Payment Processing Industry

A payment processor operates as a data and communications switch that moves payment transaction data and messaging between card-issuing banks, merchants and the acquiring banks that serve those merchants, handling credit cards, debit cards and bank account transactions. The system divides into front-end processors, which handle card authorization and connect to card networks, and back-end processors, which manage settlement and the transfer of funds through banking infrastructure such as the Federal Reserve. Within seconds a processor verifies card details with the issuing bank, applies fraud detection, and relays approval or denial back through the payment gateway to the merchant, letting merchants avoid directly handling sensitive payment data and the fraud liability that comes with it.