The Pattern
It starts the same way for every platform.
A customer asks: "Can we pay through your software?" Then an enterprise prospect says: "We need embedded payments — and we need Worldpay, not Stripe." Then your product team is fielding payment questions in sprint planning. Then your CTO is estimating a 12-month roadmap for payment infrastructure.
Payments have gone from a nice-to-have to a requirement. And the first answer most platforms hear is: "Become a PayFac."
Don't.
What Is a PayFac (and Why Platforms Consider It)
A Payment Facilitator (PayFac) is a business that processes payments on behalf of sub-merchants under its own merchant ID. Think Stripe, Square, or PayPal — they're PayFacs. Your merchants don't have individual merchant accounts; they process through the PayFac's account.
The appeal for platforms is clear:
Revenue share on every transaction your merchants process
Control over the payment experience
Stickiness — merchants using your payments don't churn easily
It sounds like the right move. Here's why it usually isn't.
Why Becoming a PayFac Is Harder Than It Looks
Regulatory Burden
PayFacs are regulated entities. You're responsible for:
KYC/AML compliance for every merchant you onboard
Transaction monitoring across your entire merchant base
Fraud liability — chargebacks and disputes are your problem
State and federal licensing in every jurisdiction you operate
Ongoing reporting to your acquiring bank and card networks
This isn't a checkbox exercise. It's an operational function that requires dedicated compliance staff, legal counsel, and ongoing investment.
PCI Compliance
Processing payments means handling card data. That puts you in PCI DSS scope — potentially at Level 1, the highest certification level. Achieving and maintaining PCI DSS Level 1 typically costs upwards of $2M, including annual audits, infrastructure, and operational controls.
Capital Requirements
Your acquiring bank will require a reserve — capital you hold against potential fraud, chargebacks, and processing losses. The amount depends on volume and risk profile, but it's real money sitting in a trust account.
Time to Market
Building PayFac infrastructure takes 12-18 months minimum. That includes acquiring bank relationships, compliance frameworks, technology integrations, underwriting processes, and certification. Your enterprise customers are asking for payments now, not in 18 months.
Ongoing Maintenance
PSP APIs change. Compliance requirements evolve. Card network rules update. Fraud patterns shift. Each of these requires engineering time, compliance review, and operational adjustment — time that comes directly off your product roadmap.
The Real Cost
Platforms that pursue PayFac status typically spend:
$2M+ on PCI compliance alone
12+ months before processing a single transaction
$360K/year in ongoing infrastructure and operational costs
20-30% of engineering capacity diverted from core product
These aren't hypothetical numbers. They're the reality of running payment infrastructure.
What Platforms Actually Need
Most platforms don't need to be a PayFac. They need four things:
1. Embedded Payments That Feel Native
A checkout, payment form, or payment flow that lives inside your platform — branded as yours. The merchant's customer never leaves your interface. They never see a third-party brand.
White-label means your brand, your colours, your domain. The payment infrastructure is invisible.
2. Merchant Onboarding That Doesn't Require a Compliance Team
Getting merchants live should take minutes, not weeks. KYC, compliance checks, and PSP provisioning handled in a single flow — without your team doing the underwriting.
3. PSP Flexibility
This is where most solutions fall short.
If you embed Stripe, your merchants use Stripe. If you embed Adyen, your merchants use Adyen. This works until an enterprise customer says: "We have a Worldpay relationship and we're not switching."
PSP-neutral infrastructure lets your merchants bring their own PSP — or you choose the best PSP for each market, use case, or merchant segment. One integration, any gateway.
4. Multi-Channel Coverage
Payments don't just happen at checkout anymore. Your platform may need:
Embedded checkout in your web or mobile app
Payment links sent via email, SMS, or chat
[Voice payments](/guides/voice-payments) for phone-based workflows
[AI agent payments](/guides/ai-agent-payments) for automated sales or service channels
[Chat payments](/guides/chat-agent-payments) for conversational commerce on web, WhatsApp, and messaging platforms
A PayFac model locks you into a single channel (online checkout). A payment layer supports all of them.
The Alternative: A Payment Layer
Instead of becoming a PayFac, use a payment layer that sits between your platform and PSPs.
Here's what that looks like:
You integrate once. A single API connects your platform to 40+ payment gateways. Adding a new gateway doesn't require new integration work.
Your merchants choose their PSP. Or you choose for them. Or different merchants use different gateways based on geography, volume, or preference. The payment layer handles routing.
