The Green Sheet Online Edition
January 1, 2017 • 17:01:01
Readers Speak
What's a payfac?
I overhead a conversation about payfacs the other day. What are they? I'm new to merchant processing, 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. Another 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 facilitator 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. 
Whether you want to upgrade your POS offerings, find a payment gateway partner, bone up on fintech regs or PCI requirements, find an upcoming trade show, read about faster payments, or discover the latest innovations in merchant acquiring, The Green Sheet is the resource for you. Since 1983, we've helped empower and connect payments professionals, starting with the merchant level salespeople who bring tailored payment acceptance and digital commerce tools, along with a host of other business services to merchants across the globe. The Green Sheet Inc. is also a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals.
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