Payment Glossary for ISVs

Embedded payments means payment processing is built natively into the software platform — the ISV owns the payment experience, onboards merchants, and earns per-transaction revenue. Integrated payments is broader, describing any software connected to payment processing, regardless of whether the ISV monetizes transactions or controls the merchant experience.

PayFac is an abbreviation for Payment Facilitator — an entity registered with card networks (Visa, Mastercard) that acts as a master merchant, enabling sub-merchants to accept card payments under the PayFac's merchant identification number (MID) without each sub-merchant needing their own merchant account.

A PayFac (payment facilitator) owns the merchant relationship and onboards sub-merchants under its master MID, while an ISO (independent sales organization) acts as a sales agent referring merchants to a processor. PayFacs earn more per transaction but carry compliance and fraud liability; ISOs earn residual income with minimal operational overhead.

A PayFac facilitates payments for other businesses (sub-merchants accepting payments from their customers), while a Merchant of Record (MoR) is the legal seller — it sells your product on your behalf, handling the transaction, tax collection, and compliance as the entity on the customer's bank statement. They solve different problems for software companies.

A payment facilitator (PayFac) is a master merchant that enables sub-merchants to accept payments without each obtaining their own merchant account.

A payment facilitator (PayFac) is a master merchant that onboards sub-merchants under its own MID, handling underwriting, compliance, and settlement. A payment processor routes transactions between merchants, card networks, and issuing banks. PayFacs use processors — they operate at different layers of the payment stack.

A payment gateway is the software layer that securely captures, encrypts, and transmits payment data from the point of sale to the processor, while a payment processor routes the transaction through card networks and facilitates the actual movement of funds between issuing and acquiring banks.

Embedded payments is the integration of payment acceptance capabilities directly within a software application's native user experience, allowing end users to pay without leaving the platform or being redirected to a third-party checkout.

A cash discount program is a pricing strategy where merchants set their listed prices to include card processing costs, then offer a discount to customers who pay with cash or debit. The discount effectively removes the processing fee from cash transactions, making the listed price the 'card price' and the discounted price the 'cash price.'

A Merchant of Record (MoR) is the entity that is legally authorized to process a customer's payment and appears on the customer's bank or credit card statement. The MoR assumes liability for the transaction, including chargebacks, refunds, tax collection, and regulatory compliance.

A PayFac (payment facilitator) is a master merchant that enables sub-merchants to accept card payments under its own merchant ID, handling underwriting, onboarding, compliance, and settlement on behalf of its sub-merchants without each needing their own merchant account.

A payment aggregator is a service provider that processes transactions for multiple merchants under a single master merchant account, rather than requiring each merchant to establish their own merchant account with an acquiring bank. Payment aggregators bundle (aggregate) many merchants' transactions together.

A payment gateway is a technology service that authorizes and encrypts payment transactions between a merchant's application and the acquiring bank's payment processor, acting as the secure intermediary that transmits cardholder data without exposing it to the merchant's systems.

An ISV (Independent Software Vendor) in payments is a software company that builds payment acceptance into its product so merchants can take card, ACH, and digital payments inside the application they already use to run the business — instead of bouncing out to a separate terminal or gateway.

Dual pricing is a payment acceptance strategy where merchants display two prices for every item or service — a lower cash price and a higher card price — passing credit card processing costs directly to customers who choose to pay with a card.

Embedded payments is the integration of payment processing directly into a software platform so that merchants can accept, manage, and reconcile payments without leaving the application. Rather than using separate payment hardware or third-party payment portals, the payment experience is built into the software itself.

PayFac-as-a-Service (PFaaS) is a model where a third-party provider gives ISVs the capabilities of a payment facilitator — merchant onboarding, underwriting, settlement splitting, and compliance — without requiring the ISV to register as a PayFac with card networks or maintain a sponsoring bank relationship.

Payment reconciliation is the process of matching and verifying payment transaction records across multiple systems — the application database, the payment processor's reports, and the merchant's bank account — to ensure that all funds are accurately accounted for and discrepancies are identified.

Surcharging is the practice of adding a fee to a transaction when a customer pays with a credit card, passing some or all of the card processing cost to the cardholder. The surcharge is disclosed at the point of sale and appears as a separate line item on the receipt.