What is third-party payment processing?


Every company that does business online needs to process payments. If earlier it was possible to sell goods or services for cash only, in the modern world, payments are made mostly online. However, third-party payment processing may be required for online payments to work effectively. In this article, we will talk about payment processors for small businesses in more detail.

What is third-party payment processing?

Third-party payment processing is carried out by so-called third-party payment processors (payment processors or aggregators). 3rd party payment processors are special organizations that allow you to accept online or bank card payments without creating a separate account.

Third-party payment aggregators are working hard to make doing business easier for companies. They provide simple payment flows and ensure that transactions are carried out. Accordingly, the client does not have to deal with setting up or maintaining a separate special account on their own. It is enough to create an account with a third-party payment processor, and it will process transactions.

Do you actually need third-party payment processing?

An important question is whether third-party payment processing is really required and, if so, for whom it will be most effective. There are several reasons why an organization may choose to use a 3rd party processor, for example, due to the inability to pay monthly fees for servicing dedicated accounts. Such a solution would be good for small and medium businesses that get a small number of card payments and cannot afford the costs of setting up a dedicated account. In this case, a third-party payment processor would be a good solution.

However, keep in mind that while there is no monthly fee or one-time payment, a third-party payment processor is not a free solution. Such companies earn through a higher commission for each financial transaction. The difference between the fees of a third-party payment processor and a dedicated merchant account is palpable. However, if the volume of transactions is small, then such a solution is more profitable. However, the larger the transaction volume, the less profitable this payment scheme becomes.

What are the advantages of third-party payment processors?

Third-party payment processors have gained fairly high popularity among online stores and startups that are small or medium-sized businesses. They have several important benefits:

  • Third-party payment processing is simple. To get started, there is no need to find a separate payment gateway, create a merchant account, set them up to work in sync, etc. Everything is very simple in this case – you create an account and start accepting payments immediately.
  • Ability to work with high-risk clients. Payment aggregators are more willing to partner with high-risk merchants than acquiring banks.
  • A third-party payment processor is all about flexibility. Such services do not enter into long-term contracts for processing payments. Accordingly, the online store can refuse to cooperate at any time in most cases.

How does third-party payment processing work?

Many companies that represent small and medium-sized businesses have problems interacting with acquiring banks. It is time-consuming and costly, especially in the early stages. Therefore, a third-party payment processor can be a good alternative.

First, you need to open a seller account. After that, a relatively simple setup takes place, taking into account the features of your online store, after which you can start working.

With the help of a third-party payment processor, clients do not have to spend time opening a merchant account with a bank. Payment processors enable customers to use their accounts in the system to process bank card payments, electronic wallets, and in some cases, cryptocurrencies. All payment information of customers is verified directly by the processor. In addition, it is the third-party payment processor that takes anti-fraud measures before the client receives permission to complete the financial transaction.

What are the risks of using a third-party payment processor?

Using a third-party payment processor can be a smart solution. However, one should not forget about the risks that may arise. First of all, this cooperation model is not suitable for large businesses and companies that process a large number of payments. This is because third-party payment processors charge transaction fees. Accordingly, the more transactions, the more funds the seller pays to the payment system as a commission.

It is also important to remember that transaction fees through a third-party payment processor may be higher than expected. For example, the fee may be higher than the third-party transaction costs associated with merchant accounts. Accordingly, it is important to carefully study all the conditions of the payment service before starting cooperation with it.


A third-party payment processor can be a good solution for small and medium businesses. It can be difficult for such companies to open a merchant account with an acquiring bank. A third-party payment processor solves this problem. In addition, this option is more beneficial for small online stores, as well as for businesses that are just starting out. Third-party payment systems are quite simple and convenient solutions. However, before choosing such a service, it is important to familiarize yourself with the terms of its work.

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