Payment processing is the term used to describe the process and service which automates payment transactions between the shopper and merchant. It is usually a third-party service which is actually a system of computer processes that process, verify and accept or decline credit card transactions on behalf of the merchant through secure internet connections.

Front-end processors have connections to various card associations and supply authorization and settlement services to the merchant banks’ merchants. Back-end processors accept settlements from front-end processors and, via the Federal Reserve Bank, move the money from the issuing bank to the merchant bank.

In an operation which will usually take a few seconds, the payment processor will both check the details received by forwarding them to the respective card’s issuing bank or card association for verification, and also carry out a series of anti-fraud measures against the transaction.