Third-Party Processor (TPP)

A Third-Party Processor is an entity that processes transactions on behalf of merchants, eliminating the need for a merchant to establish a direct relationship with a bank. TPPs can handle a range of payment processing tasks, including transaction authorization, settlement, and payment gateway services.

This means that the TPP will manage the communication between the merchant’s point of sale system or website, the issuing bank, and the acquiring bank. They will request and receive authorization for the transaction, capture the transaction details, and submit them for settlement.

Ultimately, the TPP is responsible for ensuring that the funds are transferred from the customer’s bank account to the merchant’s bank account. While this service is extremely valuable for businesses, it’s important to note that not all TPPs are created equal.

Some may offer additional services, such as fraud prevention, reporting tools, or integration with accounting software. Others may charge lower fees but offer fewer features. Merchants should carefully consider their specific needs and compare different TPPs before selecting one to work with.