4 Square Plans with LG Payments, LLC:

Square is a PayFac (Payment Facilitator)

PayFac (Payment Facilitator) is a company that lets other businesses (called sub-merchants) accept card and electronic payments without each one needing its own individual merchant account with a bank.

How it works:

• The PayFac holds a master merchant account (master MID) with an acquiring bank and is registered with the card networks (Visa, Mastercard, etc.).

• Businesses sign up under the PayFac as sub-merchants.

• All transactions flow through the PayFac’s master account. The PayFac handles onboarding, underwriting/risk checks (KYC, AML), compliance (including PCI DSS), settlement, and payouts to the sub-merchants (minus its fees).

• This is much faster than the traditional route of each business applying directly to a bank for its own merchant account (which can take days or weeks).

Key benefits:

• Fast onboarding — often minutes to hours for lower-risk businesses instead of lengthy bank underwriting.

• Simplified experience — the PayFac manages most of the payment infrastructure, risk, compliance, and fund distribution.

• Popular with platforms, marketplaces, SaaS companies, and smaller merchants that want to embed payments quickly.

Common examples:

Stripe, Square, PayPal, and many other modern payment platforms operate (or have operated) under a PayFac model.

Trade-offs:

Sub-merchants give up some direct control (e.g., over underwriting decisions, chargeback handling, or branding of the payment relationship). The PayFac itself takes on significant risk, compliance, and operational responsibility.

In short: a PayFac is the “master merchant” that aggregates many smaller businesses under one payment account so they can start accepting cards quickly and with less administrative burden.

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