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Difference between ISO and Payfac

Payment gateways and platforms like PayStudio are essential for doing business online in today’s environment. Both  Independent sales organizations (ISOs) and payment facilitators (Payfac or PFs) are parallel channels in the payments ecosystem, serving as intermediaries between payment processors and merchants by granting them access to the payments system.


In terms of funding, PFs have more options than ISOs. Funding can be done through the bank account linked to the PF, however, ISOs are not allowed to handle the cash or money in the processing system transactions are processed through the agent’s master merchant account because PayFac sub-merchants do not have their own MIDs.


ISOs are more flexible than PFs because they primarily act as resellers and have a larger choice of products to resale,  providing merchants with more options.PFs, on the other hand, are less versatile because their operations are kept simple with only two processing partners.

In comparison to ISOs, PFS necessitates a greater utilization of technology. In order to interact with their processing partners, each requires its own in-house systems. In contrast to PFs, ISOs have simpler tasks and require less technology.

Both ISOs and PayFacs use a variety of similar technologies to gain a competitive edge, cut costs, and increase merchant acquisition.


They primarily act as resellers and have a greater selection of products to resell, ISOs are more flexible than PFs, providing merchants more options.PFs, on the other hand, are less versatile because their operations are kept simple with only two processing partners.


In comparison to ISOs, PFS takes on a lot of responsibilities. PFs accept direct applications from merchants and are responsible for the full onboarding process, whereas ISOs convey information through their boarding portals and processing partners and are therefore less responsive. PayFac is in charge of both the application and onboarding for merchants who apply directly to them. The merchant data is given to their processing partner’s boarding site by ISOs. Only a few wholesale ISOs conduct underwriting and share responsibility with the processor, whereas PayFac handles most of the underwriting.

Associated Risks

The risk linked with PFs is, on average, larger than that associated with PFS. In PFs, you entrust underwriting to a third party, as well as ongoing diligence on merchants. ISOs, on the other hand, are mostly unaccountable for merchant losses. The majority of processors aren’t willing to take on the additional risk. As a result, PayFac or ISO must accept a higher level of accountability, which in the case of PayFacs may be 100%. While there are advantages to taking on high risks, such as greater flexibility and portfolio control, it can also increase costs.

Contracts and Relationships with Merchants

The two techniques are also distinct when it comes to merchant agreements. Dual-party agreements between a sub-merchant and a PF are permitted undercard brand guidelines, but the sponsor bank must be a party to the contract in the case of ISOsWhen an ISO sells services to a merchant, the agreement between the merchant and the sponsor remains completely between them.

Processor relationships

ISOs are essentially resellers, and the more products they have to market, the more options they can offer dealers, the more creative they can be with applications, the higher the fees they can charge, and so on. To access a wider range of products, more partners are required, hence most major ISOs have connections with a half-dozen or more payment processors. On the other hand, PayFacs is the polar opposite. A high number of partners has no advantage because they manage all of their sub-merchant transactions centrally and pooled. PFs, on the other hand, are less adaptable due to the fact that they only have two processing partners.

Despite the fact that ISOs and FPs share a common location, they are essentially distinct. When opposed to an ISO, the options PMs have in establishing their business operations might provide them more influence over the merchant experience. However, with this level of control comes an increased need to manage risk.

Whether organizations act as PFs or ISOs, the most critical job they have is to protect the payment system’s integrity.

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