Payment processor

When a business uses a payment processor, they are able to accept payments from a variety of sources, including credit and debit cards, and bank accounts. Front-end and back-end are the two main divisions.

Customers of merchant banks are provided with authorization and settlement services by front-end processors through links to different card associations. Using the Federal Reserve Bank as an example, back-end processors collect payments from front-end processors and transmit the money from issuing banks to merchant banks.

An procedure that typically takes a few seconds involves the payment processor verifying the information received by sending it to the issuing bank or card association for verification, as well as implementing anti-fraud steps to prevent the transaction from being used fraudulently.

Additional factors used to determine whether or not a transaction will be allowed include the nation of issuance of the card and the history of payments made with that card.

This information is then sent back to a payment processor, who verifies it before sending it to the merchant, who uses it to finalise the payment transaction. Payment processors communicate information to merchants if the card association denies verification, which results in the transaction being declined.