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.