Contact our Team


Confirm your details, and one of our friendly local team will get in contact to discuss your requirements.

PayFac vs Gateway vs Merchant Account


14 February 2018

Victoria Galloway

6 minute read

The terms payment, processor, payment facilitator & payment aggregator are used almost interchangeably. But there are important differences you need to know about these merchant services. Our payments experts help you decode the differences.

Accepting payments from your customers is arguably the most important element of running your eCommerce business. By the same logic, it should also be the simplest.

Unfortunately, that’s not always the case.

There are many cogs and gears in the payments cycle and, as an entrepreneur or eCommerce professional, you’ll find there are just as many terms used to describe them. You might have often wondered what makes a payment processor different from a payment gateway or what purpose a merchant account serves.

However, before we delve deeper, let’s look at the main parties involved in every eCommerce transaction:

  • The merchant: The business that accepts card payments
  • The cardholder: The buyer under whose bank account a card has been issued
  • The issuing bank: The bank that has issued your customer’s credit card
  • The acquiring bank: The bank that processes the customer’s credit card payments for the merchant

Now let’s move on to understand the difference between elements that work behind the scenes when you process payments.

A Payment Facilitator - What Is it and How Does it Work?

You’ve likely heard the term “PayFac” crop up in payments-related conversations. That’s just another term for payment facilitator, which is a third-party payment services provider (PSP) for merchants.

A payment facilitator typically has a contract with the acquiring bank and onboards merchants on a sub-merchant platform. For the uninitiated, a sub-merchant platform involves a payment facilitator who already has a master MID account with the acquiring bank. So if you wanted to start offering merchant services, you could sign up as a sub-merchant under a PayFac’s master account and have your own MID set up in no time.

Benefits of the PayFac model for merchants:

The PayFac model has a number of benefits, which include allowing businesses to offer merchant services quickly and efficiently. Usually, a simple onboarding application form and verification are all you need to get started.

Considerable time is also saved in underwriting as the payments facilitator can underwrite merchants with a quick evaluation tool.

The PayFac model also transfers the risk from individual merchants to the payment facilitator, who owns the master account. For instance, if you choose to use Bambora as a payments facilitator, you don’t need a merchant account.

To sum it up, when you choose Bambora as a payment facilitator for your eCommerce business, we work directly with banks to settle and disburse funds without you needing a merchant account.

Payment Facilitator vs Aggregator

The only key difference between a payment facilitator and payment aggregator is that while a facilitator provides merchants with their own MID under a master account, an aggregator signs up merchants directly under its own MID.

The aggregator model works perfectly for small or medium-sized businesses that process low volumes of transactions. Sub merchants typically only have to pay when they process online payments, rather than shell out a monthly fee.

That brings us to the important question: What’s better - a payfac or payment aggregator?

Because these two services aren’t drastically different, choosing the best option for your business might be a confusing process. We recommend you consider these aspects when making a decision:

  • What is the cost of commission?
  • What are the payment methods you can offer your customers?
  • What is the level of support you’ll receive?

A Payment Gateway - What is it and What Role Does it Play?

A payment gateway is a service that helps merchants accept payments online, which is essentially any payment method other than cash or cheque.

Here’s what a payment gateway does:

  • When a customer presents a card or digital wallet to pay for goods or services, their payment goes through a gateway.
  • The payment gateway links the customer’s bank or card brand to the merchant account so funds can be transferred between these accounts.
  • A gateway is important because it verifies your customers’ account information to either successfully process or decline transactions. This is done in a matter of milliseconds.

But remember, because the payment gateway transmits such sensitive personal information, it needs to be highly secure and capable of fending off attempts to steal valuable financial data.

At Bambora, a payment gateway trusted by hundreds of businesses in Australia and across the world, we have the highest PCI compliance level to ensure that merchant and customer data is safeguarded at all times.

Payment Processor vs Payment Gateway

Both payment processor and payment gateway transmit payments between the merchant account and the customer account. But there’s one main difference between a processor and gateway:

A payment gateway is primarily used to honour transactions on eCommerce sites. A payment gateway is also necessary for card-not-present (CNP) transactions such as those via digital wallets, card on file payments, and telephone purchases.

A payment processor, on the other hand, comes into the picture when you’re processing transactions at PoS terminals using devices such as credit card machines.

You can learn more about choosing an online payment gateway based on your needs in this helpful post.


Payment Facilitator (PayFac)

A facilitator provides merchants with their own MID under a master account.


An aggregator signs up merchants directly under its own MID. Sub merchants pay only when they process online payments, rather than shell out a monthly fee.

Payment Gateway

A payment gateway transmits payments between the merchant account and the customer account.

The PayFac model:

Allows business to offer merchant services quickly and efficiently.

The aggregator model:

Is good for small or medium-sized businesses with low volumes of transactions.

A payment gateway:

Is primarily used to honour transactions on eCommerce sites; it is also necessary for card-not-present (CNP) transactions.

A Merchant Account - What is it and How Does it Work?

Planning to accept payments online? Then a merchant account is one of the two most important things you’ll need. A payment gateway is the other one.

A merchant account differs from the average business bank account in that it allows businesses to accept online payments via credit or debit cards. This is where the final settlement of funds takes place after they have successfully passed through the payment gateway and acquiring bank. Only then do the funds make their way to your nominated business bank account.

Which merchant account type should you choose?

Independent sales organisation (ISO)

If you are a large organisation with a high volume of transactions per month, an independent sales organisation (ISO) merchant account will fit your needs. As the name suggests, these accounts are independently owned by the merchant, giving them the opportunity to control and customise these accounts as desired.

Some of the features of an ISO merchant account are:

  • Flexible credit limits
  • Multi-currency settlements
  • Dynamic currency conversion
  • Flexible processing cost structures
  • Aggregator merchant account

Aggregator merchant account

If you are a small to mid-size business that doesn’t process transactions in the millions, then an aggregator account will offer you the efficiency, convenience, and savings you need. An aggregator account gives you access to almost all of the services you’d expect from a merchant account. Except, your merchant account nests under a payments provider’s master merchant account.

This means that the payment provider, such as Bambora, is the main merchant and your business is listed as a sub-merchant.

Bambora's payment processing capabilities suit businesses of all sizes. Talk to our team today to discover which services are best for you and your customers.

About the author

Victoria Galloway is Bambora APAC's Technical Copywriter, and has been writing and producing in the payments and eCommerce space for a number of years, both in the UK and Australia.