Payment Processing For Modern Merchants: A Complete Guide

For merchants, few things impact both revenue and efficiency as directly as a payment processing system. Every year, global businesses lose an estimated 118.5 billion USD due to payment failure. It was also found that 27% of customers who experienced a false decline don’t return to the same merchant.

So, the impact of inefficient payment processing is far worse than what most businesses imagine. More than just a mechanism that moves money from the customer’s account to the business account, payment processing, when done right, ensures transactions occur seamlessly, funds arrive faster, and customers feel confident about buying from the business again.

What is payment processing?

Payment processing is a series of actions that happens behind the scenes and allows businesses to accept payments from customers. It begins when a customer enters their payment details on a checkout page (online) or taps/swipes their card at a point-of-sale (POS) terminal (in-person/offline). 

Payment processing involves multiple stakeholders as follows:

Customer and the business

1. The customer: The person making the purchase.
2. The merchant: The business accepting the payment.

Technology providers

3. Payment gateway: It collects and encrypts payment details and passes them to the payment processor. It is used primarily for online payments.
4. POS terminal: It is the hardware that’s used for physical card-present transactions, and, like the payment gateway, is connected to a processor.
5. Third-party payment processor: It manages authorisation, settlements, risk checks, etc. Payment service providers sometimes bundle the gateway and processor into a single platform, like Unlimit.

Learn more about Unlimit’s global payment processing solution and see how we help businesses handle payments faster, safer, and more efficiently.

Financial institutions and networks

6. Acquirer: The merchant’s bank that receives the settled funds.
7. Issuer: The customer’s bank, which approves or declines the payment.
8. Card networks: The organisations, like Visa or Mastercard, that link acquirers and issuers. They also enforce rules, fees, and security standards.
9. Alternate Payment Method (APM) operators: The specific entities tied to alternative payment methods, such as:

• Digital wallets: Apple Pay, Google Pay, PayPal
• Online banking: SPEI (Mexico), Pix (Brazil), PayEasy (Japan), UPI (India)
• Buy-Now-Pay-Later (BNPL) providers: NuPay (Brazil), Billease (Philippines), 
• Cash: Boleto (Brazil), 7 Eleven (Mexico), Konbini (Japan), Pago Efectivo (Peru).

For the customer, payment processing takes just a few seconds, but for the business, it can take hours or even days for transactions to be settled. 

How does payment processing work?

When a customer decides to pay, the process can start in two different places–in-person at a store or online through a website or app. In both situations, a majority of customers globally choose to pay by credit or debit cards. When that happens, the entities we mentioned in the previous sections jump into action as follows:

Customers shopping online have more payment method choices. In addition to cards, they can use digital wallets, bank transfers, BNPL, or cash vouchers. The collective of these payment methods is referred to as alternative payment methods (APMs). 

Unlike card transactions, payments made using APMs follow a different processing flow. Here’s a simple five-step overview of how it works at Unlimit.

3 questions to ask before choosing a payment service provider

Businesses working with unreliable or outdated payment providers may face challenges such as limited regional payment methods, delayed settlements, hidden expenses, frequent downtime, and a poor customer experience. These problems not only frustrate customers but can also take a lot of time to resolve and disrupt cash flow.

A reputable payment processor, on the other hand, will support business operations, secure payment data, and simplify financial management. Here are three questions to find the right payment processor for your business:

#1 Does it support the payment methods customers use?

Every consumer has their own preferences when it comes to payment methods, and in some markets, these choices are highly local.

If a customer with their cart full realises their preferred payment method isn’t available, they’re likely to abandon the purchase. Beyond lost sales, this also translates to lost potential repeat customers and wasted marketing spend that brought those visitors in.

Partner with a provider that offers access to a wide range of local and global payment methods, including highly-specific ones, like Mercado Pago in Colombia, UPI in India, PIX in Brazil, or Mobilepay in Denmark.

#2 How does the platform/processor protect my business from fraud and compliance risk?

A single data breach or even the slightest non-compliance can lead to a series of problems that can ultimately damage a business’s reputation. Beyond the obvious financial risks, such as payment reversals and fines, weak security and failure to meet data protection standards also drain time and resources that could otherwise be spent growing the business.

Make sure the payment service provider complies with global and regional standards such as PCI DSS or PSD2, stays up to date with evolving regulations, and supports security features such as 3D Secure and two-factor authentication (2FA).

#3 – How fast is the onboarding process??

When the setup process is complex or the documentation is unclear, even minor issues can cause major delays.

Look for a provider that offers modern, well-documented APIs, ready-to-use SDKs, and sandbox environments for safe testing. These tools help teams launch faster and adapt easily when new payment methods or compliance rules appear.

After integration, smooth daily operations will depend on how easily transactions can be monitored, how refunds are handled, and how settlements are reconciled. Features like intuitive dashboards and automated reporting can make a big difference in how efficiently a team manages payments, especially as the business grows.

Why choose Unlimit’s payment processing services?

Unlimit covers everything businesses look for in a payment processor. We help global businesses:

• Improve sales and reduce cart abandonment through a seamless payment experience
• Reach more customers with multi-currency support and 1000+ payment methods
• Protect the business and customer trust with top-tier security–PCI DSS compliance, encryption, tokenisation, and advanced fraud detection
• Save time and simplify accounting through automated reconciliation that syncs transactions in real-time and generates accurate reports
• Predict costs and protect margins with transparent pricing and no hidden fees
• Resolve issues quickly and keep operations running smoothly with our dedicated, responsive customer support
• Scale confidently with flexible solutions that adapt to new markets, evolving regulations, and changing customer needs

Learn more about Unlimit’s secure payment processing solution.

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