Payment Facilitation for Software Companies
Understanding the PayFac model for software companies — how it works, what it costs, and whether your ISV should become a payment facilitator.
Payment facilitation lets software companies act as the merchant of record for payments, onboarding their customers as sub-merchants under a master merchant account. For a technical breakdown of how the PayFac model works, see our glossary.
How Payment Facilitation Works
In the PayFac model, your software company registers as a master merchant with an acquiring bank. When your customers need to accept payments, you onboard them as sub-merchants under your master MID — no separate merchant account applications, no multi-day approval processes.
This means your software controls the payment experience end-to-end: onboarding, processing, settlement, and reporting.
Full PayFac vs. PayFac-as-a-Service
Full PayFac registration requires a sponsoring bank relationship, card network registration, compliance infrastructure, and $500K-$2M+ in setup costs. You own the full payment stack and earn 60-100+ basis points per transaction.
PayFac-as-a-Service (Finix, Tilled, Xplor Pay, Stripe Connect) handles the regulatory and compliance burden. You integrate their APIs, they handle underwriting and settlement. You earn 20-50 basis points — less than full PayFac, but with dramatically lower cost and risk.
Is Payment Facilitation Right for Your Software Company?
Consider PayFac if:
- Your customers need to accept payments as part of using your software
- You process (or plan to process) $10M+ annually across your platform
- Payment revenue is a strategic priority, not just a feature
- You want to control the merchant onboarding and payment experience
If you’re earlier stage or want faster time to market, start with PayFac-as-a-Service and evaluate full registration as volumes grow.