A Back-End Processor is a financial institution or company that manages the settlement of transactions in the payment processing cycle.
After a transaction has been authorized by the front-end processor, the back-end processor moves funds from the cardholder’s bank account (the issuing bank) to the merchant’s bank account (the acquiring bank).
The back-end processor also performs the following additional functions:
Batch Processing: Transactions are accumulated and processed at the end of the day.
Chargebacks: A customer disputes a charge and funds need to be returned.
Funding of Transactions: Ensuring the correct amount of money is transferred to the merchant’s account.