Becoming a Payment Facilitator (PayFac) promises faster merchant onboarding, greater control over payment flows, and the ability to earn a share of transaction revenue, all while owning a larger share of the customer experience.

However, the path to becoming a PayFac is far more complex, laborious, and expensive than most realize.

It involves strict regulatory approval, significant capital requirements, and deep operational expertise to manage risk and compliance.

This guide will walk you through exactly how to become a PayFac and whether it’s even worth it for most SaaS platforms.

We’ll cover:

• What is a payment facilitator (PayFac)?
• How to become a PayFac in 8 steps
• Three reasons most SaaS companies shouldn’t become PayFacs
• Why SaaS platforms choose Fiska as their payments partner

Fiska is an embedded payments platform built exclusively for SaaS platforms. Read on to find out more about us, or book a call here.

What is a payment facilitator (PayFac)?

Before we dive into how to become a PayFac, it’s worth briefly clarifying what this means.

Essentially, a PayFac acts as a master merchant, onboarding and managing multiple sub-merchants under its umbrella.

So instead of each merchant establishing a direct relationship with an acquiring bank, they operate under your master account. This allows you to control onboarding, pricing, and payouts from within your platform.

As a PayFac, you become the merchant of record, responsible for compliance, fraud prevention, and chargebacks across your entire merchant portfolio. In many cases, you also assume liability for your sub-merchants’ transactions. The idea is that this control enables you to onboard merchants instantly and earn more from payments.

Image from Matt Brown

A PayFac typically owns the merchant relationship and assumes liability for all transactions on its platform.

However, some ISOs can also maintain direct merchant agreements and even have merchant portability, allowing them to move their portfolios between acquiring banks. They can also take on a level of liability.

Image from Matt Brown

ISOs generally operate under one of three models: referral, registered, or ISO with liability. Each offers a different balance of control, responsibility, and revenue potential:

• Referral ISOs simply connect merchants to a sponsor bank in exchange for a share of transaction fees.
• Registered ISOs can market payment solutions under their own brand.
• ISOs with liability take things a step further, underwriting merchants directly and assuming financial responsibility for their risk.

Learn more about how PayFacs and ISOs differ here: PayFac vs ISO: What’s right for your SaaS platform?

How to become a Payfac in 8 steps

So if you do decide to become a Payfac, what steps do you need to take?

Firstly, it’s important to be clear: becoming a PayFac is a complex, expensive, and time-consuming process. It typically takes 12-18 months and requires both a significant upfront and ongoing investment.

Here’s roughly what’s involved:

Step 1: Conduct a business readiness assessment

Before you do anything else, you need to determine whether your business is genuinely ready for PayFac responsibilities. Sponsor banks expect financial stability: you are handling other people’s funds, and meaningful cash reserves to absorb risk. If you are still burning cash or operating month-to-month, approval is very unlikely.

You also need a realistic economic model based on expected processing volume and margin, and an honest view of your merchant verticals. High-risk categories such as nutraceuticals, gaming, or crypto drive up cost and complexity. Every merchant becomes your liability, so your risk model must be credible.

Step 2: Choose a sponsoring acquirer and register

You can’t become a PayFac alone; you need a sponsor bank to underwrite you with Visa, Mastercard, and the card networks. Banks will expect detailed business plans, audited financials, and formal risk and compliance procedures.

Plan for $10,000+ in fees per card network, plus legal and advisory costs. In practice, $50,000+ just to register is typical.

Step 3: Obtain PCI DSS Level 1 certification

PayFacs must meet PCI Level 1, the highest standard. That means a QSA audit, not a self-assessment. If your security posture is not already mature, expect 3 to 5 months of work and at least $50,000 in assessment, remediation, and training costs. PCI then becomes an ongoing operational obligation.

Non-compliance or a security incident can shut down your payment operation instantly.

Step 4: Build the payment and risk infrastructure

This is where most SaaS platforms underestimate the lift. You are effectively building a mini payment company. You will need to develop or integrate gateway connectivity, onboarding systems, settlement engines, dispute management, fraud tooling, and real-time bank connections.

Expect 18 to 24 months of build time and at least four specialist payment engineers at $150,000+ each. Generalist product engineers typically cannot do this alone; you need compliance-aware payments specialists.

Step 5: Stand up underwriting and compliance operations

As the merchant of record, you’re now responsible for every sub-merchant. That means robust KYC, KYB, AML, and continuous monitoring for fraud and irregular activity. You must hire dedicated compliance and underwriting staff; this cannot be done part-time or outsourced informally.

Regulatory failure here exposes you to fines and operating suspension.

Step 6: Build merchant onboarding and support

You must design onboarding that captures all required merchant information upfront, verifies identity and bank details, and enforces risk policies. At the same time, onboarding must remain usable for legitimate merchants. It is a fine balance.

