What Is a Payment Processor?
A payment processor is a company that handles the movement of money when a customer pays online. It collects the payment details securely, checks the payment with the customer's bank or wallet, takes its fee and pays the remaining money to the seller's bank account.
What it does
When a customer pays, the processor contacts the card network and the customer's bank to confirm funds are available, records the payment and later transfers the money to the seller, usually after a delay. It also handles refunds and disputes under its own rules.
What it charges
Processors typically charge a percentage plus a fixed fee for each payment, with extra charges for international cards, currency conversion, refunds and disputes. Fees vary by provider and country, so read the provider's current pricing page and test with a real example.
Holds and restrictions
Processors manage risk. New accounts, sudden growth or high refund and dispute rates may lead to delayed payouts, reserves or account closures. Providers also list businesses they do not support or treat as higher risk, and some selling models face extra rules.
An example
A customer pays for a digital product by card. The processor confirms the payment, keeps its fee, holds the funds for a short period and pays the rest to the seller's bank account.
Related terms
See chargeback, dropshipping and sales tax. For a comparison of options, read Stripe vs PayPal vs other ways to get paid.
Frequently asked questions
Is a payment processor the same as a bank?
No. A processor moves money between the customer, the card networks and your bank. Some providers also hold balances or offer banking-like features.
Why would a processor hold my money?
To manage risk, for example with new accounts, fast growth or many disputes. Read the provider's terms to see when it can hold funds.
Do processors support every business?
No. Each has restricted and higher-risk categories. Read the acceptable use policy before you build.