What Do Payment Processors Do?

Ever wondered what payment processors do? Or how they help you make more money? Then this page is for you.
Redde Payments
3 min to read

What Do Payment Processors Do?

Admit it, no matter how much time you spend on forums, blogs and trying to find the right answer, you just can't seem to get a full picture of what payment processors really do. It's not that the information isn't out there, it's just that you can't seem to find it all in one place. Which is why here we are. This article is going to take you through some of the most important things you need to know about payment processors. You'll find out how they work and why using one could be the best thing for your business.

What are payment processors?

A payment processor takes care of the transaction between the merchant and the customer. Think of it like an agent or middleman who facilitates communication between two parties; in this case, it's between the store and its customers. The store offers the product or service on their website, providing a shopping cart for customers and taking payment before sending out orders.

Payment processors do things like:

  • Process transactions (taking money from one account and depositing it into another).
  • Handle fraud protection (looking at suspicious charges).
  • Reconcile payments (making sure that what was paid matches what was delivered).
  • Manage chargebacks (when a customer disputes a charge and asks for a refund).
  • Offer security features to merchants like PCI compliance (to protect cards from theft).

The best analogy is to think of those old-fashioned ATMs where you insert your card and enter your PIN to retrieve cash. Those ATMs communicate with your bank. They're the entry point into the bank's system. They're not responsible for balancing accounts or deciding about what to do with your money, though; that's left to the banks themselves. What payment processors do is similar: they facilitate transactions by handling the communication between different banking systems and networks. This is how you get paid.

Who needs a payment processor?

If you're a business owner, then you most likely need a payment processor. If you accept credit cards or other forms of payment, then having a payment processor is essential. A payment processor will help you process payments from customers and clients so that they can pay for products or services online or in-store. Companies big and small use payment processors—from Apple to Zappos—to help them manage their customer transactions with ease.

How do payment processors work?

The definition of payment processing is the act of facilitating payments between a buyer and seller. Payment processors provide merchants with the tools they need to accept credit card payments, including hardware, software and other services.

In order to understand what payment processors do, it's important to first understand how these transactions work. When you make an online purchase using your credit card or debit card (the most common type), you're entering into an agreement with your bank that allows them access to funds in your account as needed during each transaction. Your bank then sends those funds along to whoever is selling you something online—in this case, your favorite e-commerce site or retailer like Amazon or Target—and then keeps track of everything so that both parties know where their money went once everything has settled.

The role of a payment processor is to facilitate this process, which can be tricky because the funds involved are often coming from multiple sources. For example, if you're buying something on Amazon and using your American Express card to pay for it, then there's also an agreement between AmEx and Amazon that allows them to exchange money so that they cover both sides for their products or services.

Below is an overview of how your money gets to you and the role a payment processor plays in the process:

A payment processor's role in how your money gets to you.

How do I choose a payment processor for my business?

Payment processors are a critical part of any ecommerce business, but it's difficult to choose the right one. Here are some questions you should ask yourself:

  • What features do I need? Is your site built on WordPress or another platform? Do you need recurring billing capabilities, or would manual invoicing work better for your company's needs? If there are specific features that would make accepting payments easier for customers and employees alike (like integrated tax calculations), make sure they're included in the plan before signing up with any service provider.
  • How much will this cost me over time? Every payment processor has different rates depending on which plans they offer—and sometimes these rates can vary significantly depending on how much volume goes through each account every month. Make sure not only that the monthly fee is acceptable but also whether there are additional fees associated with certain types of transactions or high-volume usage.
  • What kind of support do they offer? It's important to know what you're getting into with any software provider before signing up. Do they offer 24/7 customer support or just email-based responses during normal business hours? What are their turnaround times like, and how quickly can they provide updates if something goes wrong with your account?

Choosing the right payment processor is going to be a big part of your business's success, so choosing wisely is super important. Don't be afraid to do your research and ask around.


Perhaps the most important thing to remember about payment processors is that they are vital when accepting payments. Do not underestimate the importance of a quality processor. Take time to work with one until you find a good fit for your business and your industry. You don't need to shop around for the lowest rate, though it may help you cut a better deal if you do. Instead, look for a processor that matches your needs and fits into your budget.

With Redde Payments, you can set up secure payments with many options and be ready to accept payments from customers. If you have questions about what payment processors do or how you can use them for your needs, please reach out to us to learn more! To get started taking payments, visit

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