Support also becomes a meaningful cost center. Merchants will expect fast, expert help for settlement queries, chargebacks, and technical issues. That requires staffing and training. You also need specialized legal support to draft compliant merchant agreements.

Step 7: Run a controlled merchant pilot

Don’t launch at scale immediately. You need a closed pilot to validate transaction flows, chargeback handling, settlement timing, and fraud controls under real-world conditions. Many PayFac issues only surface once merchants start transacting.

Expect multiple iterations before full rollout.

Step 8: Scale and maintain compliance

Once live, the work doesn’t stop. You must file detailed monthly reports to Visa and Mastercard, continuously monitor merchant risk, and maintain PCI status. Pricing, underwriting rules, and operational processes all need continuous refinement as your volume grows. You’ll typically need dedicated team members to manage this.

Three reasons most SaaS companies shouldn’t become PayFacs

Even with these financial and operational demands, many SaaS platforms, likely admiring the likes of PayFacs like Shopify and Toast, still see becoming a PayFac as an important evolution.

However, the truth is that becoming a PayFac is simply not necessary for building a successful payment strategy.

In fact, it might even hold you back considerably. Here’s why:

1. It costs too much to make financial sense for 99% of SaaS platforms

The PayFac model only becomes profitable at very high scale. Platforms like Shopify process tens of billions of dollars each year. That is the level of volume usually required for PayFac economics to work.

Below roughly 50 million dollars in annual processing, the fixed costs of infrastructure, compliance, and risk management quickly outweigh the extra revenue you might earn.

Of course, you may earn an additional 5 to 15 basis points in margin that PayFacs can gain compared to ISOs…but this is offset by the expenses.

Risk and compliance salaries, technology upkeep, audits, and legal fees: for small to medium platforms, becoming a PayFac almost always actually reduces overall profitability.

2. It drains resources from your core product

Running a PayFac is like running a second business. You need payment engineers, compliance officers, and risk analysts, all of whom are expensive and difficult to hire: you’ll be competing with established payment companies such as Stripe and Square for the same limited talent pool, often at salaries that are not workable for SMBs.

And crucially, none of these roles directly improves your product or customer experience.

Engineering time that could be spent improving your platform ends up dedicated to regulatory reporting, chargebacks, and merchant risk management.

3. Instant onboarding causes more problems than it solves

One of the main PayFac selling points is instant merchant onboarding.

This is perhaps the most crucial misunderstanding about PayFacs: instant merchant onboarding is not necessarily a positive. In practice, this often creates more issues than benefits.

Here’s an example to illustrate:

Imagine a fitness SaaS platform onboarding a new gym operator.

With a PayFac, the gym can start taking card payments within minutes. At first glance, this feels like an advantage: the merchant is live immediately.

But a week later, the PayFac flags missing business documents and unclear beneficial ownership details. Payouts are frozen pending further review.

The gym’s revenue is suddenly locked, staff can’t be paid, and support requests spike. The merchant now blames the platform for “holding their money,” even though the issue is regulatory, not operational. That rapid onboarding experience has now turned into churn risk and reputational damage for the platform.

Contrast that with an ISO flow: onboarding can take 24 hours, but compliance checks are completed upfront. When the gym goes live, funds flow smoothly from day one and there are no surprise freezes. A day’s wait eliminates a week’s disruption.

And if a merchant can’t wait single day to go live, it’s often a sign of higher risk rather than opportunity.

SaaS platforms can thrive on the ISO model

Let’s circle back to why SaaS platforms want to become a PayFac in the first place.

There are typically two primary objectives:

1. Onboard merchants faster
2. Generate more revenue

With an ISO model, you can still…

• Offer fast, streamlined onboarding (typically 24 hours). It’s not instant, but do your merchants really care about waiting one day? Especially if it could avoid future headaches.
• Create a branded, embedded payment experience that reflects your brand
• Develop a payment strategy that allows you to actually earn: turning payments from a chore into a scalable revenue stream

In other words, you get the benefits platforms care about, without the hidden operational cost, capital requirements, and regulatory burden that come with PayFac status.

Why SaaS platforms choose Fiska as their payments partner

As you can tell, payments are complex, and in order to succeed as a SaaS platform – whether you go the PayFac route or ISO – you need a payment partner you can trust.

In our view, a true partner goes beyond a simple payment solution.

A true payment partner like Fiska lets you focus on building your software while we handle the payment infrastructure and advise on the best strategy for your business.

We are an embedded payments platform purpose-built for SaaS businesses. But why should you choose us over a competitor? Here are a few reasons:

Earn meaningful revenue and retain control of your pricing

Payments should strengthen your business model, not squeeze your margins. With Fiska, your platform earns real revenue on every transaction without taking on PayFac-level costs, risks, or operational burden.

