Historically, for small and medium-sized enterprises (SMEs), freelancers, or online marketplaces in Brazil, accepting credit and debit card payments was a bureaucratic and slow process. Each business had to undergo a lengthy underwriting process directly with a traditional acquirer. The Payment Facilitator (PayFac) model emerged as a revolutionary solution to this challenge, simplifying and democratizing access to digital payments. Known in Brazil as a Subcredenciadora or Subadquirente, this model has been a key driver of financial innovation and inclusion in the country. This article explains what a PayFac is, how its model differs from the traditional one, and its regulatory context within Brazil.
Content:
- What is a Payment Facilitator (PayFac)?
- The PayFac Model vs. The Traditional Acquirer Model
- How a Transaction Works in the PayFac Model
- Regulatory Landscape in Brazil
- Benefits for Brazilian Businesses
What is a Payment Facilitator (PayFac) in Brazil?
A Payment Facilitator is a company that provides payment processing services to a group of smaller merchants, known as sub-merchants. Instead of requiring each small merchant to have a direct relationship and a unique merchant ID with an acquiring bank, the PayFac holds one master merchant account with the acquirer. It then onboards multiple sub-merchants under this single account.
Think of the PayFac as a landlord of a large commercial building who holds the master contract with the utility companies. The landlord then rents out individual shops (the sub-merchants) and provides them with ready-to-use electricity and water, simplifying the process for each shop owner. The PayFac is responsible for the entire sub-merchant lifecycle, including underwriting, onboarding, processing transactions, and managing risk and compliance.
The PayFac model vs. the traditional acquirer model
The key difference lies in the onboarding process and the nature of the relationship.
- Traditional Acquirer Model: A merchant applies directly to an acquirer (like Cielo, Rede, or Getnet in Brazil). The process involves a detailed and often slow underwriting and risk analysis for that single business.
- PayFac Model: A sub-merchant signs up with the PayFac through a fast, simplified online process. The PayFac is responsible for the risk assessment and Know Your Customer (KYC) procedures, making onboarding possible in minutes or hours, not weeks.
This speed and convenience have made the PayFac model the standard for SaaS platforms, marketplaces, and any business that needs to onboard a large number of sellers quickly.
How a transaction works in the PayFac model in Brazil
The flow of funds in a PayFac model involves a few additional steps compared to a direct acquiring relationship:
- Authorization: A customer makes a purchase from a sub-merchant. The transaction request is sent through the PayFac’s system to the acquirer and then to the card networks (Visa, Mastercard) for approval.
- Settlement: After the transaction is authorized, the funds are settled by the acquirer into the PayFac’s master merchant account.
- Payout: The PayFac receives a single settlement for all of its sub-merchants’ transactions. It then reconciles these funds, deducts its service fees, and pays out the net amount to each individual sub-merchant’s bank account.
Regulatory landscape for Payment Facilitator in Brazil
In Brazil, the PayFac (Subcredenciadora) model is a regulated activity overseen by the Central Bank of Brazil (Bacen) as part of the broader Brazilian Payment System (SPB). Because PayFacs participate in the payment flow and hold funds on behalf of their sub-merchants, they are typically required to operate as a regulated Payment Institution (“Instituição de Pagamento”).
This classification requires them to adhere to specific rules regarding:
- Fund Safeguarding: Ensuring that sub-merchant funds are kept in a separate account from the PayFac’s operational capital.
- Compliance: Implementing robust programs for Anti-Money Laundering and Counter-Terrorist Financing (PLD/CFT).
- Settlement: Adhering to the timelines and rules for settling transactions as defined by the Central Bank.
Benefits for brazilian businesses
The PayFac model offers significant advantages, especially for the long tail of small and micro-entrepreneurs in Brazil:
- Fast Onboarding: Businesses can start accepting payments almost immediately.
- Simplified Pricing: Often offers a transparent, bundled fee structure.
- Integrated Experience: PayFac services are usually integrated with software, e-commerce platforms, or POS systems, creating a seamless experience.
- Accessibility: It opens up the digital economy to businesses that might not have qualified for a traditional merchant account.
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