Read on Twitter
A walk down memory lane on the creation of the “payfac” (ie “payment facilitator”).
I was at Visa when the “payfac” category was created. Before payfacs there was only such a thing as “Internet payment service provider,” or IPSP. The first to be an iPSP? PayPal. 1/ https://twitter.com/regulatorynerd/status/1386438992741027840">https://twitter.com/regulator...
I was at Visa when the “payfac” category was created. Before payfacs there was only such a thing as “Internet payment service provider,” or IPSP. The first to be an iPSP? PayPal. 1/ https://twitter.com/regulatorynerd/status/1386438992741027840">https://twitter.com/regulator...
The iPSP label was essentially created to allow PayPal to do what it was doing (processing payments on behalf of sub-merchants) within network (V/MA) rules.
At the time some ppl wanted to shut them down. Others thought V/MA should buy PayPal. As we know, neither happened 2/
At the time some ppl wanted to shut them down. Others thought V/MA should buy PayPal. As we know, neither happened 2/
Instead, the iPSP concept was born.
Around 2010-11, a little company called Square came on the scene and took the Internet PSP model... OFFLINE.
I was at Visa at the time. It caused more than a few industry brains to explode.
https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤯" title="Explodierender Kopf" aria-label="Emoji: Explodierender Kopf"> 3/
Around 2010-11, a little company called Square came on the scene and took the Internet PSP model... OFFLINE.
I was at Visa at the time. It caused more than a few industry brains to explode.
The iPSP category had been created for the Internet. No one had contemplated aggregating sub-merchants in a face-to-face (card present) environment. https://abs.twimg.com/emoji/v2/... draggable="false" alt="😱" title="Vor Angst schreiendes Gesicht" aria-label="Emoji: Vor Angst schreiendes Gesicht">
There were two schools of thought:
1) shut ‘em down!
2) change the rules...
https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤔" title="Denkendes Gesicht" aria-label="Emoji: Denkendes Gesicht">
4/
There were two schools of thought:
1) shut ‘em down!
2) change the rules...
4/
Square got a waiver to continue operating while everyone tried to figure out what to do.
On the one hand, allowing Square to operate seemed like it would open new opportunities. On the other hand, some fretted about lack of insight into sub-merchants, fraud, etc. 5/
On the one hand, allowing Square to operate seemed like it would open new opportunities. On the other hand, some fretted about lack of insight into sub-merchants, fraud, etc. 5/
A proposal was put forth: what if we dropped the “i” in iPSP and just allowed the concept of a master merchant to *facilitate payments* for sub-merchants...
This revolutionary new concept became known as a “payment facilitator”, or payfac!https://abs.twimg.com/emoji/v2/... draggable="false" alt="💡" title="Elektrische Glühbirne" aria-label="Emoji: Elektrische Glühbirne">https://abs.twimg.com/emoji/v2/... draggable="false" alt="💳" title="Kreditkarte" aria-label="Emoji: Kreditkarte"> 6/
This revolutionary new concept became known as a “payment facilitator”, or payfac!
Side note: at this same time another company in addition to Stripe and Square had come in the scene: Balanced Payments.
Balanced’s co-founder? None other than @mahmoudimus - now CEO of @getVGS 7/
Balanced’s co-founder? None other than @mahmoudimus - now CEO of @getVGS 7/
Why do I mention Balanced? Well, aside from being one of the first payfacs, Balanced built payments for marketplaces, ie *embedded fintech* before it was cool.
All the stuff we take for granted now (payouts, reconciliation, onboarding, etc) Balanced pioneered. 8/
All the stuff we take for granted now (payouts, reconciliation, onboarding, etc) Balanced pioneered. 8/
For the privilege of building his fintech-enabling payfac, Balanced, @mahmoudimus as CTO spent ~1 year + $1 million getting all of the necessary compliances (PCI, SOC 2, etc) to operate.
That experience inspired building @getVGS to solve compliance for fintech innovators 9/
That experience inspired building @getVGS to solve compliance for fintech innovators 9/
Anyway... back to the payfac origins. I had the fortunate opportunity to manage Visa’s relationship with Square immediately following Visa’s investment. It was a fascinating time as Square pushed the envelope and challenged preconceived ideas of what acquiring could be. 10/
Today, payment facilitation and embedded fintech is all the rage, but in those early days the future of payfacs was anything but certain. Amazing what open minds (and some rule changes) can accomplish. https://abs.twimg.com/emoji/v2/... draggable="false" alt="😜" title="Zwinkerndes Gesicht mit Zunge" aria-label="Emoji: Zwinkerndes Gesicht mit Zunge"> 11/