PCI compliance is included. The payment layer is PCI DSS Level 1 certified. Card data never touches your infrastructure. Your PCI scope is effectively zero.
You go live in weeks. Pre-built merchant onboarding, checkout components, and a management portal — white-labelled to your brand. No 12-month build project.
You monetise payments. Revenue share on transactions, without carrying the regulatory and operational burden of being a PayFac.
You expand to new channels. Voice, links, chat, AI agents — all through the same integration. Add a new payment channel without re-engineering your payment stack.
PayFac vs. Payment Layer: A Direct Comparison
Becoming a PayFac | Using a Payment Layer
Time to market | 12-18 months | Weeks
PCI compliance | You carry it ($2M+) | Provider carries it
PSP flexibility | You are the PSP | Any PSP, merchant's choice
Merchant onboarding | You build it | Pre-built, white-label
Regulatory burden | Full (KYC, AML, licensing) | Minimal
Capital requirements | Reserve account required | None
Engineering investment | 20-30% of roadmap ongoing | Single integration
Channel coverage | Checkout only | Checkout, voice, links, chat, AI
Revenue opportunity | Higher margin per transaction | Revenue share without the burden
Control | Full | High (white-label, configurable)
The honest trade-off: PayFac gives you more margin per transaction and more control. But it costs more, takes longer, and consumes engineering resources that could be building your core product.
For most platforms, the math doesn't work. The payment layer delivers 80% of the revenue upside at 10% of the cost and complexity.
When a PayFac Model Does Make Sense
To be fair, there are cases where becoming a PayFac is the right move:
Payments are your core product. If you're building a payments company, not a platform that needs payments, then owning the stack makes strategic sense.
You have the scale to justify the investment. Processing billions in annual volume with the margins to support a dedicated compliance and engineering team.
You need pricing control at the merchant level. Setting your own interchange-plus rates, controlling underwriting criteria, managing risk directly.
You already have the compliance infrastructure. Financial services companies, banks, and regulated entities that are already PCI certified and licensed.
If none of these apply, a payment layer is the faster, cheaper, and more flexible path.
The Enterprise PSP Problem
This deserves its own section because it's the pain point that pushes most platforms toward a payment layer.
Enterprise customers mandate their PSP. It happens in every industry:
Insurance platforms: carriers require specific payment processors
Travel platforms: airlines and operators have existing PSP relationships
ERP platforms: enterprise clients won't switch PSP for a software vendor
Contact centres: clients bring their own gateway and expect the platform to support it
If you've built your payments on Stripe, and an enterprise customer requires Worldpay, you have three options:
Turn down the deal. This is what usually happens.
Build a Worldpay integration. And then another one for the next customer's PSP. And another. Each one takes months and expands your PCI scope.
Use a PSP-neutral payment layer. One integration supports whatever gateway the customer brings.
Enterprise PSP mandates are the #1 reason platforms move from single-PSP to multi-PSP infrastructure. A payment layer makes this a configuration change, not an engineering project.
FAQ
What's the difference between a PayFac and a payment aggregator? A PayFac processes transactions under its own merchant ID, with sub-merchants beneath it. An aggregator pools transactions from multiple merchants through a single account. In practice, the terms are often used interchangeably, but PayFac implies more control and more regulatory responsibility.
Can I still monetise payments without being a PayFac? Yes. Payment layers offer revenue share models — you earn on every transaction your merchants process without carrying the regulatory, compliance, or operational burden.
What about PayFac-as-a-Service (PFaaS)? Providers like Payrix and Finix offer "PayFac in a box" — you get PayFac-like capabilities without building everything from scratch. This reduces the build time but still carries compliance obligations, and typically locks you into a single PSP. It's a middle ground that works for some platforms but doesn't solve the multi-PSP problem.
How long does it take to embed payments using a payment layer? Weeks, not months. Pre-built components for checkout, merchant onboarding, and management portals are white-labelled and deployed as part of the integration. A demo environment can typically be running within hours.
What if I've already started down the PayFac path? It's not too late to change course. Many platforms that began building PayFac infrastructure have switched to a payment layer approach after realising the ongoing cost and complexity. The sunk cost is real, but the ongoing savings usually justify the switch.
Ready to embed payments — without becoming a payments company? See how platforms use Shuttle to go live with multi-PSP payments in weeks, not months — with white-label checkout, merchant onboarding, and PCI compliance included.
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