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Issues cards to consumers on behalf of card networks like Visa and Mastercard
Bear the risk for transferring funds to acquiring banks, liable for consumer purchases, has all the checking and savings accounts information
Revenue earned based on consumer behavior and spending
TSYS, FIS, Galileo
NOT payments processors
Approves and declines transactions in real time
Gets information from issuing banks about transactions
Gets funds too, transfers them to merchant's bank
Does all the heavy lifting to help underwrite, pay / transfer funds, manage risk and disputes
Comes in many names like PSPs too. Check Visa and Mastercard definitions
Aka aggregator / master merchant
Basically like a big merchant that can underwrite sub-merchants, process transactions, manage disputes, and manage fund transfers for their sub-merchants
Revenue potential dependent on monetizing the payments stack. Opportunity from onboarding to bps / transaction to risk management to speed
We see a lot of specialized payfacs now for different verticals like restaurants, spas, etc.
Classifying as a processor or payfac is kind of wishy - washy. It depends on how much of the stack economics you own. E.g. Stripe, Square, Helcim, all have back end acquiring banks but they own the majority of the economics so they're considered processors. But they all use a Wells Fargo / Elavon / etc.