We operate on a transparent revenue share model. There are no platform fees, and pricing is based on interchange so you always know your baseline cost. You set your own merchant pricing, choose your markup, and keep the majority of the margin. That gives you direct control over how payments contribute to your unit economics and long-term growth.

Because our success depends on your success, we actively support your strategy. We help you identify the right pricing structure for your market, increase merchant adoption, and ensure your payment offering delivers real value. As your portfolio grows and performs, your revenue scales, and so does ours. That alignment encourages sustainable growth, not surface-level volume.

With Fiska, payments become a profitable, strategic part of your business rather than a cost centre or compliance project. You keep control, capture meaningful upside, and get expert guidance along the way.

Read more: Why Fiska doesn’t charge fixed fees (and how our partnership model works)

Deliver a payment experience that feels like part of your product

Most merchants do not think about payment infrastructure. They just want it to work. They expect onboarding to be simple, funds to settle reliably, and checkout to feel native to your platform. When payments distract them, it reflects on you.

With Fiska, the entire journey stays inside your product. Merchants onboard, activate, and manage payments without ever feeling like they have left your environment. It looks and feels like your own payment stack, supported quietly in the background by our infrastructure.

One unified API powers online and in-person payments, supported by universal tokenization for true one-click and cross-channel experiences. Merchants get seamless repeat checkout and consistent workflows, while you avoid the complexity of integrating and maintaining multiple systems.

We also manage PCI, compliance, underwriting, and settlement behind the scenes, so your product team can focus on building great software, not running a payments operation.

The result is a payment experience that feels like a natural extension of your platform rather than an add-on. Merchants stay focused on their business, and your brand owns the customer relationship throughout.

Get real support from real people who understand software and payments

Payments touch revenue, onboarding, support, and customer trust. When something needs attention, you cannot afford to wait days for a ticket response or explain your product to someone who has never seen it before. You need people who understand your platform and can move quickly.

With Fiska, you speak directly to the team that builds and runs the platform. You have a real relationship with real people, including Slack access to our engineers and payments specialists. Your team talks to experts who understand SaaS behaviour, activation funnels, and merchant expectations. And when your merchants need help, we provide level 2 support so issues get resolved fast and you are not left carrying the load.

We are hands-on throughout the partnership. We run discovery sessions, refine onboarding flows, advise on pricing structure, and help you plan when to introduce new payment capabilities. Our goal is to embed alongside your product and operations team, not sit outside the business as a vendor.

Modern payments work best when there is a human partner behind the scenes. With Fiska, you get a team that knows your roadmap, understands your users, and supports you as you scale, not an anonymous support portal.

Start smart as a registered ISO and scale toward PayFac when the time is right

The PayFac path is long, expensive, and operationally heavy. Most SaaS platforms simply don’t need to become a PayFac. With Fiska, you can offer a fully branded payment experience and earn meaningful revenue without building a payments operation from scratch.

To see what this could look like for your platform, book a no-obligations discovery call with our CEO, Patrick Huynh.

FAQ: Becoming a PayFac as a SaaS platform

1. Do SaaS platforms need to become a PayFac to offer payment processing?

No. Most SaaS platforms can offer payment processing without becoming a PayFac.

A payment facilitator model gives full control, but it also brings compliance requirements, risk liability, and operational overhead. Many ISVs use a white-labeled integrated payment solution or ISO structure to streamline onboarding and still earn revenue without managing a master merchant account or in-house fraud systems.

2. What is the difference between a PayFac and a payment gateway or ISO?

A PayFac is the merchant of record, while a payment gateway or ISO is not.

Gateways and ISOs pass merchants to external payment processors for underwriting and compliance. PayFacs onboard merchants directly, manage Know Your Customer checks, and handle cardholder risk, chargebacks, and PCI compliance internally. It offers more control over the user experience, but also more responsibility.

3. When does becoming a PayFac make financial sense?

It usually only makes sense once a software platform processes around $50M+ annually.

Below that level, transaction fees rarely offset the cost of compliance, underwriting, payment system build-out, and ongoing reporting to payment providers and card networks. Most software companies earn more by partnering rather than running payments in-house.

4. What are the biggest challenges of running payments in-house?

The biggest challenges are compliance, risk, and ongoing operations.

PayFacs must manage PCI compliance, Know Your Customer and anti-money laundering checks, chargebacks, merchant services support, and the underwriting process for every new merchant. This often requires dedicated payment operations and legal resources.

5. Can a platform still offer a seamless user experience without becoming a PayFac?

Yes. Platforms can deliver a seamless, white-labeled payment experience without going full PayFac.

Modern payment providers allow software platforms to embed merchant onboarding, integrated payment flows, and online payments while external partners handle due diligence, compliance, and processing payments behind the scenes.