Full Guide to Payment Processors: Examples and Top Solutions (2024)

Retail stores, eCommerce merchants, and other sellers and service providers select payment processors.

Payment processing services get authorization and receive payments from credit card issuers on behalf of customers. Card transactions include online or in-person credit card or debit card transactions. The credit cardholders make credit card payments after later receiving their monthly statements.

Our payment processor definition expands to include U.S. ACH payment processing and international eCheck payment methods like SEPA for paying vendor invoices.

Table of Contents

  • What is a Payment Processor?
  • Understanding Payment Processors
    • The Acquirer
    • The Issuer
    • Merchant Account
    • PCI Compliance
    • Payment Gateway
    • EMV Chip Credit Cards
  • What Does a Payment Processor Do?
    • How Does It Work?
  • Examples of Payment Processors
  • Top-Rated Payment Processors of 2022
  • How to Pick a Payment Processor for Your Business

What is a Payment Processor?

A payment processor is a third-party vendor used by businesses to facilitate the logistics of accepting credit card payments from customers. It’s responsible for verifying authenticity, providing security, completing credit card and debit card transactions, and payments to merchants. A payment processor is also the third-party processor of ACH bank transfers.

Understanding Payment Processors

Understanding payment processors includes knowing basic terminology:

  • About participants
  • Designated bank accounts for merchants
  • Online payment gateways
  • Requirements for card security, and
  • Credit cards with merchant fraud liability protection.

It’s how a payment processor works on transaction processing as an intermediary. A payment processor’s go-between status could be with:

  • Banks of the merchant and customer and credit card networks, or
  • Payers and member banks of the ACH network or SEPA for international eChecks.

Payment processors earn a service fee. It’s usually a per-transaction percentage amount and a fixed fee per transaction. A different pricing plan is a monthly fee combined with lower per-transaction authorization fees.

Some sellers with high transaction volumes can negotiate better rates with payment processors.

Payment processors also work as intermediaries to process other payment methods. These payment options include ACH bank transfer and eCheck. E-check is a broad term for electronic checks used for ACH and global payments made through a payment processor.

The Acquirer

The acquirer (acquiring bank) is the financial institution providing the merchant account for accepting credit cards and debit cards. The acquirer receives settled payments through the payment processor from the issuer. Batches of card transactions are paid into the merchant account by the acquirer.

The Issuer

The issuer is the bank issuing the customer their credit card to pay for purchases. Through a payment processor, this issuing bank pays the acquirer responsible for paying the merchant for credit card transactions. The issuer later receives funds from the cardholder paying their credit card statement. The issuer is often the same as the customer’s bank.

Merchant Account

A merchant account is a designated business bank account into which money from the issuer on behalf of the cardholder is deposited to pay for batches of the merchant’s customer credit card transactions within one to three days of a sale transaction.

PCI Compliance

PCI compliance means following PCI security standards, applying to:

  • Merchants & service providers (PCI DSS)
  • Software developers of payment applications (PCI PA-DSS)
  • Manufacturers of PIN entry devices (PCI PTS).

PCI DSS stands for Payment Card Industry Data Security Standard.

Payment Gateway

A payment gateway is a fast and secure method for transmitting payment data online. A payment gateway includes card reader devices for point-of-sale (POS) and online portal software technology for eCommerce transactions. It’s used to authorize and enable payments from a customer to a merchant or vendor.

EMV Chip Credit Cards

EMV chip credit cards include an embedded silicon chip for better security. When merchants accept EMV chip credit cards, the fraud responsibility for transactions goes to the credit card issuer. Chip cards eliminate fraud liability (fraud chargebacks) for the merchant.

What Does a Payment Processor Do?

In a card transaction, a payment processor acts as an intermediary between the credit card networks, the merchant’s bank, known as the acquirer, and the bank that issued the customer’s credit or debit card, known as the issuer.

The acquiring bank and issuing bank are members of credit card networks. Credit card companies, including VISA, Mastercard, Discover, and American Express, have proprietary credit card networks.

Payment processors are responsible for obtaining authorization for credit and debit card transactions. Payment processors instruct the financial institution as card issuer to pay the acquirer bank on behalf of its cardholder customer, using secure, encrypted information. Then the acquirer pays the merchant through their designated merchant account, which is a bank account.

Payment processors may also offer intermediary services for other types of payment methods, including ACH and global ACH payments (eChecks).

How Does It Work?

