PayFac: What is a payment facilitator and should you become one?

A PayFac (Payment Facilitator) allows platforms to aggregate processing on behalf of users. It acts as a payment processor and takes on the payment integration so its platform users don’t need to. 

By offering payments functionality to their customers, PayFacs often engage in regulated payment services. This means that regulatory licences and approvals are required to offer these services.

Adding payments to your software offering has been transformative for platforms, providing seamless payment experiences and transforming the platform business model. 

Traditionally, platforms had limited options: they could use the payments referral model or become Payment Facilitators (PayFac). Some platforms chose to obtain a PayFac licence to gain more control over their payments infrastructure.

Platforms often operate as as a PayFac with the goal of unlocking key benefits, such as:

• Increased revenue and valuation

• Enhanced customer experience

• Faster expansion

However, these same goals can be achieved by partnering with a provider that offers PayFac-as-a-Service such as Adyen for Platforms. This alternative partnership for embedded payments can yield the same advantages while eliminating the significant challenges of obtaining a regulatory licence (more on this below).

Not all providers let platforms fully monetise without becoming a registered PayFac, and even when they do, the revenue upside often doesn’t match the effort and cost. With Adyen, you get full commercial benefits and control without needing a regulatory licence. Investors still expect embedded payments, but strong valuations no longer depend on registration.

While the motivations for becoming a PayFac are clear, many platforms underestimate the complexities:

1. Regulatory burden: It also means taking on a heavy regulatory and operational burden. To become a PayFac, a platform may need to register with card networks and get the necessary licences and approvals—all of which require extensive due diligence, compliance processes and extended KYC/AML policies, and legal work.

2. Higher costs: PayFacs face significant expenses. Licensing fees, regulatory compliance, underwriting, reporting and monitoring diligence all add up. 

3. Hurdles to fast expansion: As a regulated PayFac, you need local legal entities with management presence and approvals in each acquiring region, which slows down expansion.

Whether you’re already a PayFac or considering becoming one, there is another option that allows you to access all the benefits of a PayFac without the complexity.

Platforms no longer need to take the complex path of getting regulatory approvals to act as a PayFac. By partnering with a financial technology provider that offers embedded payments without the need for a PayFac licence, platforms can experience the same benefits without the complexities. This allows them to fully own the payment experience, scale effortlessly across regions, avoid regulatory burdens, and eliminate the need for separate licences.

With Adyen for Platforms, you get the full benefits of embedding payments and maintaining commercial, operational and risk controls—without the overhead of obtaining or managing a PayFac licence. Adyen’s infrastructure allows you to offer embedded payments and financial services seamlessly, while still providing the flexibility to register with the schemes if needed. Importantly, this registration does not impact the commercial terms, technical setup, or control over your payments.

Many features that add additional values for platforms and their users, such as local payment methods, automatic split configurations, dynamic shopper statements, risk monitoring, passing on payment fees, automatic sub-merchant data submission required by the schemes, and processing insights actually get unlocked only by non-aggregated processing outside of a PayFac setup.

Why choose Adyen for Platforms?

• Faster go lives and expansions since you don’t need to spend time on PayFac regulatory approvals. If you are registered as a PayFac in one region and looking to expand to other regions, you can speed up the time to go live by choosing Adyen for Platforms without opting in for a new local registration. This will allow you to save permanent resources, both financial and employee resources, by slimming down on internal compliance.

• Save on the recurring fees of a PayFac registration.

• Use Adyen's tools to control the user’s payment and related fees, balances, payouts and manage user risk.

With Adyen for Platforms, you can enjoy the benefits of owning payments without the risk and complexity, so you can focus on growing your business.

Ready to explore embedded payments? Get in touch.