A payment processor is a third-party service provider that securely facilitates electronic transactions between buyers and sellers. It acts as a bridge between merchants, banks, and payment networks, ensuring payments are authorized, processed, and settled efficiently.
How It Works:
The customer initiates a payment using a credit card, debit card, or digital wallet like Google Pay.
The payment processor securely transmits the data to the card network (Visa, Mastercard, etc.) and the issuing bank for authorization.
The bank verifies the transaction and approves or declines it.
The processor settles the funds, transferring money from the buyer’s account to the seller’s account.
Why is a Payment Processor Important:
It ensures secure and fraud-free transactions using encryption and compliance measures (e.g., PCI DSS).
Payment Processor Speeds up payment processing, reducing manual effort for businesses.
It enables multiple payment methods, including credit/debit cards, e-wallets, and bank transfers.
It also supports global transactions by handling currency conversion and cross-border payments.
