A company that handles the technical and financial steps of card and digital payments between a merchant, card networks, and banks.
When a customer taps a card or enters details online, the payment processor sends the transaction to the card network and issuing bank for approval, returns the result, and later moves the funds into the merchant's account. Many processors also provide card readers, payment gateways, fraud screening, dispute handling, and reporting. Some, often called payment facilitators, let small businesses start accepting payments quickly without a separate merchant account application.
For example, a food truck might use a processor's mobile card reader and app, paying a flat percentage per transaction. Larger businesses may negotiate pricing based on interchange plus a fixed markup. When comparing processors, businesses should look at total fees, payout speed, hardware costs, contract terms, support, and how chargebacks are handled.
A reversal of a card payment initiated by the cardholder's bank, usually after the customer disputes a charge.
Interchange FeeA fee paid by the merchant's bank to the cardholder's bank on each card transaction, forming a large part of card processing costs.
PCI DSSThe Payment Card Industry Data Security Standard, a set of security requirements for any organization that stores, processes, or transmits card data.
Payment GatewayA service that securely captures and transmits payment details from a customer to the banks and networks that approve the transaction.
Point of Sale SystemThe hardware and software a business uses to ring up sales, take payments, issue receipts, and track transactions, often called a POS.
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