Third-Party Processor

The term third-party processor can refer to many different services, depending on which industry is involved. When talking about payments, though, third-party  processors are outsourced providers that perform credit card payment processing services on behalf of merchants who don’t have their own merchant accounts.

Businesses can use an outside processor to accept credit card payments, online payments, and any other cashless payment method which requires a merchant account. Because they are not affiliated with a specific bank or merchant service, third-party processors have more freedom to act as an intermediary between the merchant and the merchant services provider.

Third-party processors not only serve as a surrogate merchant account, they can also handle the entire payment transaction process. Many offer additional services such as fraud protection, reporting tools, and integration with eCommerce platforms.

While most commonly used by small businesses, startups, and online retailers, third-party processors cater to any merchants who need a way to accept credit card payments without requiring extensive setup or ongoing maintenance. Examples of third-party processors include PayPal, Square, and Stripe.