Payment Processors are the intermediaries who receive payments from consumers and transmit money to brands or advertisers in return for compensation. Payment Processors have a large role in the global economy, which has made it imperative for governments to regulate this industry. Payment processor fee sources include transaction fees, merchant fees, programmatic fees, and interchange fees. In order to pay their suppliers or investors via a payment processor, businesses must first credit those funds into an account of the relevant payment processor before transferring that currency into their own bank account. In certain cases (e.g. fraud prevention), Payment Processors may be required to pay for new services, such as fraud monitoring and security (e.g. chargeback monitoring). In 2014, the largest payment processor was Visa Inc. with a 20.5% share of the payments market, followed by global payment processor MasterCard Inc. with a 19.9% share and processing network group American Express Co., which had 5.7% of the market; other companies included Worldpay Holdings PLC (4.9%), First Data Corporation (3%), PayPal Holdings Inc (2.1%).
What are Payment Processors?
Payment Processors are companies that store and process electronic payments for brands and advertisers. It is estimated that the value of payments transactions worldwide amounts to USD $6 trillion annually, which makes these specialised companies an important part of any industry. Over 98% of all payment cards are used within their countries of issue, and the global processing industry is set to reach USD $130 billion by 2016 – an increase of over 50% since 2008. Payment processing enables consumers to pay in a safe and convenient manner whilst giving businesses new ways to communicate with consumers.
Payment Processors live in a world defined by one simple principle: maximize revenue for every payment transaction at all times, with as little expense as possible.
Significance of Payment Processors:
Payment Processors are important because they help to provide services that enable payment behaviour between consumers and businesses. As such, they are essential to the facilitation of activities that require interaction between consumers and businesses.
A payment processor is a company that provides or facilitates restricted payment services to payment service users on behalf of a third party (the merchant) who may not have a direct relationship with the consumer. In order for a business to receive funds from consumers, it must have an account at a payment processor. Payment Processors have the ability to collect payments from consumers directly and then channel this money into merchants’ bank accounts for them. Payment Processors also monitor transactions to prevent fraud in most cases. Payment processor companies are responsible for ensuring that all payments are secure and processed quickly, whilst also offering as many payment options as possible to consumers.
Types of Payment Processors:
A common method used for categorizing Payment Processors is by the channel which they use to process payments. This can be divided into two categories: online payment processing and offline payment processing. Online Payment Processors include PayPal and Adyen, who both process payments on behalf of merchants for goods or services delivered online and through mobile devices. Offline Payment Processors include Worldpay and Sofortüberweisung; both organizations offer telegraphic transfer services that allow merchants to take payments from customers over the counter or via a mobile device while they are in-store.
Other ways to categorize Payment Processors are by the number of payment options that they offer, and by their target audience. Large Payment Processors such as Visa and Mastercard offer consumers a range of purchase options, including credit card payments and debit card payments. By contrast, there are some Payment Processors that are dedicated to serving a particular demographic; they might specialize in accepting payments from students or from people without a bank account. There are many different types of Payment Processors. Some Payment Processors only provide certain services, such as accepting credit card payments or processing checks. Other types of Payment Processors help create new ways for consumers to pay for goods and services, such as the introduction of mobile payments.
Mobile Payments are transactions that occur via the use of mobile phones and other Internet-enabled devices. Users can pay for goods and services via text message, their mobile browser or an app on their phone. For example, a consumer could send an SMS text message with their bank’s BSB code and account number to pay a monthly bill; doing so would initiate a transfer from their account to that of the business.
Perceived Benefits of Payment Processors:
Many businesses choose to accept electronic payments because they believe it will give them an advantage over their competitors. One type of advantage occurs when a business takes more convenient forms of payment; this is known as being “card friendly”.
Payment Processors are critical to the success of the payments industry, and they provide a wide range of financial services and payment processing services to a vast array of businesses. Basing their processes on the requirements of merchants, Payment Processors offer a number of different payment options in order to aid in the facilitation of business-to-consumer interactions.
Payment Processors allow businesses to accept electronic payments and make it easier for consumers to pay for goods or services. However, there is an inevitable cost associated with this convenience; by removing the need for consumers to carry cash or make a physical transaction at a business location, Payment Processors remove some costs from consumers while charging merchants fees based on each payment they accept.