An explanation of how credit card processing/payment processing works is:

A payment gateway through the retail point-of-sale (POS) card reader device or the seller’s website or mobile app is used to securely transmit transaction and card data, including card information, online to credit card networks, acquirers, and card issuers and pay merchants for batches of credit card transactions through their merchant account. A payment processor is an intermediary.

A merchant gets credit card sale authorization through an acquirer that contacts the card issuer to check the customer’s ability to pay for the credit card transaction. The payment processor again acts as the intermediary. The merchant provides batch transaction data for credit card transactions to the acquirer (acquiring bank) to be paid for its sales.

The transaction amount may be put on hold status or pending by the issuer in the customer’s credit card account to reserve credit availability for the transaction.

The issuer sends the net amount to the acquirer (another bank) to settle credit card transactions and deposit money into the merchant’s bank account within 24 hours to three days.

The issuer, the acquirer, and the payment processor are paid service fees. The credit card issuer (a bank) deducts interchange fees as its compensation in payment processing. The acquirer deducts a discount from the amount as compensation for its services. The payment processor charges merchants fees for its services.

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Examples of Payment Processors

Examples of payment processors include:

  • Stripe
  • PayPal
  • Square
  • 2Checkout
  • Authorize.Net
  • Braintree
  • ChargeBee
  • Wise (formerly Transferwise)
  • Payoneer
  • WePay
  • Secure Payment Systems
  • QuickBooks Payments (Intuit Merchant Services)

Braintree, acquired by PayPal in 2013, is operated as a separate eCommerce payment processing service and gateway that integrates with PayPal.

Secure Payment Systems offers products, including its Partner Payments subsidiary for credit and debit card payments and ACH payments through the Automated Clearing House network regulated by Nacha.

Quick Books Payments, operated through Intuit Merchant Services, is a payment processor for approved QuickBooks users. Payment method choices include credit cards, debit cards, PayPal, Apple Pay, ACH, and wire transfers.

Although your company can consider these named payment processor alternatives or other payment processing service providers to meet its business needs, we narrow the list to the top three third-party payment processors of 2022.

Top-Rated Payment Processors of 2022

Top-rated payment processors for 2022 are Stripe, PayPal, and Square. The best payment processor companies can be used in-store and as online payment software for eCommerce and other suppliers’ needs.


Stripe is a payment processor and software platform for accepting customer payments. Stripe software uses API integration to create eCommerce websites. You can integrate the Stripe payments user interface and Stripe Terminal with your mobile app to accept payments for the business.

Stripe is used by:

  • Retailers with store point-of-sale (POS) and online sales
  • eCommerce companies
  • Subscription businesses
  • Marketplaces.

Merchants can add Stripe Terminal card readers to point-of-sale equipment. Stripe uses machine learning technology to reduce fraud.


PayPal, which provides a payment gateway called Payflow, is a third-party payment service provider (PSP), considered a merchant aggregator, that doesn’t require a merchant account. Considering its functionality, we rank PayPal as a top-rated payment processor.


Square is still the brand name for this payment processor owned by renamed parent company, Block. Square lets customers build a free customizable online store and accept payments on their existing website, mobile app, or social media.

Square’s payment solutions include point-of-sale, card reader, and terminal equipment for accepting customer payments in person at checkout. Customers may use square terminals for contactless payments using near-field communication.

Square’s payment processing and hardware pricing are reasonable for startups and small business owners.

How to Pick a Payment Processor for Your Business

Pick a payment processor with a good customer reputation. It should provide security (including data encryption), reasonable pricing, and excellent customer service. Compare per-transaction fees as a percentage of the total amount and fixed fees, chargeback fees, miscellaneous fees, payment gateway fees, and the cost of any monthly plans.

When comparing vendors, businesses with a high volume of transactions can request a quote. The quote may be for lower per-transaction rates. If your business qualifies for a quote, use it to calculate the total cost of using each of the considered payment processing companies.

Full Guide to Payment Processors: Examples and Top Solutions (2024)


What is an example of a payment processor? ›

Top-rated payment processors for 2022 are Stripe, PayPal, and Square. The best payment processor companies can be used in-store and as online payment software for eCommerce and other suppliers' needs.

Who are the largest payment processors in the world? ›

What are the Biggest Payment Processors?
  • PayPal. With an impressive transaction volume, PayPal is one of the biggest payment processors globally. ...
  • Stripe. ...
  • Square. ...
  • Worldpay. ...
  • FISERV. ...
  • Other Payment Processors. ...
  • Compare Fees. ...
  • Consider Global Reach.

