Guides · Infrastructure
PayFac, PSP or orchestration: what your platform actually needs.
Marketplaces and platforms get pitched three different acronyms as "the answer" to payments. All three are real; none is universally right. The correct choice follows from your money flows — who you onboard, who you pay, and who carries the risk when something goes wrong.
The three models, stripped of marketing
PSP (payment service provider). You are one merchant. The PSP accepts payments into your account; anything you owe to sellers or suppliers, you pay out yourself, from your own funds, on your own compliance. Simple to start, and fine — until the money you're holding is really other people's money, at which point regulators start using words like "safeguarding" and "licence".
PayFac (payment facilitator). The platform becomes a master merchant under a sponsoring acquirer and onboards its sellers as sub-merchants. Card networks explicitly support this model: the PayFac owns the merchant relationship, runs KYB/KYC and underwriting, and the sponsor acquirer supervises. You get control over onboarding, splits, payouts and economics — and you inherit the compliance workload that comes with it.
Orchestration. A routing and abstraction layer over multiple PSPs and acquirers. It optimises approval rates, cost and redundancy — but it does not by itself solve onboarding, regulated money holding or payouts. Orchestration answers "how do transactions route", not "whose money is this".
The questions that actually decide it
- Do you hold other people's money? If seller earnings sit with you before payout, a plain PSP setup eventually stops being an option — you need sub-merchant balances (PayFac-style) or a licensed partner holding the funds.
- Do you split single payments across parties? Splits, commissions and reserves need a ledger with per-party balance accounts, not spreadsheet arithmetic on top of a merchant account.
- Who eats the chargeback? If seller risk lands on the platform, you need per-seller reserves, exposure monitoring and instant controls — capabilities, not clauses.
- Do you monetise payments? Platforms that earn on the flow need sub-merchant economics and interchange-aware pricing, which PSP retail rates don't give you.
The honest trade-off table
| Model | Strength | Cost |
|---|---|---|
| PSP | fastest start, least compliance | no seller balances, no payment revenue, scaling wall |
| PayFac | control, economics, seller experience | underwriting, risk ops, sponsor requirements |
| Orchestration | approval uplift, redundancy, leverage | doesn't hold or move money by itself |
The combination most platforms actually need
These models compose. The pattern we see for platforms with real money complexity: PayFac-style onboarding and balances for control, orchestration underneath for approval rates and acquirer redundancy, and licensed partners carrying the regulated weight while volumes earn the case for your own authorisation. That composition — onboarding, ledger, splits, payouts, routing and reconciliation as one system — is precisely what Veloqen's platform is, with the sponsor relationships already part of the model. How it plays out for marketplaces specifically is on our platforms page.