Understanding the difference between a payment facilitator (payfac) and an ISO (Independent Sales Organization) is essential for choosing the right payment processing structure for your business stage and volume.
**Payment Facilitator (Payfac)**: - Example companies: Square, Stripe, PayPal, Shopify Payments, Toast - Setup: Instant or same-day, minimal underwriting - Pricing: Flat rate (typically 2.6%–2.9% + per-transaction fee) - Account type: Sub-merchant account under payfac's master account - Stability: Lower — accounts can be frozen or terminated quickly - Control: Limited — payfac sets all terms and pricing - Best for: Startups, very low volume, or businesses testing card acceptance
**ISO (Independent Sales Organization)**: - Example companies: Liberty Bancard, North American Bancard, First Data agents - Setup: 1-7 business days for underwriting and approval - Pricing: Interchange plus (negotiated markup over actual interchange) - Account type: Dedicated merchant account - Stability: Higher — direct relationship with acquirer - Control: More — can negotiate rates and terms - Best for: Established businesses processing $10,000+/month
The fundamental economic difference: payfacs make money by charging a flat rate that covers their costs and profit in all scenarios. ISOs make money on a smaller markup over actual interchange, which scales with volume.
Choosing between a payfac and an ISO is primarily a business stage decision: - Starting out / under $5,000/month: Payfac (easier setup, lower risk) - $5,000–$15,000/month: Either works, evaluate based on your needs - Over $15,000/month: ISO with interchange plus will typically save 0.5%–1.0% in effective rate - Over $50,000/month: ISO is almost always significantly cheaper
Annual comparison at $300,000 in processing: - Payfac (Square at 2.6%): $7,800/year in fees - ISO (Interchange plus at 1.95% effective): $5,850/year in fees - Annual savings with ISO: $1,950
Consider switching when you're consistently processing over $10,000-$15,000/month and the savings from lower rates justify the slightly more complex setup process. Most businesses find the crossover point between $10,000-$20,000/month.
Yes, some businesses use a payfac as a backup or for specific channels while their primary processing runs through an ISO. This can provide processing redundancy.
Liberty Bancard is an ISO — not a payfac. That means dedicated merchant accounts, negotiated interchange plus pricing, and personalized service. If you've outgrown Square or Stripe, we can show you exactly what you'd save by switching.
Continue learning: Browse all 60 payment processing terms in our Payment Processing Glossary, or upload your statement for a free analysis of your current processing costs.