PayFac vs ISO: Top 3 Powerful Differences in 2025
PayFac vs ISO: The Ultimate Showdown in Payment Solutions is a hot topic for tech-savvy business owners and developers seeking the best way to handle electronic transactions. If you’re looking for a quick answer regarding the differences, here’s the gist:
Speed and ease of onboarding: Payfacs have a faster and simpler setup, perfect for businesses needing quick access to payment solutions.
Flexibility and negotiation: ISOs offer more options for customization, making them ideal for larger companies looking to negotiate terms.
Fees and costs: Payfacs typically have straightforward fees, while ISOs might offer better rates for high-volume merchants.
Control over the payment process: ISOs give businesses more control, while Payfacs manage everything under a master account.
In today’s crowded payment landscape, knowing whether to choose a payment facilitator (payfac) or an independent sales organization (ISO) can set the stage for growth and efficiency in handling merchant services.
I’m Gene Krause, and with 25 years of experience in building software applications integrated with payment solutions, I’ve seen the impact that choosing between payfac and ISO can have on businesses. My expertise centers on helping platforms integrate seamless and efficient payment systems.
Understanding PayFacs
In payment solutions, Payment Facilitators (PayFacs) have emerged as a pivotal choice for businesses looking to streamline their payment processing. But what exactly makes PayFacs stand out?
How PayFacs Work
PayFacs simplify the complex web of payment processing by taking on the heavy lifting for businesses. They handle everything from onboarding to payment processing, ensuring that merchants can focus on what they do best: running their business.
Underwriting and KYC Checks: PayFacs perform rigorous underwriting to assess the risk associated with new merchants. They conduct comprehensive Know Your Customer (KYC) checks to verify identities, ensuring compliance with Anti-Money Laundering (AML) laws. This meticulous process helps mitigate risks like fraud and chargebacks, protecting all parties involved.
Payment Processing: By partnering with acquiring banks and integrating payment gateways, PayFacs enable merchants to accept various payment methods seamlessly. This integration often includes credit and debit cards, ACH transfers, and even mobile payments.
Benefits of PayFacs
The benefits of choosing a PayFac are numerous, especially for businesses that need quick and efficient payment solutions.
Quick Setup: One of the biggest advantages of a PayFac is the speed of onboarding merchants. With a streamlined process, businesses can start accepting payments in no time, often within hours.
Visibility and Control: PayFacs offer merchants improved visibility into their payment processes. This includes detailed insights into transactions and settlements, allowing businesses to make informed decisions.
Fast Settlement: PayFacs often provide faster settlement of funds compared to other models. This means businesses can access their money quickly, improving cash flow and financial planning.
Given these advantages, PayFacs are particularly appealing to small and medium-sized businesses looking to scale efficiently without getting bogged down by the complexities of payment compliance and risk management.
Exploring ISOs
Independent Sales Organizations, or ISOs, play a crucial role in the payment processing ecosystem. They act as intermediaries, connecting merchants with payment processors and acquiring banks. But how exactly do they operate, and what advantages do they offer?
How ISOs Operate
ISOs function as resellers of payment processing services. They set up merchant accounts for businesses, allowing them to accept electronic payments like credit and debit cards. Here’s how they do it:
Intermediary Role: ISOs bridge the gap between merchants and payment processors. They handle the initial setup and paperwork, making the process smoother for businesses.
Processor Relationships: ISOs typically partner with multiple payment processors. This allows them to offer merchants a range of options and flexibility in choosing the best processing solution for their specific needs.
Customer Support: ISOs often provide ongoing support to merchants. This includes helping with the leasing or purchasing of payment processing equipment and offering assistance with any issues that arise.
Advantages of ISOs
Working with an ISO offers several benefits, especially for businesses with specific needs or those looking to optimize costs.
Flexibility: By partnering with various processors, ISOs offer merchants the flexibility to choose from a wide range of payment solutions. This is particularly beneficial for businesses with unique requirements or those that process high volumes of transactions.
Multiple Processors: Having relationships with multiple processors means ISOs can negotiate better terms and rates for merchants. This can lead to significant cost savings, especially for larger businesses with high transaction volumes.
Cost Savings: ISOs often help businesses save money by securing competitive rates and fees. For example, a large retailer might negotiate a lower per-transaction fee based on their high sales volume, resulting in long-term savings.
