ISV vs PayFac: What’s the Difference?

Confused by ISV vs PayFac? This blog breaks down the key differences between the two to help you choose the right path for your business.

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Choosing the right payment processing for your SaaS business:

  • ISV (Independent Software Vendor):
    • - Integrate payments directly into your software.
    • - Negotiate potentially lower rates directly with processors.
    • - Better for long-term value.
  • PayFac (Payment Facilitator):
    • - Faster onboarding for your users (sometimes instant approval).
    • - Easier setup but may have higher fees.
    • - Good for businesses that prioritize speed over cost.
  • Other factors to consider:
    • - ISO (Independent Sales Organization): Similar to PayFac but with individual merchant accounts.
    • - Swipesum: Helps you find the best payment processing solution for your business.

Accepting payments seamlessly is crucial for any SaaS business. But when it comes to integrating payment processing into your platform, the options can feel overwhelming.

Two prominent choices emerge: the ISV (Independent Software Vendor) and PayFac (Payment Facilitator) models.

While both play a role in facilitating payments, they cater to different needs.

Keep reading to clear the confusion surrounding ISV vs PayFac. We’ll also explain ISOs, and most importantly, help you choose the right path for your business.

Unsure of which option best suits your SaaS platform? Book your free consultation to navigate the complexities of payment processing.

What Are ISVs, PayFacs, and ISOs?

ISV (Independent Software Vendor)

ISVs can leverage your payment processing expertise by integrating it directly into your software. This seamless integration allows their end users to accept payments effortlessly within the familiar interface of the ISV's software. These end users are also known as sub-merchants.

PayFac (Payment Facilitator)

Think of a PayFac as the middleman between your sub-merchants and the actual payment processor. They handle the heavy lifting of underwriting (risk assessment). They also manage merchant accounts for your users under a single, master merchant account.

Essentially, PayFacs act as a single point of contact for businesses, streamlining the entire payment process.

Not all PayFacs are created equal. A registered PayFac has been officially approved by the card brands (Visa, Mastercard, etc.) for payment processing. This adds a layer of security and trust but also involves a more rigorous registration process.

Managed PayFac streamlines things further. They offer pre-built PayFac solutions that bypass the need for direct registration with the card brands. However, this convenience often comes at a premium cost.

ISO (Independent Sales Organization)

ISOs are sometimes mentioned alongside ISVs and PayFacs.

While they share some similarities, there’s a key difference between ISO vs PayFac.  

ISOs typically don't hold their own merchant accounts. Instead, they partner with acquiring banks to set up individual accounts for each merchant they bring on board.

PayFacs, on the other hand, operate under a single master merchant account and aggregate transactions from their sub-merchants.

The Differences Between PayFac vs ISV: Picking the Right Partner

Let’s compare the ISV and PayFac models. We’ll highlight their strengths and weaknesses to help you find the best fit for your vertical SaaS business.

ISV Providers

When it comes to ISV partnerships, you have a wide range of options. Established payment processors like Elavon, TSYS, First Data, Worldpay, and Global Payments all offer ISV solutions.

Additionally, all registered ISOs can also be potential partners.

When it comes to ISV vs. ISO, there's a significant difference in the size of certification markets.

According to Global Newswire, the ISV market, valued at around $894.7 million in 2023, is expected to reach $1.55 billion by 2031.

On the other hand, the ISO certification market is much larger. It was valued at $10.32 billion in 2022 and is expected to reach $34 billion by 2030.

This translates to a wider pool of potential ISO partners. But it's important to consider the specific needs of your business. Especially when choosing between an ISO vs ISV for your payment processing needs.

Managed PayFac Options

The Managed PayFac path offers a seemingly faster and easier setup with providers like Payrix, ProPay, WePay, etc.

However, this convenience comes at a price. Managed PayFac solutions often have higher fees built into their structure. Especially compared to negotiating directly with an ISO or becoming an ISV.

Choosing between a PayFac vs ISO can be a complex decision. Understanding the fee structures and level of control is crucial for making the best choice for your business.

The Goal: Transparency and Competitive Rates

Regardless of the path you choose, transparency is key. Make sure you have a clear agreement with your chosen provider. Outline all fees and ensure you understand the buy-rates (the fees you pay for processing transactions).

Swipesum: Getting You the Best Deal

At Swipesum, we leverage our extensive experience and processing volume to negotiate the best possible deals for our clients. We can often secure rates up to 50% lower than what you might get by going directly to a provider.

A person using their phone to make a payment.

Which Model Should You Choose?

Now you've seen the features of both ISV and PayFac models. But which one is the right fit for your vertical SaaS business? Here's a breakdown to help you decide.

Onboarding Speed

PayFac solutions often get the nod for faster onboarding. Their pre-built systems can get your users to accept payments quicker, sometimes with instant approvals.

However, for high-volume merchants (for example, $20k per month), additional underwriting might be required later. This could negate the initial speed advantage.

Long-Term Value

While PayFac might seem convenient upfront, ISV partnerships can offer potentially lower buy-rates in the long run. This is because ISVs typically negotiate directly with processors, bypassing the markups associated with PayFac services

It's important to remember that PayFac's popularity often stems from their higher marketing budgets. This is not necessarily better value for you.

User Experience

Don't get hung up on thinking one model offers a vastly different user experience than the other.  Both ISV and PayFac can provide a seamless payment experience for your customers. Ultimately, the key differentiator is the onboarding time.

The 3-5 Day Advantage

If your typical customer onboarding process takes 3-5 days, the ISV route might be the better choice. The potential cost savings over time can outweigh the slightly slower initial setup for your users.

Finding Your Ideal Partner

An ISV might choose to integrate a common payment gateway like Cybersource,, or NMI into their software.

In payment processing, a gateway acts as the secure bridge between your software and the processor. It encrypts and transmits customer payment information for authorization and final settlement.

They can then partner with a processor like Swipesum to manage all the backend payment operations.

This allows the ISV to focus on their core software development. This ensures a smooth payment experience for their users.

Don’t Just Process Payments, Grow Your Business

Swipesum acts as your trusted Chief Payments Officer, guiding you to optimized revenue sharing and unlocking new revenue potential.

We provide expert support for every aspect of payments, from customer conversations to pricing strategies.

Book your free consultation today and see how Swipesum can fuel your software's success.

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Michael Seaman

Michael Seaman

Michael is the co-founder and CEO of Swipesum. A veteran of the payments industry, Michael and his brother Stephen have led Swipesum since its inception in 2016. In his free time, Michael enjoyes time with his three children.

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