Not long ago, the PayFac model seemed like the gold standard for platforms entering embedded payments. Acting as the payment facilitator meant speed to market, tighter control over merchant accounts, and the potential for increased revenue.
But by 2025, the realities of the model have set in. Rising regulatory scrutiny, growing operational costs, and heightened risk exposure have caused many Independent Software Vendors (ISVs) to reconsider their approach.
With 27 years of experience navigating payment industry shifts, MSG has seen firsthand how ISVs benefit from ISO partnerships that balance control, scalability, and support.
PayFac Model Explained: Control Comes at a Cost
The PayFac model allows a platform to operate as the “master merchant,” boarding sub-merchants under its umbrella. The appeal is clear: ISVs gain direct control over how merchants start accepting payments, the look and feel of their payment experiences, and potential pricing flexibility.
However, with that control comes weighty responsibilities:
Compliance with card network rules and government regulations
Underwriting and risk management, including fraud monitoring
Financial liability for their merchants’ transactions, fees, and losses
Operational overhead, including reporting, reconciliation, and dispute/chargeback handling
These obligations require significant time, capital, and liability coverage. Platforms operating as PayFacs often underestimate these hidden costs, leaving them stretched thin between maintaining compliance and focusing on software innovation. In reality, becoming a PayFac means ISVs must essentially build a parallel business—hiring staff, managing compliance infrastructure, and entering an industry where they often lack deep expertise.
The ISO Model: A Smarter Alternative in 2025
By contrast, the ISO model takes a different approach. Instead of being the PayFac of record, ISVs partner with an Independent Sales Organization that works directly with acquiring banks and payment processors.
How ISOs work:
ISOs typically provide the infrastructure, compliance oversight, and support services.
The ISV focuses on building software and delivering value-added features.
Merchants benefit from faster approvals and a simplified path to begin processing payments.
For ISVs, this means less overhead, zero compliance liability, and a more stable growth foundation. Backed by nearly three decades of industry expertise, ISO partners like MSG bring proven processes to streamline operations and protect long-term growth.
Merchant Onboarding: The Deciding Factor for Platforms
For many ISVs, the tipping point in the PayFac vs ISO decision comes down to merchant onboarding.
Under the PayFac model, merchants face long KYC and AML checks, repeated documentation requests, and potential regulatory delays.
With an ISO partnership, much of this burden is shifted to the ISO and its acquiring bank.
The result? Faster onboarding, smoother experiences, and less merchant frustration.
At MSG, onboarding is where we differentiate, drawing on 27 years of refining merchant experiences to ensure fast, smooth, and frustration-free approvals:
Fully electronic forms designed for speed and clarity
Automated checks to accelerate approvals
Tailored support so merchants feel guided, not abandoned
This approach ensures merchants can start accepting payments quickly, helping ISVs retain and grow their user base.
Risk & Compliance: Why ISVs Are Shifting Away from PayFacs
Being the PayFac isn’t just a title. It comes with full liability for fraud, chargebacks, and compliance breaches. The regulatory environment in 2025 is only increasing these pressures.
With the ISO model, ISVs don’t carry risk exposure. Acquiring banks, payment gateways, and ISOs coordinate to fully manage compliance, liability, and fraud protection.
For ISVs, this means:
No need to build or maintain fraud prevention infrastructure
Freedom from liability for credit card disputes and chargebacks
Confidence knowing compliance is managed by industry experts
Strong risk management is central to protecting long-term merchant growth. With 27 years of proven compliance expertise, MSG’s ISO partnerships deliver safeguards that PayFacs cannot match without significant investment.
The Business Case: Growth, Revenue, and Support
Ultimately, the decision isn’t just about compliance; it’s about growth.
The ISO model allows ISVs to:
Stay focused on software development instead of payment industry regulations
Leverage co-selling and joint marketing with ISO partners
Offer merchants value-added payment services without building everything from scratch
For ISVs looking to scale in 2025, ISO partnerships strike the right balance between revenue potential and operational stability. MSG’s 27-year track record in guiding ISVs and merchants ensures partners gain both speed to market and sustained support.
Why MSG Is the Partner of Choice for ISVs in 2025
Not all ISO partnerships are created equal. MSG has built its business model to meet ISV needs at every stage:
Flexible integration paths – From lightweight APIs to prebuilt solutions, we adapt to your technical requirements.
Merchant-first onboarding – Our process minimizes friction, so your merchants are ready to process payments faster.
Dedicated enablement – Beyond payments, we provide co-marketing resources, sales support, and compliance expertise to strengthen adoption.
With more than 27 years of experience, MSG knows what it takes to support ISVs from onboarding to long-term merchant servicing. That expertise ensures ISVs can compete confidently in today’s payments landscape without taking on the liabilities of the PayFac model.
Choosing the Right Path for Growth
In 2025, more platforms are choosing ISO partnerships over PayFac models for one reason: long-term success.
The ISO model offers ISVs:
Faster onboarding that drives merchant satisfaction
A true zero-risk model, where compliance and liability are fully managed by the ISO and acquiring banks
Scalable growth supported by experienced payment processors and decades of proven industry knowledge
When evaluating PayFac vs ISO, the choice is becoming clearer. ISO partnerships give ISVs the freedom to focus on building great software while ensuring merchants enjoy stable, secure, and seamless payment experiences. With 27 years of experience delivering trusted payment solutions, MSG is uniquely positioned to help ISVs succeed today and adapt for tomorrow.
Ready to explore how MSG’s ISO partnership model can accelerate your payments strategy? Connect with our team today.
