Processor
A processor is the partner in a payment transaction within the framework of a card business who takes care of providing the technical basis. It is responsible for ensuring that all payments are executed in a technically flawless manner. In addition, a processor takes over numerous other ancillary tasks from the acquirer or issuer bank. In only a few cases do the acquirer or issuer bank also perform the processor’s tasks at the same time.
Tasks of the processor
The processor is generally responsible for providing the necessary network. In most cases, this network is also operated by the processor. The payment service providers, who cooperate with the technical service provider, use this network and set up a technical connection for it. Processors also take on the card management tasks that an issuing bank usually has to perform. These include not only providing the technical basis, but also tasks such as authorization, card authentication and counterfeit prevention, processing complaints and misuse, issuing replacement cards and invoices, and many others. The processor reviews incoming transactions and authorizes their execution. It also monitors credit limits in the process. Payment transactions, also known as clearing, are also part of a processor’s scope of services.
Scope of a processor’s activities
A processor does not necessarily perform the full range of these services. Depending on how a credit card company is organized, it may also handle more or less large parts of the processing of transactions itself. There are credit card companies that do not outsource any tasks to a processor at all, but perform all tasks in-house. The exact scope of a processor’s activities is accordingly defined by the agreements between the partners involved.
Dealing with fraud and abuse
According to the German Federal Statistical Office, there are several thousand cases of credit and check card fraud every year. Losses due to fraud and the misuse of credit cards amount to millions of euros every year. In order to reduce this rate, a processor is working day by day to develop security mechanisms for credit card payments that will make the processing of payments on the Internet in particular more secure. This is because it is much easier to spy on credit card data via Trojans and phishing attacks here than it is for offline credit card payments. According to a study by Eurostat, around three percent of German Internet users suffered financial damage as a result of phishing or fraud in 2010, which further underlines the explosive nature of these efforts.
