Banks and credit unions are the two most common financial institutions that are bill payment providers, otherwise known as BPPs. A BPP is a corporation or association that works, often as a third-party entity, to accept payments on behalf of a merchant. A bill payment provider is appointed by the merchant account for processing payments, settling transactions and authorizing activity. These payments are electronically collected each day, along with all other data collected during a merchant’s regular credit card processing. Payments can come from either credit cards or debit cards. After a card holder conducts a transaction, data is collected, reviewed, and approved or declined by the bill payment provider. This all takes place within a matter of seconds. Any built in security measures will also be performed during the authorization period at check out.
What services do Bill Payment Providers offer?
From the beginning of a transaction to the end, the bill payment provider is actively involved. There are two different types of transactions channeled between the credit card processing and the BPP. They are known as the front-end and back-end processors. The front-end processors offer authorization and settlement services, as well as connections to many credit and debit card associations. Each transaction begins here. Then, the back-end processors transfer funds from the issuing financial institution to the merchant account holder’s bank. Once the front-end has settled a batch, it is sent to the back-end where it is accepted and transferred to the merchant’s financial institution.
The channel of credit card processing is anything but simple, but each step is important. What begins with the merchant when a point of sale is made, moves to the credit card network, and finally to the financial institution. It is a chain reaction put in place to protect each party involved. It helps prevent technical difficulties that may arise, inefficiencies and even fraud. Each link in the chain is vital to the success of each transaction, which is why bill payment providers have such a big influence over the entire scope of a merchant’s payment process.