By the time you reach this decision, you have already chosen aggregated or split settlement, decided whether you sit as merchant of record, and sketched your onboarding flow. Now the question is structural: what does your platform actually become in the eyes of Visa and Mastercard, and what does that obligate you to do every day after launch.
The label you pick is not marketing. It determines who registers with the networks, who underwrites your sellers, who holds the funds, and who eats a chargeback when a seller disappears. Get this wrong and you either take on liability you did not price for, or you build a compliance program the networks will not let you operate.
The three models, by what they own
The cleanest way to separate these is to ask one question: where does the platform sit relative to the money and the merchant relationship.
Payment facilitator (PayFac)
A payment facilitator signs a contract with an acquiring bank, registers with the card networks as a PayFac, and then onboards its own sellers as sub-merchants under a master merchant account. The seller does not get its own direct acquirer relationship. The PayFac underwrites them, monitors them, and is contractually on the hook to the acquirer for their behavior.
This is the model that gets you fast onboarding and a clean, unified payment experience. It is also the model that pushes the most liability onto your balance sheet. You are accountable for sub-merchant fraud, for compliance screening, and for funding flows that route through your master account.
There is a hard ceiling worth knowing before you commit. Mastercard raised its sub-merchant threshold tenfold to $1,000,000 in annual volume in 2014, and Visa applies a comparable $1,000,000 sponsored-merchant threshold, above which a sub-merchant is generally expected to contract directly with the acquirer rather than sit under the PayFac. There are carve-outs. Where the relationship is more than two years old with the same acquirer, and the PayFac provides ongoing reporting on volume, disputes, and fraud while the acquirer keeps oversight, the acquirer does not need to be a party to the agreement even past that line. The point is that the PayFac model is built for a long tail of smaller sellers, not for whales.
Marketplace
A marketplace facilitates transactions between many buyers and many sellers and takes on a broader operational role than a pure PayFac: seller vetting, fund-flow management, buyer protection, and direct handling of disputes. The networks treat marketplaces as their own registered entity type. Visa requires qualified, registered marketplaces to use MCC 5262, and applies enhanced due diligence on seller onboarding.
The line the networks draw is sharp: a payment facilitator must not onboard or process for a marketplace. If your platform brokers a true multi-seller buyer relationship, with goods or services sold by third parties, you are likely a marketplace and need to register as one. You cannot quietly run that volume as a fleet of PayFac sub-merchants.
Payment orchestration
Orchestration is the odd one out, because it is not a network-registered acceptance role at all. An orchestration platform sits above multiple acquirers, processors, and PSPs and routes each transaction to the best provider in real time based on cost, currency, and approval odds, with failover when one provider declines or times out.
The defining trait: the orchestrator is generally not in the fund flow and is not the merchant of record. The merchant keeps its own commercial relationships with each underlying processor. The orchestration layer provides one integration and the routing logic on top. That means it carries far less regulatory weight than a PayFac or marketplace, and it solves a different problem: resilience and economics, not acceptance and liability.
How to actually choose
Start from obligations, not features. The features all three sell sound similar from the outside. The obligations diverge hard.
Ask three questions in order.
Are third parties selling to your buyers? If yes, and the buyer relationship is genuinely with those third parties, you are in marketplace territory. Register as a marketplace and accept the enhanced due diligence and buyer-protection duties. Do not try to model it as PayFac sub-merchants.
Do you want to own onboarding, funding, and liability for a long tail of your own sub-merchants? If yes, and your sellers are mostly below the seven-figure volume line, the PayFac model fits. Budget for underwriting, transaction monitoring, and reserve management as permanent operating functions, not a launch checklist.
Do you already have acceptance solved and just want better routing and resilience? Then orchestration is the answer, and it can layer on top of either of the above. A registered PayFac can still run an orchestration layer underneath to improve approval rates and add acquirer redundancy.
A worked example
Take a vertical SaaS company for fitness studios. Studios bill members through the platform.
If the studio is simply using the platform's software to charge its own members, the studio is the seller, the member is its customer, and the platform is facilitating those payments. That is a PayFac shape. The platform registers as a payment facilitator, onboards each studio as a sub-merchant, underwrites them, and funds them out of its master account. Most studios run well under $1,000,000 in annual card volume, so the sponsored-merchant threshold is rarely a problem. The platform owns chargeback exposure when a studio shuts down mid-membership.
Now change one thing. The platform launches a class-booking surface where independent trainers, not the studios, sell sessions directly to consumers the platform brought in. The buyer relationship is now with the trainer, brokered by the platform. That is a marketplace. The platform needs to register as a marketplace, apply enhanced seller vetting, and stand behind buyer protection. The same code base, a different network role.
If, later, that platform wants to push EUR transactions to a European acquirer for better approval rates and keep a US acquirer as failover, it adds an orchestration layer. That does not change its registration. It changes its routing.
The takeaway
PayFac, marketplace, and orchestration are not a ladder you climb. They answer different questions: who underwrites the seller, who stands behind the buyer, and who routes the transaction. Decide based on who is selling to whom and how much liability you are willing to own, confirm the network registration that role demands, and only then talk to acquirers. The model you declare on day one sets the compliance and capital burden you carry for the life of the platform, which is exactly what module 8 picks up next.