Payment processor
Encyclopedia
A payment processor is a company (often a third party) appointed by a merchant
to handle credit card
transactions for merchant bank
s. They are usually broken down into two types: front-end and back-end.
Front-end processors have connections to various card associations and supply authorization and settlement services to the merchant banks’ merchants. Back-end processors accept settlements from front-end processors and, via The Federal Reserve Bank, move the money from the issuing bank
to the merchant bank.
In an operation that will usually take a few seconds, the payment processor will both check the details received by forwarding them to the respective card’s bank issuing bank
or card association for verification, and also carry out a series of anti-fraud measures against the transaction.
Additional parameters, including the card’s country of issue and its previous payment history, are also used to gauge the probability of the transaction being approved.
Once the payment processor has received confirmation that the credit card details have been verified, the information will be relayed back via the payment gateway
to the merchant, who will then complete the payment transaction. If verification is denied by the card association, the payment processor will relay the information to the merchant, who will then decline the transaction.
Merchant
A merchant is a businessperson who trades in commodities that were produced by others, in order to earn a profit.Merchants can be one of two types:# A wholesale merchant operates in the chain between producer and retail merchant...
to handle credit card
Credit card
A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services...
transactions for merchant bank
Merchant bank
A merchant bank is a financial institution which provides capital to companies in the form of share ownership instead of loans. A merchant bank also provides advisory on corporate matters to the firms they lend to....
s. They are usually broken down into two types: front-end and back-end.
Front-end processors have connections to various card associations and supply authorization and settlement services to the merchant banks’ merchants. Back-end processors accept settlements from front-end processors and, via The Federal Reserve Bank, move the money from the issuing bank
Issuing bank
An issuing bank is a bank that offers card association branded payment cards directly to consumers.-Detail:The issuing bank assumes primary liability for the consumer's capacity to pay off debts they incur with their card....
to the merchant bank.
In an operation that will usually take a few seconds, the payment processor will both check the details received by forwarding them to the respective card’s bank issuing bank
Issuing bank
An issuing bank is a bank that offers card association branded payment cards directly to consumers.-Detail:The issuing bank assumes primary liability for the consumer's capacity to pay off debts they incur with their card....
or card association for verification, and also carry out a series of anti-fraud measures against the transaction.
Additional parameters, including the card’s country of issue and its previous payment history, are also used to gauge the probability of the transaction being approved.
Once the payment processor has received confirmation that the credit card details have been verified, the information will be relayed back via the payment gateway
Payment gateway
A payment gateway is an e-commerce application service provider service that authorizes payments for e-businesses, online retailers, bricks and clicks, or traditional brick and mortar. It is the equivalent of a physical point of sale terminal located in most retail outlets...
to the merchant, who will then complete the payment transaction. If verification is denied by the card association, the payment processor will relay the information to the merchant, who will then decline the transaction.