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Everything You Need to Know about Secure Payment Processor
Everything You Need to Know about Secure Payment Processor

Imagine you are recently launching an online store and setting up the portal for selling your products. Among all critical elements required in developing your website, payment processing always has an intimidating effect on online entrepreneurs. It is understandable since you will be dealing with vital financial data of your customers and safeguarding them is your prime concern. Any small error in handling credit or debit card details can permanently tarnish your image. Relax and calm down! Luckily, secure payment processing is not that tough that online merchants make it out to be. Once you start looking for it on suitable forums, it is not challenging to figure out the working of payment processors.

What is Secure Payment Processor?
The function of the secure payment processor is to help online entrepreneurs receive payment by offering a connection to an acquiring bank. These processors also aid in storing funds, disbursing payments for employees, detect frauds, and meet other compliance needs. In simple words, you can say, they act as financial platforms working in the background for online merchants processing financial data and offering a successful transaction. Nowadays, advanced secure payment processors also come with in-built anti-fraud measures which would evaluate whether the deal is valid and then process it. Credit card associations have outlined several regulations and strategies including rules for charge backs, detecting thefts and frauds which the processors must comply.

What is the difference between payment gateways, payment processors, and merchant accounts?
While discussing functions of payment processors, two other terms- payment gateways and merchant accounts always come into play. Let us understand what they mean in layman’s language to understand what actually each of these three terms mean when the subject of payment processors is raised.

Payment Gateways
Payment gateways act as mediators between transactions placed at your portal and payment processors. They play a prominent role during payments because due to security protocols, online merchants cannot send transaction details directly from their portals to payment processors. Payment gateways place the transaction request to payment processors.

Merchant Account
Merchant account becomes an utmost necessary for online traders because, without them, you cannot accept credit and debit card payments. Payment gateways require a merchant account or MIDs for the processing of financial transactions. You can either open this account through payment gateways, direct services from banks, or through payment processing companies. It is the account where your fund would be deposited after a successful online transaction.

How are payment gateways payment processors, and merchant accounts related?
As we have already pointed out the three units - payment gateways, payment processors, and merchant accounts work in close coordination for the processing of payments. Let us understand this process briefly. When a customer enters his credit card details after selecting an item from your store, he is asked to wait for a few seconds for the processing of data. During this period, the payment gateway acts as a mediator between the consumer’s data and the payment processor. It transmits sensitive financial details from the customer to the processor. The secure payment processor then sends this information to the merchant account and also checks the validity of the customer’s credit card. After this, the issuing bank accepts or declines the transaction. If it gets approved, the bank transmits the information to the processor, then to the payment gateway, which saves this data and finally to the customer and seller.

This was, in brief, everything that you would need to know about secure payment processor and also the importance that the processor has during online transactions.

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