What is a Payment Processor?

Payment processor

What does payment processor mean?

A company that is authorized in the processing of credit card transactions between sellers and buyers. The payment processor is often the third party and will be appointed by the merchant. There are two types of payment processor; front end and back end.

A front-end processor will have a connection to various card associations and will supply settlement services and authorization to the merchant banks’ merchants. The back end processors are used to accept the settlements from the front end processors, and to move money from the issuing bank to the merchant bank, this process being complete in just a few seconds.

These processors perform many functions such as evaluating whether transactions are valid and approved, using anti-fraud measures to assure that a purchase transaction is initiated by the source it claims to be. Processors are held to standards and regulations organized by credit card associations. These standards include rules regarding fraud, chargebacks, and identity theft.

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