According to PYMNTS.com, the payment facilitator model has transformed from a niche operational convenience into a global infrastructure trend that’s reshaping commerce. Discover Network launched its PayFac registration program two years ago and already counts hundreds of registered PayFacs navigating complex scaling decisions. Dave Dew, senior manager of U.S. acquiring and digital payments at Discover Network, emphasizes that while the promise of speed, control and revenue opportunity is real, so too are the costs, compliance obligations and forks in the road. Companies face make-or-break choices between becoming registered PayFacs with maximum control but longer timelines, or opting for PayFac-as-a-Service solutions that can launch in as little as four weeks. The operational mechanics aren’t trivial, requiring everything from choosing the right acquiring bank to mitigating risk and navigating card network registrations.
The PayFac Dilemma
Here’s the thing about payment facilitators: everyone wants the benefits but few are prepared for the reality. The model sounds amazing on paper – embed payments directly into your software platform, streamline merchant onboarding, and create new revenue streams. But the devil’s in the details. Companies have to ask themselves some hard questions: Do they really have the appetite for building compliance programs from scratch? Are they ready to manage underwriting processes and handle customer support for merchants? Or are they just looking for incremental revenue without overhauling their core operations?
I think this is where many companies get tripped up. They see the success stories but don’t realize that PayFac is, as Dew puts it, “a very intricate space with many layers.” The early decisions around acquiring partners and risk infrastructure are absolutely formidable. Get them wrong, and your PayFac ambitions could stall before you even launch.
The Scaling Challenge
So let’s say you’ve successfully navigated the initial hurdles and built a thriving domestic PayFac business. Now what? Scaling internationally reveals a whole new layer of complexity that many aren’t prepared for. That vertical specialization that made you successful initially? It can become a barrier to broader expansion.
Discover Network is positioning itself as a global partner here, with dedicated teams across the U.S., Canada, APAC, EMEA and LatAm. But the technical requirements aren’t trivial – things like integrating all issuer identification number ranges to ensure seamless transaction processing across network alliances. The vision is compelling: a PayFac in Chicago should be able to support a merchant with customers in Tokyo or São Paulo without the merchant ever realizing the complexity behind the scenes.
The Merchant Experience Reality
For all the focus on infrastructure and scaling, Dew brings it back to what really matters: “The merchant experience is pivotal to a PayFac’s success.” That means seamless onboarding, transparent pricing, responsive multichannel support, and robust dashboards for real-time analytics. These might sound like table stakes, but they’re apparently what separates thriving PayFacs from struggling ones.
Basically, successful PayFacs need to act as true partners to their merchants rather than just payment processors. They should leverage existing strategic partnerships and forge new ones. And increasingly, they need to think about offering embedded financial services beyond just payments. The model is evolving, and differentiation will depend less on whether a company can become a PayFac and more on what they can actually do with that capability.
The real question isn’t whether to become a PayFac – it’s whether you’re building the right kind of PayFac for long-term success. Because in this rapidly evolving space, today’s competitive advantage could be tomorrow’s minimum requirement.
