A payment processor is essentially an organization handling transactions that enable the purchase of your products by customers, which means payment processing companies ideally relay information from a debit or credit card belonging to your client to your customer’s bank as well as your bank. The transaction can only go through if the funds available in your client’s card are adequate, and if the card is valid. This entire process takes mere seconds.
The payment processor will also check for security measures, which includes ensuring the data in a client’s credit or debit card is correct. The payment processing companies bear the responsibility of ensuring fraudulent practices do not occur, especially since such practices sometimes happen. If for instance, one of your clients raises a complaint and proceeds to prove that your company incorrectly charged them, the payment processor company caters for that particular transaction, regardless of whether or not it is deemed accidental.
However, taking care of such a transaction does not mean they will do it for free, and as much as your client incurs no charges, your company will, on the other hand, be charged. This means that if you make a mistake during checkout or your client returns an item due to dissatisfaction, your company will incur a fee since the payment processing company has to transfer money from your account to the payment processor, and back into your client’s account.
Merchant accounts are of significant importance to businesses, particularly if the firms accept credit cards over the internet. You will not be able to accept money from you client’s debit or credit card if you lack a merchant account since you will have nowhere to put that money. A merchant account is, therefore, a bank account capable of accepting credit and debit card payments, without which a business cannot accept these forms of payment.
This is essentially what connects both a merchant account and the payment processor to debit or credit card companies like American Express. It is basically connecting a client’s financial account to an organization’s merchant account. Any business entity would be missing a key factor when it comes to the completion of financial transactions if that company lacked a payment gateway. A business cannot receive the customer’s payment without having a payment gateway regardless of whether or not the business has all the other parts required to move or receive money.
Payment gateways can be used to combine merchant accounts and payment processors, depending on whether you have an in-house department to perform the duty, or you outsource a third party. To complete a transaction in which an outsourced third party is involved, this particular entity communicates with the debit or credit card company.
Types of payment modes accepted by payment processors
Determination of the kind of payment method accepted by payment processors mainly depends on the company you use. Even though the American Express might not be, Visa and Mastercard are generally accepted, which is mostly because payment processing companies look at factors such as the fact that different cards feature different fees and risks. You should, therefore, research what type of cards your payment processor accepts before you lock yourself into any deal since it might not be what you want or need.