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How to Become a Payment Processor

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A payment processor is a third-party company merchants and merchant banks utilize to process credit card transactions. Processors, also known as acquirers, are responsible for the allocation of funds between businesses and consumers. They supply pre-authorization, post-authorization and refund services for businesses accepting credit card payments. Payment processors are generally a type of financial institution distinct from the bank. The bank acts as the processing underwriter (assumes the risk). Most banks do not handle their own credit card processing, since it is more cost-effective to hire a processor to do it for them. The easiest way to become a payment processor is to partner with an underwriting bank.

Create your business entity. Typically, an underwriting bank is not going to approve a processing agreement with an individual. To become a payment processor, it is best to establish a partnership or corporation, which requires considerably less capital than trying to become an actual processing underwriter (bank).

Sign up for a credit card processing merchant account. or can help you set up a merchant account and provide you with everything necessary to accept credit cards. This often means all equipment, setup, Secure Sockets Layer (SSL) for transaction security and software you will need. They will also establish your payment gateway (e-commerce interface) with a company like

Locate an underwriting bank that will sign a processing agreement with your business. Several banks use payment processors; First Data is probably the largest. Many banks prefer to partner with a processor willing and able to take on some or all of the risk involved in credit card processing. Credit card companies do not engage in processing agreements directly with processors, but deal only with the underwriters.

Fill out the application to become a payment processor with the underwriting bank willing to employ your company’s services. Most applications require personal, as well as business information, which may include your Social Security number. Most banks or financial institutions will not underwrite a business without this information.

Sign the processing agreement for credit card transactions. Normally, before an application can be approved, you must sign the agreement as your personal guarantee to deliver services as outlined in the accepted terms and conditions. A personal guarantee is also a way for the underwriting bank to deter irresponsible or fraudulent behavior.

Partner with another business already processing for an underwriting financial institution. If you are unable to secure your own agreement, perhaps due to number of years in business or the state of your personal credit, then partnering with an established processing company gives you the opportunity to gain valuable experience and build your reputation.


Based in California, Debbie Donner is a freelance online writer who primarily writes articles related to personal finance. Donner received a Mensa scholarship in 2006 while attending California State University, Fresno. She holds a Bachelor of Arts degree in liberal arts and a multiple-subject teaching credential.