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charitable and crowdfunding organizations, that have analysis and APIs to board merchants quickly; they're
their own unique billing models. "This won't blow up the designed to aggregate data and interface with other
traditional acquirer model," said Rick Oglesby, President systems. "You realize how much more you can do and the
of AZ Payments Group LLC. "It will drive up growth in control that comes with that, based on these data points,"
acquiring." Silberstein said.

Several large acquirers are now actively pursuing payfacs Payrix co-founder Boruch Greenberg concurred. "Fifteen
as clients, Targen noted, adding that in some instances years ago, we were reps, going door to door like everyone
traditional ISOs are becoming payfacs. In October 2017, else," he said. "As a full liability ISO, payfacs were never
leading acquirer Elavon Inc. launched Scoop, a turnkey on our radar until we realized we needed control of the
solution for payfacs. Also in October, JPMorgan Chase & whole cycle, from A to Z. It was only by becoming a
Co. revealed plans to acquire WePay, a technology firm that payfac that we could control transactions, underwriting,
developed a payfac application programming interface risk management, KYC [know your customer] and AML
(API) used by the crowdfunding website GoFundMe, [anti-money laundering rule compliance]. This degree of
online marketer Constant Contact and others. JPMorgan control is unparalleled in the industry."
plans to offer the API through Chase Merchant Services
and to set up WePay as the banking giant's payments When Payrix was launched in 2015, Greenberg and
innovation incubator. Silberstein focused on simplification and scale. "As an ISO,
we wanted to fix holes in the system, improve efficiencies
The benefits to acquirers working with payfacs are and be able to monitor and manage risk in real time." The
obvious: increased processing volume. Payfacs, for their traditional ISO model can sometimes amplify problems
part, get either a revenue share, or a wholesale buy-rate with transactions, Greenberg noted. For example, ISOs
that they mark up and pass on to sub-merchants. often aren't alerted to errors until problem transactions
have been settled and merchants funded, and it can take
"The traditional ISO model may become extinct in five up to a week to recoup funds.
to 10 years, as more and more software vendors solve
merchants' needs and monetize payments by integrating With real-time transaction monitoring, ISOs and acquirers
and offering their own solutions," said Benny Silberstein, can react immediately to problems, instead of waiting
co-founder of Payrix, a payfac platform for merchant for third-party providers that pass on information that
aggregators. is often incomplete. "With Payrix, using our SDKs, we're
capturing all the information, including customer data
Todd Ablowitz, President of Double Diamond Group LLC, and device fingerprint, and we're leveraging that data,"
said ISOs and acquirers need to accept that payfacs are Greenberg said.
here to stay. "Any ISO that chooses to bury their head in
the sand on this is going to find themselves playing catch Integration, flexibility
up," he said. Merchants today need to integrate with multiple platforms,
as well as change and adapt those platforms continually
In the 2016 report Why Software Vendors Should be Payment to keep pace with consumer shopping and payment
Facilitators, Double Diamond estimated 10,500 U.S. preferences. Payfacs are positioned to help merchants
companies are providing integrated software services to manage multiple integrations while maintaining a
businesses that are positioned to benefit from the payfac cohesive customer experience.
model, including 4,200 in card-not-present markets
and 6,300 in card-present markets. These companies, "There are so many links in payments and everyone has
combined, represent potential processing volumes in a piece of them," said Nadav Naaman, Vice President
excess of $1.6 trillion, the report calculated. of Product at Zooz. "Costs are affected by the way you
route your transactions. At PayPal, for example, every
The report further predicted the payfac market – basis point of improvement in a risk or fraud element or
excluding the three early aggregators, PayPal, Square cross-border payment translates into millions of dollars."
and Stripe – will double annually for at least another two Zooz is a payment technology company that helps banks,
years, before "moderating" to 80 percent a year. "Those third-party service providers and large retailers integrate
payment facilitators will generate more than US$4 billion disparate technologies across payments channels.
in payment processing revenue net of interchange and
network fees in the same timeframe," the report stated. Providing a flexible integration process is only part of

Newer, faster rails the value proposition, however. Merchants must be able
to effectively manage multiple technology relationships
Unlike traditional ISO models built on old technology that simplify connectivity and interaction, Naaman
rails, payfacs use advanced technologies, automated fraud noted. Automated technologies are increasingly replacing

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