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Thinking about how to handle payments for your business? Whether you’re just starting out, looking to upgrade your current setup, or considering incorporating payment solutions within your own platform, two models you’ll encounter often are Payment Facilitators (PayFacs) and Independent Sales Organizations (ISOs). They both get you from A to B when it comes to payment processing. But how they do it, and what that means for your business, is totally different.
This guide breaks down PayFacs and ISOs, including what each model does, where they shine (and fall short), and how to figure out which one fits your business better.
Key Takeaways
- PayFacs offer an all-in-one setup: fast onboarding, built-in fraud tools, and a shared merchant account model.
- ISOs help you set up your own merchant account and work directly with banks or processors. You get more control, more flexibility, and sometimes better pricing.
- If you want something quick and simple, PayFac might be the move. But an ISO could make more sense if you’re running a bigger operation or need more customization.
Understanding the Basics of Payment Processing
Every time a customer taps, swipes, or clicks “Buy Now,” there’s a behind-the-scenes system making sure that money lands in your account safely. That’s payment processing in action. Simply put, payment processing is the system that securely and efficiently facilitates transactions from one bank account to another. The main difference between an ISO and a PayFac is how you get access to that system.
What Is an Independent Sales Organization (ISO)?
An ISO is basically a middleman between your business and a bank or payment processor. They help you set up a traditional merchant account, negotiate terms, and usually offer more personalized support. This model gives you more flexibility to customize your setup, which is especially useful if you’re processing a high volume of payments or operating in a niche or high-risk industry.
Some Well-Known ISOs: EVO Payments, Global Payments, First Data (now part of Fiserv), and Total Merchant Services.
Quick Note: Don’t confuse ISOs with ISVs (Independent Software Vendors). ISVs can build software with payment features, while ISOs handle the payments themselves.
What Is a Payment Facilitator (PayFac)?
PayFacs aggregate multiple merchants through their merchant account. As a financial intermediary, a PayFac can simplify payment processing through this aggregation, offering a faster onboarding process for smaller organizations. With this method, payment processing is funneled through a master merchant account rather than individual accounts.
Examples of PayFacs include Square and Shopify, both of which offer payment processing services to other businesses. The rise of digitalization has significantly democratized access to payments infrastructure and reduced traditional barriers to entry. More than 5,000 fintech companies, including many PayFacs, now account for close to $100 billion of total global revenues in payments.[1]Mastercard Services. “How Payment Acceptance for Micro and Small Businesses Goes Beyond Just Payment Acceptance.” Accessed September 17, 2025.
For Software-as-a-Service (SaaS) solutions looking for a piece of that payments pie, many platforms now leverage Payment Facilitation-as-a-Service (PFaaS) to enable merchant payment processing directly within their ecosystems. By integrating PFaaS, platforms can enhance their all-in-one merchant experience and create an additional revenue stream by monetizing payment volume processed through their services.
Comparing PayFacs and ISOs: Pricing, Onboarding, and Operational Tradeoffs
If your organization is deciding between the two models, refer to our ISO vs. PayFac table below to review their key differences.
| PayFac | ISO | |
|---|---|---|
| Merchant Onboarding Process | PayFacs typically manage the entire onboarding process, which leads to faster approval and faster time to market. | ISOs route merchant information to a payment processor to perform due diligence before issuing a merchant account. |
| Potential for Customization | PayFacs typically offer less customization when it comes to payment processing and security than their ISO counterparts. | With the ISO model, businesses generally have more control over contract terms, pricing, services, and payment solutions. |
| Fees | Most PayFacs provide a flat-rate, straightforward pricing structure. | ISOs may offer flexibility in negotiating rates and fees based on transaction volume. |
| Technology and Infrastructure | PayFacs often have advanced in-house technology and systems, though some rely on their back-end payment processor’s technology. | ISOs typically rely on their payment processor’s comprehensive tech and infrastructure. |
Pros and Cons of the PayFac Model
When it comes to the payment facilitator model, the pros and cons include:
Pros:
- Easy Set Up and Onboarding: The PayFac model offers a simple setup for payment acceptance. You won’t get bogged down by cumbersome paperwork, and there’s usually no long-term contract. Onboarding can take minutes with a PayFac, rather than days or sometimes weeks with an ISO.
- Quick Underwriting Process: Since PayFacs partner with banks to manage underwriting for you, you receive a quick underwriting process.
- Multiple Integrations: Some PayFacs may simplify the compliance process of onboarding multiple sub-merchants, allowing platforms or SaaS companies to manage payment processing for many businesses through an integration with the PayFac’s system.
Cons:
- Lacking Customer Service: A less personalized experience means getting in touch with a PayFac for support can be hard. They are not widely known for top-notch customer service.
- One-Size-Fits-All Onboarding: This is a case where a pro can also be a con. While onboarding is speedy with payment facilitators, it does not allow for a customized approach. The one-size-fits-all nature may lead to increased overall risk.
- High Processing Fees: PayFacs tend to charge higher reporting and reconciliation fees, as well as more expensive transaction fees and add-ons.
Pros and Cons of the ISO Model
The independent sales organization model comes with benefits and drawbacks, including the following:
Pros:
- Customized Payment Processing Setup: With enhanced customer service, an independent sales organization supports setup, customization, and ongoing flexibility. ISOs often provide more control over account terms and the opportunity to negotiate rates.
- Dedicated Customer Support: ISOs typically offer more tailored customer support, which can help newer businesses or those who need help navigating the world of payment processing. Dedicated customer support can also come in handy when issues arise.
- Lower Processing Fees: Because they offer more personalized support, ISOs can often negotiate lower rates and fees with payment processors depending on your business operations.
Cons:
- Underwriting Process: Typically, underwriting for a merchant account via an ISO is more thorough than that for a PayFac. This can be a plus and a minus. It will take longer, but it’s more comprehensive to support a more customized approach.
- Required Contracts: ISOs typically require business owners to sign a contract, which may be challenging to get out of without extensive termination fees. Some, however, are more flexible and offer month-to-month options.
How To Choose Between an ISO and a PayFac
If you’re split between an ISO or a PayFac, start by determining how much control your organization needs, how large your business is, and how many payments you typically process.
Customization Needs
ISOs offer more customization regarding setup and processing options, while PayFacs offer a more standard, streamlined approach. If you operate in a unique business niche or one that other payment processors have categorized as high risk, an ISO may fit your needs. For example, an ISO might be better equipped to support SaaS billing due to their complexity and customization needs.
Business Size
Smaller businesses with smaller volumes of transactions sometimes prefer the simplicity of PayFacs. However, larger companies with more transactions might choose ISOs for cost savings and greater flexibility.
Payment Volume
If you process high payment volumes, a PayFac may not be ideal. Most high-volume operations need the type of customized support that is more readily available through an ISO that can connect them with banks equipped to handle higher transaction volumes. Unlike the PayFac model, the ISO model can customize security to guard against risks to which your business is often exposed.
Make the Right Payment Partnership Decision
Whether you choose a PayFac or an ISO, what matters is finding a partner who understands your business and has the tools to help it grow.
At PaymentCloud, we support the full spectrum of payment solutions. We work with businesses of all sizes (including high-risk) and offer everything from lightning-fast processing to custom payment setups. Whether you need a merchant account tailored to your business, want to grow through our ISO agent program, or you’re a SaaS platform looking to monetize with embedded payments — we’ve got you covered.
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