Commanding a knowledge of all the key Payment Facilitation terms is essential if you want to become a Payment Facilitator.

Here is a list of the top 21 payment terms most commonly used across the payments industry:

Payment Facilitator

A Payment Facilitator (PayFac) is a company that provides payment processing services under sponsorship of a financial institution. The PayFac simplifies the acquisition of a merchant account by streamlining merchant underwriting and onboarding alone with mining exposure and liability by catering to small businesses.

Payment Card Network Operators (PCNOs)

Payment Card Network Operators refers to an entity that directly, or through licensed members, processors, or agents, provides the proprietary services, infrastructure, and software that route information and data to handle transaction authorization, settlement, and/or disbursement, and that a merchant uses in order to accept as a form of payment a brand of debit card, credit card or other alternative services.

Managed PayFac

A Managed PayFac is a payment monetization model in which a company gets most of the benefits of a full Payment Facilitator but without the same level of liability or risk. This model also provides a streamlined registration process, greatly increasing time to market. One downside is, they have limited control over disbursement of funds and may have stricter criteria on the merchant boarding process, influencing which industries, or merchant they can cater to.

ISO (Independent Sales Organization)

An Independent Sales Organization (ISO) is a third-party organization that sells credit card processing services on behalf of an acquiring bank. ISO’s generate a large amount of their income from the processing revenue, co-brand processing services and build up a portfolio of merchants which is a very strong asset. ISOs maximize their portfolio by leveraging a strong processing partner, so they can offload all the risk associated with the merchant and their payments. In return for their sales work, they get to share the revenue associated with all the payments of their merchants.


Underwriting is the process of screening and validating information provided by a merchant in order to qualify for the ability to process payments. The process entails analyzing the financial risk associated with the merchant, and other guidelines. Merchants are evaluated by a combination of automated tools and risk processes that screen the data against a list of databases, credit scoring, personal and address verification, used to meet said qualification requirements and determine if they meet those qualifications.

Master Merchant

A Master Merchant is a company which provides payment services to sub-merchants who use their platform. The Master Merchant enters in an agreement with an acquirer which permits them to onboard sub-merchants and facilitate their payments.


A Sub-merchant is onboarded by a Master Merchant. All the payments of a sub-merchant are then processed through the merchant account operated by the Master Merchant. Sub-merchants are screened and verified to meet various rules and regulations including, Know Your Customer (KYC) requirements, Anti Money Laundering (AML) rules, and the US Office of Foreign Asset Control (OFAC) requirements.


A Chargeback occurs when customers dispute charges on their account. Once reported, the issuing bank then passes the dispute through the card network to the acquiring bank and to the merchant on record. Payment Facilitators are responsible for managing the chargeback process along with the acquirer, and are liable for any monetary losses resulting from chargebacks.

PCI DSS (Payment Card Industry Data Security Standards)

PCI DSS is an information security standard for organizations that handle credit cards. PayFacs that store, transmit or process credit card and cardholder data are required to follow PCI DSS regulations and guidelines. PayFacs will need to provide Level 1 Service Provider PCI DSS Compliance Validation documentation and a documented process explaining how the Payment Facilitator validates PCI compliance of sub-merchants for PCI compliance and registration requirements.

Sponsoring Bank

A Sponsoring Bank is a financial institution who is authorized to extent sponsorship to qualifying institutions for various financial services such as Payment Facilitation, ISO Registration and BIN allocation, Acquiring and Issuing Services by applying strict registration and reporting criteria.


Reserves are a pool of money that is remaining and may be used to minimize risk of financial fraud for PayFacs. Reserves are usually withheld to be used for refunds, chargebacks, and ACH returns.

Reputation Monitoring

Reputation Monitoring is information available online for reviewing consumer perception of a sub-merchant that has potentially higher risk. Reputation Monitoring helps to perform efficient due diligence and risk mitigation.


Settlements are transactions which are approved by a cardholders issuing bank, then captured via a processing entity and disbursed via the acquiring banks sponsored infrastructure to the qualifying merchant operating bank account. This is referred to as the settlement process.

BIN (Bank Identification Number)

BIN is the initial set of six numbers that appear on a credit or debit card which identifies the institution that issues the card. Outside of the cardholder experience, it can also refer to an acquiring bank identifier which is used to process transactions.


A Gateway provides payment processing services to merchants. Merchants will typically integrate a Payment Gateway via an API. The Gateway then processes their transactions with a payment processor or an acquiring bank, and provides a set of reports that help merchants reconcile their payments.

Issuing Bank

An Issuing Bank is a bank or financial institution that issues payment cards to consumers. Issuers are liable for all payments processed on their issued cards on behalf of their cardholders.

Acquiring Bank

An Acquiring Bank is a bank or financial institution that funds the payment facilitator for settled sub-merchant funds made on credit or debit card payments. The acquiring bank holds deposits through a merchant account for Payment Facilitators and is liable for transactions processed through the Payment Facilitators customers.

Payment Processor

The Payment Processor is an entity which manages credit card processing on behalf of a portfolio of merchants, partners, and ISOs. They are mediators extending services between acquiring entities, ISOs, and merchants. Often, they can manage and run their own acquiring or PayFac services, beyond just offering the technology suite as a service. They will handle the processing of authorizations, settlements, funding institutions, risk management and operational management along with security and compliance requirements. They take all the responsibility from an operational, card acceptance and compliance, technological security and customer service standpoint.

Credit Score

A credit score is a numerical expression that is based on the analysis of a person’s credit history typically sources from credit bureaus. As Payment Facilitators take on financial risks when processing payment card transactions for sub-merchants, they can use a credit score to determine if sub-merchants are financially capable and responsible before being onboarded.

OFAC (Office of Foreign Assets Control) Check

A Payment Facilitator must check their merchant against a list of OFAC individuals or companies that are not authorized to do business in the United States. During the underwriting process, merchants must be verified that they are who they say they are and checked against the OFAC list.

Mastercard Match

Mastercard Match is a list created and managed by Mastercard that holds information about businesses and owners whose credit card processing privileges have been revoked for a set of specific reasons. A Payment Facilitator will typically check their sub-merchants again the Mastercard Match list as part of the underwriting process.