Why do we need payment processors?

Any transaction going from point A to point B passes through several participants, either of which has its function: transaction capability test, data encryption, providing tools for fast transactions, etc. The payment processor is an intermediate link between the transaction parties. In the review below you will find out how transactions are performed and what is the payment processor's contribution in the chain work.

The processing center and its contribution to the transaction completion 

Payment processing involves such parties as:

• Consumers or customers. They make payments to sellers. They are the first link in the transaction chain.
• Sellers. Payments recipients. They are the final link in the transaction chain.
• Commercial banks. Institutions where consumers and sellers open accounts and verify payments. Banks issue cards of payment systems on their behalf.
• Payment systems. Organizations provide tools for safe and fast payments between participants.
• Payment processors. Organizations or their subdivisions dealing with payment processing services, namely, transactions participants verification, payments authorization, information transfer, etc.  They are the dotted line that provides technical and informational interaction between the payment participants.
• Payment gateways. Hardware and software systems encrypt data transferred to make a transaction.

Payment processors are also called processing centers. Payment gateways can be both separate independent platforms and parts of the processing center.

The process of making payments is as follows:

1. The buyer transfers money from their card to the seller's card.
2. Information about the transaction is transferred to the seller's acquiring bank.
3. The bank sends a request to the payment system to contact the buyer's acquiring bank. 
4. The buyer's bank checks the sufficient amount of money available on the account and, in case of a positive result, sends permission for the money withdrawal to the payment processor.
5. Information on the transaction is sent from the payment processor to the seller''s bank. And the payment is received here. A payment gateway is a tool through which information on a transaction transfers to the payment processor from the buyer's bank and is sent further to the seller's bank.

A payment processor is a specialized computing center that contains a customer database of payment systems and processes requests for transaction protocols authorization. The payment processor's function comes down to direct transactions processing. It acts as the core in the chain, and the payment system is the supplier of tools for operations realization. The main requirements for processing centers are the high-powered communication lines availability, the ability to process a large amount of information, and the quickest possible data transfer rate between geographically distributed net members.

To simplify the process of making payments, an online business can use financial aggregators -  payment providers. They connect dozens of payment methods by connecting the seller with the processing center. A comprehensive private label payment provider solution allows you to become a payment provider, saving on fees.