What Are Payment Processors?

Payment processors facilitate the transaction of credit cards, debit cards, and non-cash transactions. These companies are held to a high standard and adhere to a series of regulations. Payment processors charge fees for their services and have standards and regulations to follow. Learn more about payment processors. Here’s an overview of the services they offer. If you have a business, payment processors can help you manage payments. The payment processor will handle the details of a credit or debit card transaction, so you don’t have to.

Payment processors facilitate credit card and debit card transactions

A payment processor is a company that facilitates the processing of credit and debit card transactions. Generally, a payment processor will handle the transaction by connecting the merchant with a bank that processes credit and debit cards. Payment processors will assess a transaction and apply anti-fraud measures to protect the merchant from fraudulent activity. Payment processors are held to strict standards and regulations by the credit card associations. As a result, they are able to meet and exceed these standards.

Today’s payment processors are usually partners with merchants through the concept of software-as-a-service (SaaS). SaaS providers offer a single electronic portal for multiple types of payments. These services typically facilitate recurring credit card payments, ACH payments, cash transactions, Web payments, and remittances. SaaS payment processors offer a full suite of business solutions and can process any origination. This streamlined approach reduces the overall cost of credit card processing while improving transaction quality.

They are held to standards and regulations

The payment industry is regulated through several agencies. Federal agencies such as the Consumer Financial Protection Bureau and the Federal Trade Commission (FTC) have brought enforcement actions against payment processors that facilitate unfair, deceptive or fraudulent marketing practices. While these agencies have not taken action against individual processors, they do regularly audit their policies and practices. Payment processors must adhere to certain standards and regulations and must pass annual compliance audits.

Whether or not a payment processor complies with PCI-DSS standards is another important factor to consider. This industry standard requires all payment processors to follow certain standards and regulations to protect the data of cardholders. In addition to PCI-DSS compliance, payment processors must follow the Payment Card Industry Data Security Standards to safeguard sensitive customer data. This is vital to the success of a business and ensures the safety of the consumer’s financial information.

They facilitate non-cash transactions

Some payments are not made in cash, so payment processors facilitate these transactions. To prevent money laundering and terrorist financing, Payment Processors must adhere to strict compliance standards. In the United States, payment processors are subject to regulations that govern financial institutions, including money transmitters, clearinghouses, and banks. Fraudulent activity can be detected by investigating suspicious transactions made through these processors. A financial institution may suspend a merchant account if it suspects that it is being used by an unauthorized party.

When a transaction involves a credit or debit card, a payment processor handles the transaction. It communicates with the cardholder’s issuing bank and transfers the funds to the merchant’s account. A merchant may incur fees for credit card transactions or swipe fees, which vary by payment processor. Merchants also have to consider the merchant interchange rate and the transaction fee when comparing different processors. Payment processors typically offer three different pricing structures.

They carry out anti-fraud measures

Payment processors are taking additional steps to prevent fraud. They have a number of industry-advised safeguards to prevent fraud, such as real-time detection capabilities, comprehensive views of payment patterns, and block potentially fraudulent transactions before funds leave the institution. However, the best fraud protection is not just in the hands of payment processors. The end users can play a major role in preventing fraud, too. By educating consumers about social engineering scams and protecting themselves from the online scourge, they can help reduce the incidence of fraud.

Fraudulent activity has become a significant issue in the online payment industry. With online channels growing by leaps and bounds, fraud has increased in proportion. Some estimates suggest that merchants spend 10% of their eCommerce revenue on fraud management. The goal of payment fraud management is to limit losses, protect the organization, and maintain smooth, secure, and scalable operations. The rise in online payment fraud is only expected to continue.