs depend on external payment processors, which may slow things down.

Flexibility:
Want more processor options? An ISO might be your answer. They work with various processors, giving you more choices. However, if you need greater control over your payment experience, a PayFac’s self-managed infrastructure offers unparalleled flexibility.

Fees:
Watching your margins? Businesses with high transaction volumes may be able to negotiate lower fees with a PayFac. Because ISOs often act as resellers of third-party services, their ability to negotiate can be more limited. However, many ISOs provide in-depth market expertise to help their small business customers find the best solution for their needs at a competitive price.

Visibility:
Need clear insight into your payment processes and data? A PayFac provides significant visibility, ensuring you stay informed about every transaction.

Settlement Speed:
When it comes to funding and payments distribution, PayFacs and ISOs operate differently. PayFacs manage the entire payment process—from authorisation to settlement. This can often lead to faster settlement times for merchants. ISOs rely on their payment processor partners for payment processing, which gives them less control over settlement times. 

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