May 8, 2019
Written by
James Davis
Written by James Davis
Senior Technical Writer at United Thinkers

Author of the Paylosophy blog, a veteran writer, and a stock analyst with extensive knowledge and experience in the financial services industry that allows me to cover the latest payment industry news, developments, and insights. Read more

Reviewed by
Kathrine Pensatori
Product Specialist at United Thinkers

Product specialist with more than 10 years of experience in the Payment Processing Industry. I help payment facilitators and PSPs solve their various payment processing issues. Read more

The Evolution of Merchant Services: PayFac vs ISO

Key Takeaways:

PayFac vs ISO is an illustrative example of natural selection and adaptation in the fintech world. About 50 thousand years ago, several humanities co-existed on our planet. Relationships of modern humans with other human species, such as Neanderthal etc, ranged from killing and eating each other to interbreeding. Modern-type humans turned out to be better adapted to changing environmental conditions. So, at some point, all other human species became extinct. However, fragments of Neanderthal and other archaic DNA patterns can still be found in the DNA of many modern nations. The same applies to merchant services.

The world of merchant services is, presently, inhabited by its own modern-type and archaic-type individuals. We are talking about payment facilitators and independent sales organizations. It took nature about 10 thousand years to select the best-adapted species, wiping out other humanities. However, in the world of merchant services, the process of replacement of ISO by PayFac might take just 10 years or so. PayFac vs ISO (or ISO vs PayFac) is not some existential conflict, but payment facilitator model is steadily becoming the dominant one.

In comparison to Neanderthal people, modern-type humans diversified their activities, used more versatile materials, and, probably, had better immunity. But why are PayFacs the “better-adapted species” of the present-day merchant services world? Shortly speaking, payment facilitation model is more beneficial for acquirers/processors, merchants, and, of course, PayFacs themselves.

White-Label Payment Solution

PayFac vs ISO: 5 Significant Reasons why PayFac Model Prevails

Payment Gateway Project Seems Complex?


Now, is it the fate of Neanderthal people that awaits ISOs in the near future? Well, not necessarily. ISOs in their present-day form are, indeed, dying out, vacating the space for PayFacs. However, an ISO can become a payment facilitator (an option that archaic humans, unfortunately, did not have). The acquirer has to underwrite a merchant as a PayFac and implement merchant lifecycle support functions within his platform. For the skeptics, who think it is “easier said than done,” there are a lot of intermediary options. These include “try-it-before-buy-it” solutions, such as the white-label PayFac model.

Feel free to contact us for more information on PayFac vs ISO dichotomy and watch our short video guide on PayFac gateway selection.

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