In summary, ISOs provide flexibility and potential cost savings by leveraging their relationships with multiple payment processors. They act as a valuable partner for businesses looking to optimize their payment processing setup without the hassle of managing these relationships themselves.
Key Differences: PayFac vs ISO
When choosing between a PayFac and an ISO, understanding their key differences can help you decide which is better suited for your business.
Risk Management
Risk Assumption:
PayFacs take on more risk. They handle underwriting and compliance, which means they are directly responsible for managing fraud, chargebacks, and liability. This is because PayFacs have direct contracts with merchants and act as the primary point of contact.
ISOs, on the other hand, do not assume the same level of risk. They pass merchants to payment processors, who then manage the risk. This makes ISOs more of a middleman with no direct liability for merchant activities.
Onboarding Process
Speed and Control:
PayFacs offer a quick setup process. They manage onboarding in-house, which includes underwriting and Know Your Customer (KYC) checks. This control allows them to onboard merchants swiftly and efficiently, often providing a seamless experience for businesses.
ISOs rely on payment processors for onboarding, which can slow down the process. They have less control over how quickly merchants are onboarded since they must wait for the processor to complete the necessary checks and approvals.
Settlement and Funding
Payment Distribution and Transparency:
PayFacs offer greater transparency and faster settlement. They disburse funds directly to merchants, often providing detailed transaction-level visibility. This means merchants can track payments more closely and receive funds quicker.
ISOs do not handle money directly. The payment processor manages the settlement, which can lead to delays and less detailed reporting. Merchants receive bulk settlement amounts, making it harder to track individual transactions.
In summary, the choice between a PayFac and an ISO involves weighing the benefits of faster onboarding and greater control with PayFacs against the flexibility and potentially lower costs offered by ISOs. Each model presents unique advantages and challenges, depending on your business needs.
Frequently Asked Questions about PayFac vs ISO
What is the difference between PayFac and ISO?
Merchant Funding and Visibility:
PayFacs provide direct funding to merchants. They offer detailed transaction-level visibility, allowing businesses to see exactly where their money is at any given time. This transparency is a big plus for businesses that want real-time insights into their cash flow.
ISOs, however, act as intermediaries. They don’t disburse funds directly. Instead, the payment processor takes care of that. This can result in less visibility into individual transactions, as merchants receive bulk settlement reports from the processor.
Risk Management:
PayFacs assume more risk. They manage compliance, fraud prevention, and chargebacks themselves. This means they have to be very diligent about underwriting and monitoring transactions to protect against fraud.
ISOs pass the risk to payment processors. They don’t handle underwriting or compliance directly, which means they have less risk but also less control over these processes.
Agile Payments is a PayFac. This means they offer comprehensive services, managing the entire merchant lifecycle. From onboarding to compliance, they handle it all in-house. By adopting the payfac model, Agile Payments provides seamless integration and fast onboarding for their clients. They also offer robust risk management and real-time visibility into transactions, making them a powerful partner for businesses looking to streamline their payments process.
What does ISO mean in payments?
An ISO, or Independent Sales Organization, is a company that acts as a reseller for payment processing services. They work with acquiring banks and payment processors to set up merchant accounts for businesses. ISOs provide flexibility by offering multiple processor relationships, which can be beneficial for businesses looking to negotiate better rates or terms. However, they do not handle money directly or assume risk, as these responsibilities lie with the payment processor. This makes ISOs an attractive option for businesses that want to leverage existing processor relationships without taking on additional risk or operational overhead.
Conclusion
In the changing world of payment solutions, choosing the right partner can make a significant difference for your business. Agile Payments stands out as a Payment Facilitator (PayFac), offering a comprehensive suite of services that streamline the payment process from start to finish.
Our payment solutions are designed to simplify electronic transactions. With our developer-friendly APIs, businesses can integrate payment processing seamlessly into their existing systems. This means less time spent on setup and more time focusing on what really matters—growing your business.
One of our key strengths is providing integration tools that are both agile and robust. Whether it’s ACH, EFT, or credit card processing, our solutions cater to both US and Canadian markets, ensuring that businesses have the flexibility and support they need.
By choosing Agile Payments as your payment partner, you gain access to quick onboarding, real-time visibility into transactions, and comprehensive risk management. Our commitment to excellence ensures that you can manage your payments with confidence and ease.
For a deeper dive into how our PayFac model can benefit your business, explore our payment facilitation services. Let us help you steer the complexities of payment processing with the expertise and support your business deserves.
