What is a Payment Processor?
Jun 5, 2023 by Brandon Jones
What is a Payment Processor? A payment processor or merchant processor is a vendor service that allows business owners (often called merchants in the payment process) to accept online payments. This is mainly because payment processors are designed to manage the logistics of credit and debit card transactions for businesses, so they don’t have to worry about certain complexities involved in this process. Typically, to be able to process credit card transactions, your business will need a merchant account. Still, to get one, your company must meet various requirements, including having a business license, making an agreement where your business submits to underwriting, and undergoing a stringent approval process. This process can take quite a bit of time, and if your business is too new or doesn't fit all of the requirements, it may not be accepted. Payment processors eliminate the need for businesses to go through the headache of securing their merchant accounts. Instead, they manage the credit card transaction process as the bank and merchant middleman. Payment processors authorize payments for your business by verifying customers’ billing information, confirming that your customer’s funds are available in their accounts, and transferring the money to your bank account. This entire process occurs in a matter of seconds and is used for both card-present and card-not-present transactions.
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