How many payment processors are there? Electronic payment processors are part of a system composed of the buyer, the seller and the payment gateway. The IT and communications platform is also involved, as well as various banking and digital service providers. These components operate on the basis of legal regulations, a security policy and formal procedures.
What is a payment processor?
A payment processor is the company responsible for managing the credit or debit card transaction process. It acts as a sort of intermediary between the consumer bank and the merchant, allowing information to pass back and forth.
Here is a simple definition of a payment processor:
A company authorized to process credit card transactions between sellers and buyers. The payment processor is usually a third party and will be designated by the merchant. There are two types of payment processors; front end and back end.
The front-end processor will have a connection to various card associations and will provide settlement and authorization services to merchants from merchant banks. The back-end processors are used to accept settlements from the front-end processors and to move money from the issuing bank to the merchant bank, this process is completed in just a few seconds.
These processors perform many functions, such as assessing whether transactions are valid and approved, using anti-fraud measures to ensure that a purchase transaction is initiated by the source it claims to be. Processors are subject to rules and regulations organized by credit card associations. These standards include rules on fraud, chargebacks and identity theft.
The role of a payment processor
This payment technology is responsible for the secure transmission of data corresponding to a purchase. In other words, it integrates your company’s accounting-administrative software with the banking systems and merchants involved.
The above-mentioned transmission process involves user authentication and access control. This ensures data confidentiality and privacy. Additionally, data integrity is guaranteed and audit trails are generated. You may consider the following roles for a technology solution for money transfer processing:
- Evaluator: determines the validity of transactions and, if applicable, approval.
- Verifier: checks the amount assigned to the credit card at the customer’s bank.
- Administrator: manages the transactions completed by the affiliated online store.
How many payment processors are there?
There are two basic types:
- Front-end: It is associated with credit card issuers. It performs authentication and authorization tasks for merchants.
- Back-end: It approves the release of funds and completes money transfers between participating banks.
The Role of an online payment gateway
The goal of an online payment gateway is to facilitate the purchasing process. The aim is to increase the level of customer satisfaction and for the seller to transmit confidence and security during the purchasing experience.
What is a payment processing gateway?
It works as a virtual point of sale. In this remote transaction system, the customer’s credit card data is captured through electronic means. This is done through a website or a mobile app. The store that operates under the e-commerce modality offers the technological solution.
What is the difference between a payment gateway and processor?
The main difference between a gateway and a processor is defined on the basis of the functions they perform. The first one records and sends the data related to the transaction. The second receives this data and redirects it to the information systems of the banks involved. The aim is to ensure that the purchase is successfully completed.
Why do you need a payment processing gateway?
The relevance of this technology lies in its ability to configure a flexible, simplified and customized solution for the release of funds online. The main goal is not to miss sales opportunities and to offer customers a convenient, secure and easy-to-use option.
The importance of a secure payment gateway
It includes the services that have a current PCI (Payment Card Industry) certification. They may require an additional fee to activate insurance for the replacement of the transaction value to the customer in case of electronic fraud. This offers security guarantees for the merchant and reduces the risk of money loss. According to the PCI Security Standards Council (2020), 41% of small businesses have experienced data breach attempts. The council issues some recommendations to prevent them.
What is an online payment gateway?
In this group, we can include those platforms that allow automated disbursements of money. For example, banking services, electronic wallets or credit cards. Generally, they employ a payment button available on the website or mobile app. They act as virtual versions of the points of sale for face-to-face purchases.
What is a merchant payment gateway?
In this category, we may include automated apps that authorize transactions in stores and businesses (virtual or face-to-face mode). This process involves the financial institutions, the merchant account, the credit card company, the processor and the buyer, among others.
Payment gateway for international payments
These are technological solutions to enable cross-border payments. They allow currency conversion and collections in different currencies.
The criteria you may consider when selecting a tool of this type are:
- Available functionalities
- Your business requirements and the level of satisfaction with them when using a specific platform
- Ability to integrate with internal information systems
- Ease of use
- Associated costs
- Transaction completion time
- Technology used
How does a payment processor works?
Next, we will explain how this platform works, together with the other steps that intervene in an Internet purchase process:
- The customer enters their credit card information to pay for the products or services selected in the electronic catalog.
- The electronic gateway receives the transaction data and transfers it to the transaction processor or operator.
- The latter sends the data to the automated system of the bank to which the credit card is affiliated.
- The system verifies the data is correct and determines if the amount can be processed and approved. The operator is notified of the approval or rejection.
- It notifies the status of the transaction to the digital gateway. This, in turn, issues an explanatory message to the customer via the website or mobile app.
- All the previous steps record the data generated for later consultation or audit and, in this way, the purchase process is finalized.
The general purpose of the apps described is to provide the greatest convenience to customers under the criteria of comfort, security, confidentiality and privacy. For those responsible for online stores, it is crucial to have an understanding of how they work to offer secure payment services.
How many payment processors are there? At PayRetailers, we have the experience and knowledge to help you answer this and other questions!