What Is a PayFac and How It’s Revolutionizing Digital Payments in Banking

Juan Carlos Garavito
Oct 2
3 min read

When we talk about innovation in digital payments, terms like crypto or AI often steal the spotlight.Yet, a quieter revolution is happening through Payment Facilitators (PayFacs) — reshaping how money moves in digital commerce.

Today, PayFacs handle billions in transactions and are projected to process over $4 trillion globally by 2025.

They act as master merchants, grouping hundreds of sub-merchants and enabling SaaS platforms, marketplaces, and small businesses to accept payments with minimal friction.

What Is a PayFac?

A Payment Facilitator is a company that simplifies how businesses accept electronic payments.Instead of each merchant opening an acquiring bank account — a long, costly process — the PayFac holds a master account and integrates multiple sub-merchants under it.

In this model:

The PayFac becomes the merchant of record for payment networks.
Sub-merchants can start accepting payments within hours or days.
The PayFac manages infrastructure, risk, compliance (KYC, AML, PCI DSS), and chargebacks.

This allows an artisan or a growing SaaS startup to accept payments immediately, while the PayFac handles the technical and regulatory complexity.

Key Benefits for Businesses

PayFacs bring clear advantages, especially for SMBs:

Frictionless onboarding: fast, digital sign-up.
Simple pricing: flat or predictable fees.
Delegated compliance: PayFac manages KYC, AML, and data security.
Democratized access: even small merchants can join the digital economy.

Evolution of Payment Facilitation

To understand their impact, let’s look at how acquiring evolved:

Acquiring banks (1950s–1980s): served only large, established merchants.
ISOs (1990s): expanded reach but required individual merchant accounts.
Payment gateways (1990s–2000s): enabled e-commerce but still needed banking approval.
PayFacs (2010s–today): players like PayPal, Square, and Stripe changed the game with one master contract onboarding thousands of merchants in minutes.

This leap solved the small merchant problem, enabling thousands of businesses to easily accept card payments.

The Current Impact

Today, PayFacs are everywhere — from fintech and SaaS to mobility apps and marketplaces.By 2026, they’re expected to process over $4 trillion globally, highlighting their massive influence on the payment

ecosystem.

The Role of Banks in This Ecosystem

Rather than replacing banks, PayFacs are strategic allies.Banks provide strength and regulation; PayFacs add speed, flexibility, and reach.

For banks, partnering with a PayFac means:

Expanding into previously unreachable segments.
Diversifying services by integrating fintech models.
Capturing higher transaction volume with lower entry barriers.

WAU’s Contribution

At WAU, we’ve identified that banks face not only a technological challenge — but a strategic one.

We help financial institutions integrate with PayFacs through:

Dynamic, modular architectures that reduce integration time.
Secure, compliant design built from the ground up.
Scalable solutions that grow with the bank and its merchant network.

Our mission is clear: to bridge banking strength and fintech innovation, empowering banks to lead, not just participate, in this evolution.

Experience in REACH

Beyond WAU, as founder and director of REACH, I’ve seen how the PayFac model accelerates omnichannel communications and digital payment management.

By integrating PayFac capabilities, REACH offers faster onboarding, transparent pricing, and instant payment access — even for small businesses previously excluded from the digital economy.This democratizes access to electronic payments while maintaining strict regulatory compliance.