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ReadersSpeak

What's a payfac?

I overhead a conversation about payfacs the other
day. What are they? I'm new to merchant pro-
cessing, and there's nothing about payfacs in my
training materials.
Lydia Nybourg
Customer service rep
Lydia,

Payfac is short for payment facilitator, and we've
published articles on payfacs in the past year that will
fill you in fully on what they do. In "Payfac: Fad or new
norm?" The Green Sheet, Sept. 12, 2016, issue 16:09:01,
Adam Atlas defined payfac as follows:

"A payfac, also known as a payment facilitator or
payment services provider (PSP), is an aggregated
merchant account serving multiple merchants," he wrote.
"Usually, a payfac assumes liability for chargebacks and
other losses related to its sub-merchants. The acquirer or
processor for a payfac looks exclusively to the payfac for
all legal liabilities related to the sub-merchants under it.

"The payfac has its own merchant agreement with
each sub-merchant and makes underwriting decisions,
such as what merchants to board, settlement amounts,
reserve accounts, etc. Not all payfacs are the same. Some
sub-merchant agreements are tri-party agreements,
with the acquirer or processor being parties together
with the payfac and the sub-merchant."

Atlas went on to say that a payfac is basically a legal
aggregator. "For a long time, aggregation was taboo
in merchant services," he noted. "Aggregation means
using a single merchant account to process for multiple
merchants. High-risk processors have been doing this
for decades, but normal ISOs and processors have
avoided it because it results in the acquirer processing
transactions for merchants with which it has no direct
connection."

You'll find the rest of Atlas' article at www.greensheet.com/
emagazine.php?story_id=5086&search_string=payfac. An-
other article containing useful information on payfacs
is "The changing face of merchant acquiring," by Patti
Murphy, The Green Sheet, April 25, 2016, issue 16:04:02,
www.greensheet.com/emagazine.php?story_id= 4876.It
delves into a paper issued by Visa on the payment fa-
cilitator model and identifies key responsibilities of
payfacs.

Calling for news, questions, suggestions

Thank you to all who have been sending breaking news
week in, week out to press@greensheet.com. We look
forward to continuing to serve as your educational and
professional resource in the coming year. To help us
do that, please send your questions and suggestions to
greensheet@greensheet.com.

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