If you’re an ISV weighing how to monetize payments, you’ve probably run into four terms that get thrown around: referral, gateway, ISO, and PayFac. Each one changes how much revenue you keep, how much risk you take on, and how much operational work lands on your team.
Here’s what each model actually means, and how to think about which one fits where your business is right now.
REFERRAL
You point your merchants to a payments provider and collect a commission when they sign up. That’s the whole job: no underwriting, no support tickets, no compliance exposure.
The tradeoff is revenue share. Referral programs pay the smallest percentage of the three, because you’re not carrying any of the operational weight. It’s the right starting point if you’re not ready to build payments into your product roadmap, or if payments are a side conversation rather than a core part of your value.
AGENT/ISO
An ISO (or agent under an ISO) takes on more: you’re signing merchants under your own agreements, often with input into pricing, and you’re the first call when a merchant has a question. In exchange, the revenue share climbs meaningfully above referral.
This model works well once you have a real merchant base and the support capacity to back it. You’re not underwriting risk yourself, but you’re accountable for the relationship in a way referral partners aren’t.
PAYFAC-AS-A-SERVICE
This is the deepest level of integration. Your merchants onboard through your platform, under your brand, often in minutes instead of days. You get the highest revenue share of the three models, but you’re also taking on more responsibility for the merchant experience end to end.
PayFac-as-a-Service tends to make sense for ISVs with real transaction volume and a product where embedded, invisible payments meaningfully improve the merchant experience.
