What Is a Payment Facilitator (PayFac)? Complete Guide 2026

A payment facilitator (PayFac) is a service provider that holds a master merchant account with an acquiring bank and enables businesses to accept payments as sub-merchants without needing their own merchant account. Rather than applying directly to a bank for their own merchant account, businesses join the PayFac's platform to begin processing payments. The PayFac manages onboarding, compliance, and settlement, acting as the primary interface with the acquiring bank.

Obtaining a merchant account independently is slow, complex, and impractical for many businesses. A direct application involves weeks of underwriting, credit checks, and bank negotiations. The PayFac removes all of this by serving sub-merchants under their master merchant account, handling much of the regulatory obligations, onboarding, and ongoing compliance on behalf of the business. This allows companies to start accepting payments almost immediately. 

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How the payment facilitator model works

The PayFac model introduces a layer between the acquiring bank and individual businesses. Understanding that layer clarifies both the benefits and the obligations involved.

A traditional merchant account relationship looks like this: a business applies to an acquiring bank, undergoes underwriting, receives a unique Merchant Identification Number (MID), and manages its own compliance and settlement obligations. This gives businesses a direct relationship with the acquiring bank. It also takes weeks or months to begin implementation and comes with compliance and cost factors that add ongoing operational burden. 

Under the PayFac model, the acquiring bank relationship belongs to the PayFac, not the individual business. The PayFac holds a master MID and when a business is onboarded by the PayFac as a sub-merchant, it receives a sub-merchant ID beneath the master merchant account. The PayFac conducts its own KYC and AML checks during onboarding, often in hours. Once approved, the sub-merchant can begin processing payments through the PayFac's infrastructure.

This structure transfers significant responsibility to the PayFac:

• Underwrites each sub-merchant
• Monitors transactions for fraud and suspicious activity
• Manages chargebacks and disputes across its entire portfolio
• It maintains PCI DSS compliance
• Settles funds to sub-merchants on an agreed schedule, distributing funds as agreed.

For the sub-merchant, the experience is much simpler and less resource intensive. Businesses integrate once, start accepting payments, and rely on the PayFac to manage:

• Compliance and regulatory obligations
• Payment processing and settlement
• Banking and acquiring relationships

This removes much of the operational burden that businesses would otherwise need to maintain themselves.

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Where the payment facilitator sits in the payment chain

The PayFac sits between the acquiring bank and the individual merchant. It owns the acquiring relationship and holds the master merchant account, providing gateway and processing access to sub-merchants as part of the service. Sub-merchants interact only with the PayFac's platform; the underlying bank and network relationships are managed on their behalf. For a full breakdown of payment gateways, including their relationship to issuing banks, acquiring banks, card networks and processors, check out our payment gateway guide. 

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Leading UK PayFac and PSP providers list

The table below shows how leading UK PayFac and PSP providers compare across the criteria that matter most for businesses.

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What a payment facilitator is responsible for

When a business joins a PayFac, it transfers a substantial compliance burden to the PayFac. Understanding what the PayFac owns is important when evaluating providers.

Sub-merchant underwriting

The PayFac must assess each sub-merchant before allowing them to process payments. This involves KYC (Know Your Customer) checks, business verification, and AML (Anti-Money Laundering) screening. Under card network rules, the PayFac is liable for its sub-merchants' transactions. It cannot onboard businesses without due diligence.

Transaction monitoring

The PayFac monitors all transactions across its sub-merchant portfolio for fraud, unusual patterns, and regulatory red flags. Card networks require ongoing monitoring, not just point-of-onboarding checks.

Chargeback management

When a customer disputes a transaction, the chargeback lands with the PayFac first. The PayFac manages the dispute process and recovers funds from the sub-merchant where the dispute is upheld. High chargeback rates across the portfolio can impact the PayFac's relationship with its acquiring bank.

PCI DSS compliance

The PayFac holds Level 1 PCI DSS certification, the highest available standard. Sub-merchants benefit from this coverage and face significantly reduced PCI compliance obligations of their own.

Settlement and payouts

The PayFac receives settled funds from the acquiring bank and distributes them to sub-merchants on an agreed schedule. For marketplaces with multiple sellers per transaction, this step should include automated split payments: the platform commission is deducted, and each seller receives their portion in real time.

Regulatory compliance

In the UK, PayFacs handling funds on behalf of third parties must be authorised or registered with the Financial Conduct Authority (FCA). This is not optional. Any provider processing payments for sub-merchants in the UK without FCA authorisation is operating outside the regulatory framework. 

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PayFac models: PayFac-as-a-Service vs PSP

Not all payment facilitation arrangements carry the same obligations. For most businesses, the choice is between a payment service provider and a PayFac-as-a-Service arrangement.

A payment service provider (PSP) bundles the gateway, processor, and acquiring bank into a single service. This removes the need to manage separate relationships with a gateway provider, processor, and acquirers. Providers, including Ryft, Stripe, and Adyen operate as PSPs, combining merchant services into one payment stack. For marketplace operators managing payments between buyers, sellers, and the platform itself, the PSP model significantly reduces operational complexity.

PayFac-as-a-Service (PFaaS) takes this further. The business partners with a third-party provider that holds the acquiring relationships and compliance obligations. The platform gets full PayFac functionality, rapid sub-merchant onboarding, branded payment flows, and split payments, without becoming a registered facilitator itself. The provider handles underwriting, monitoring, and settlement. This is the best route to embedded payments for most platforms.

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PayFac pricing: flat-rate vs volume-based

Most PayFacs charge either flat-rate or volume-based transaction fees. The difference is significant when you’re scaling.

Flat-rate pricing charges a fixed percentage per transaction regardless of card type, transaction value, or monthly volume. The fee is predictable and easy to model, but it does not reduce as volumes grow. For high-volume marketplaces, flat-rate fees become a material cost as transaction volumes increase.

Volume-based pricing rewards growth by reducing transaction costs as processing volume increases. As businesses scale, they retain more of the value from each transaction, improving margins and overall profitability.

For businesses processing significant transaction volumes, their pricing model has a larger impact on unit economics than most other assessment criteria. 

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About Ryft

Founded in 2021 by the team behind Butlr, a marketplace they scaled to over one million users, Ryft was built to solve the payment challenges they couldn't find a solution for elsewhere. Ryft is an FCA-licensed payment solution built specifically for marketplaces and platforms, providing embedded payments, automated split payments, seller onboarding, and 24/7 support from humans. Speak to our team to find out how Ryft can work for your business.

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