PayFac vs. ISO: Which Should a Merchant Choose?
Blog post from Basis Theory
Payment facilitators (PayFacs) and independent sales organizations (ISOs) both help merchants enter the payments ecosystem, but they operate differently and suit different priorities. A PayFac allows businesses to process payments as sub-merchants under its main account, providing shared infrastructure, security, fraud monitoring, settlement, reporting, and rapid onboarding in exchange for ongoing transaction-based fees and significant control over risk decisions. An ISO instead connects merchants with banks, payment service providers, gateways, and other partners, helping arrange direct contractual relationships while typically being compensated by providers rather than through a share of merchant transactions. PayFacs can offer convenience and speed, particularly for new businesses, but may create dependence on one provider, limit control over customer data and pricing, and expose merchants to account restrictions based on risk assessments. ISOs may require more time and coordination initially, yet can help merchants build a diversified payment network with greater control over fees, geographic coverage, business continuity, and long-term processing economics.
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