How do PSP make money? ›

Some PSPs provide services to process other next generation methods (payment systems) including cash payments, wallets, prepaid cards or vouchers, and even paper or e-check processing. PSP fees are typically charged in one of two ways: as a percentage of each transaction, or as a fixed cost per transaction.

How can I improve my payment processing? ›

These valuable tips should help businesses of all sizes optimise their payment processing systems and ensure smooth and consistent financial transactions.
  1. Ask for a Deposit Upfront. ...
  2. Send Prompt Bills. ...
  3. Make Payment Terms Easier. ...
  4. Scrap Paper Invoices. ...
  5. Incentivise Early Payments. ...
  6. Automate Follow-ups. ...
  7. Provide Payment Plans.

Is Zelle a payment processor? ›

Zelle is a bank-to-bank payment service connecting US-based banks together to make simple money transfers possible. It's a free service that allows you to transfer money quickly and securely, even if the person on the receiving end uses a different bank.

Is venmo a payment processor? ›

Venmo is a peer-to-peer payments app that lets customers transfer funds to businesses' accounts. However, Venmo for business is not a point-of-sale system or payment service provider. It doesn't sell POS hardware or software, or offer businesses a way to securely accept payments from their online store's website.

Who is the market leader in payment processing? ›

The global Payment Processing market size is projected to reach US$ 248930 million by 2028, from US$ 90880 million in 2021, at a CAGR of 14.5% during 2022-2028.In the global Payment Processing market, the five leading players are PayPal, Global Payments, Adyen, Fiserv ans Stripe. They hold a share over 50%.

What is the first largest payment processing company? ›

JPMorgan Payments

JPMorgan Chase & Co, owner of the largest bank in the U.S., was the merchant acquirer for a jaw-dropping $1.74 trillion in purchase volume in 2021. Chase provides backend services for eCommerce payment processing giant, PayPal and processes transactions in over 160 countries and 120 currencies.

What is the most used payment platform in the US? ›

Table of Contents
  • PayPal.
  • Authorize.Net.
  • Stripe.
  • 2Checkout.
  • Amazon Pay.
  • PaySimple.
  • WePay.
  • Braintree.

What is the difference between a payment processor and a PSP? ›

A payment processor acts as an intermediary for an online retailer and card acquirers or banks. A PSP, on the other hand, offers a comprehensive service that includes both technical payment processing and money collecting.

What programming language does PSP use? ›

For new PSP programmers, try Python: It's a good place to start. However, the recommended language for PSP homebrew is C, since the firmware, homebrew, and most games use C as their native language, and it allows deeper memory management (which, given that you have only 32MB/64MB available, you really need to do it).

How do processors make money? ›

Payment processors make money by receiving a commission. The fee is calculated as a percentage of the transaction between the customer and the merchant and relies on the last one. It also could be a fixed price per transaction.

What is the strongest current trend in payment processing? ›

Changing trends in payments
  • The increase in global cashless payment volumes.
  • The acceleration of cross-border, cross-currency instant and B2B payments.
  • The use of data and analytics to streamline the customer journey.
  • Innovations in security measures to reduce digital payments fraud.

What is the faster payment process flow? ›

The Faster Payments Service checks the payment instructions and forwards them to your supplier's bank, known as the receiving bank. The receiving bank then checks that the account number is valid and informs the Faster Payments Service that it has accepted the payment (it may reject it).

How hard is it to start a payment processing company? ›

The traditional way takes a lot of work, time, and money. You could develop and build your own payment processing software. For this, expect to easily invest $100,000 to $250,000 simply to create a minimum viable product (MVP). Plus, you've got to obtain numerous financial licences and adhere to dozens of regulations.

What are the types of payment processor? ›

A payment processor is a system that enables financial transactions, commonly employed by a merchant, to handle transactions with customers from various channels such as credit cards and debit cards or bank accounts. They are usually broken down into two types: front-end and back-end.

Is PayPal a payment processor? ›

As your payment processor, gateway, and online merchant account, PayPal authorizes transactions and helps protect electronic payments that come through your website. So you can easily accept online payments and earn money for your business.

Is Amazon a payment processor? ›

Amazon Pay is the leading online payments service for large enterprise businesses.

Is Cash App a payment processor? ›

The Company is a payment facilitator that allows you to accept Cards (defined below) from customers for the payment for goods and services. We are not a bank and do not offer banking services.

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