Why the Payfac era is ending for software platforms

Ben Weiner is global head of partner channels at Nuvei, a payments technology company serving merchants and platforms worldwide.

A model built for control has become a constraint in a mature embedded payments market.

For much of the last decade, the Payfac model represented ambition in embedded payments. The Payfac model refers to software platforms becoming regulated payment intermediaries — owning onboarding, compliance, and settlement — at a time when that ownership still delivered a clear strategic advantage. To become a payment facilitator was to signal seriousness. Platforms that made the leap were no longer just software providers. They positioned themselves as infrastructure players, closer to the money, the data, and the economics.

That belief shaped strategy across the industry. Investors encouraged it. Boards celebrated it. Product teams reorganized around it. Owning payments became shorthand for progress.

As embedded payments infrastructure matured, however, the assumptions behind the Payfac model began to weaken. What once looked like strategic control increasingly resembles structural weight. The model did not fail. It was overtaken.

Why the Payfac model made sense

In its early years, the Payfac construct solved real problems. It enabled rapid merchant onboarding at scale, supported complex settlement and funding flows, and improved unit economics at a time when viable alternatives were limited.

For software platforms operating in fragmented payments environments, facilitation was often the only path to speed and flexibility. The additional operational and regulatory responsibility was justified by the advantage it delivered.

For a time, the trade-off worked.

When advantage turned into overhead

That balance shifted as processors and acquirers modernized their distribution models. Reseller and independent software vendor frameworks began to offer comparable economics, configurability and merchant experience without requiring platforms to assume full regulatory and operational responsibility.

Parity arrived through technology, not licensure.

As this parity emerged, the costs of running a Payfac became harder to defend. Underwriting, fraud management, compliance operations, capital reserves, and regulatory exposure did not decline as differentiation faded. Control, once the reward, became the burden.

Many platforms now find themselves maintaining a complex operating model to achieve outcomes that no longer require it.

The hidden cost of staying a Payfac

Running a Payfac is not a one-time strategic decision. It is an enduring commitment that demands ongoing investment, even when payments are not central to the core product or primary source of differentiation.

As revenue share in embedded payments continues to shift toward software platforms, the economics of facilitation have grown increasingly asymmetric. In many cases, it is now cheaper to operate like a Payfac than to be one.

Only a narrow set of use cases still requires the model. Platforms with extreme onboarding velocity or deeply bespoke settlement logic may still need full facilitation. Most do not.

An industry quietly unwinding

Despite these shifts, many leadership teams continue to ask outdated questions. The debate often centers on whether to become a Payfac, rather than whether remaining one still makes sense.

Across the industry, a quiet reversal is underway. Software platforms are exploring hybrid and reseller models that preserve merchant relationships and user experience while transferring risk, settlement, and compliance to specialized partners.

These transitions are not simple. Contracts must be re-papered. Internal processes must be redesigned. Strategic narratives must be updated. But the direction of travel is clear.

This shift is not a retreat; it is focus.

Redefining control in embedded payments

Defenders of the Payfac model often frame the debate in terms of control. Relinquishing facilitation, they argue, means surrendering destiny.

That framing belongs to an earlier phase of the market. Today, control is delivered through orchestration and technology, not regulatory proximity. Modern embedded payments stacks already provide the data access, configurability, and economics that Payfacs once monopolized.

The lesson of the Payfac era is not that software platforms should disengage from payments. It is that ownership is no longer the primary source of advantage.

In 2018, becoming a Payfac signaled that a platform was ahead of the curve. Now, it increasingly suggests the curve has already moved.

The next phase of embedded payments will reward platforms that simplify their operating models, partner intelligently, and focus on where they truly create value.