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.
Funding
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.
Technology
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.
Flexibility
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.
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%.
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 ISOs When an ISO sells services to a merchant, the agreement between the merchant and the sponsor remains completely between them.
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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