The significance of digital payments continues to accelerate with non-cash payment volume increasing more than tenfold in the past 20 years, according to the World Payments Report 2026.
Within the rapidly transforming environment, non-bank payments players are on the rise but for those that don’t want to navigate the complex regulatory environment and lengthy process of obtaining a bank license, bank sponsorship is required.
That’s where partners like Merrick Bank come in. Merrick Bank, a wholly owned subsidiary of CardWorks Financial Group, provides sponsorship and customized solutions for payment facilitators (PayFacs) and wholesale and retail independent sales organizations (ISOs).
Tom Boyer, senior vice president of Merrick Bank Merchant Acquiring has been in the payments business for more than 30 years. In this Q&A, he explains how ISOs and PayFacs can get the most from their sponsor bank.
Q: What is the role of a sponsor bank in a PayFac relationship?
A: A sponsor bank, like Merrick, oversees the activities of the PayFac and gives them access to networks, such as MasterCard and Visa. To that end, we take a rigorous and holistic approach to the evaluation of a PayFac’s capabilities.
First, we evaluate the PayFac’s operating and technology infrastructure, underwriting processes and policies, risk management and compliance protocols, and secure system access for the bank.
Then, in partnership with the PayFac, we establish a comprehensive operating and oversight framework encompassing:
- Know your customer/Know your business
- sanctions screening
- transaction monitoring
- enhanced reviews for higher-risk sub-merchants and;
- defined requirements for card network registration, compliance, and regulatory reporting
Q: What are the top 3-5 things PayFacs should consider when selecting a merchant acquiring bank sponsor?
A: When interviewing a merchant acquiring bank sponsor, it is essential to fully understand their risk appetite, compliance oversight, ease of onboarding and funding capabilities.
In this model, the PayFac is the merchant of record and:
- onboards and underwrites each sub-merchant
- aggregates the payment card transaction activity
- settles daily funds for each sub-merchant enrolled on the payment facilitator platform
One of the key benefits in this model is the speed to onboard a sub-merchant and enable payment acceptance capabilities. On the flip side, this model also introduces inherent risk for PayFacs with downstream sub-merchants — from potential credit and fraud losses to compliance oversight requirements, to daily reconciliation of funds. Each function requires a robust investment in infrastructure and resources. That is why having a bank sponsor that understands the risks, collaborates, and has a proven track record of success is critical to the success of all parties.
Q: What about Independent Sales Organizations (ISOs) – do the same considerations apply? How should their expectations differ?
A: Most of the same considerations apply to Wholesale ISOs. The top priorities for the ISO to evaluate in this model is credit policy and risk appetite, appropriate commercial terms, onboarding automation, and operational responsiveness. Wholesale ISOs need to invest in infrastructure to support their sales, marketing, credit and risk, data security, operations and customer service. In both models, the Wholesale ISOs and Payment Facilitators assume all liability for any potential credit losses, fraud losses, and Card Brand fines. The primary difference between the two models is that the risk and compliance oversight and the funding reconciliation component are more complex and burdensome in the Payment Facilitator model. The other notable difference is that the start-up capital investment is lower for Wholesale ISOs when compared side-by-side to a Payment Facilitator model. It’s also less complex for ISOs to get the program up and running.
Q: Why are strong compliance and risk discipline such an important part of the equation for ISOs and PayFacs?
A: Strong compliance and regulatory experience are critical when choosing a merchant acquiring bank sponsor because banks with less than adequate compliance disciplines are often forced by regulators to terminate programs suddenly, whereas a bank with rigorous compliance frameworks mitigates card brand exposure, maintains program stability, and enables sustainable growth for ISOs and PayFacs.
Q: How does the merchant acquirer that PayFacs or ISOs choose impact their growth?
A: The merchant acquirer selection can impact speed of growth, so it is important to ensure that the business model, risk appetite and the merchant industry expertise are fully aligned to avoid growth headwinds
Q: Merrick Bank has been a bank sponsor for more than 20 years and is a top 15 merchant acquirer in volume for Visa and Mastercard. Why is that significant?
A: Being a top merchant acquirer and committed to the business provides competitive advantages, including sponsorship to all the major card networks, proven infrastructure, program diversity, processors knowledge and expertise, and the ability to handle complex large-scale acquiring.
Our program at Merrick Bank includes:
- direct access and full representation to the card networks for BIN/ICA credit and debit card sponsorship programs
- flexible program operating frameworks
- a dedicated high touch client management team
- client tailored solutioning
- the option to select from multiple major acquirer processing platforms
- a robust risk and compliance discipline
Q: How is our merchant acquiring business model different from others, and what makes us stand out in a crowded market?
A: We enable growth for our clients and partners through digitally enabled solutions, rigorous compliance frameworks, robust risk management disciplines, and operational excellence. What separates us from the crowd is our high service level and collaborative approach to creating customized solutions that fit our client’s strategy
Learn more about Merrick Bank Merchant Services at www.merrickbank.com/merchant-services/