They verify that transactions are valid and that customers have enough funds, check for fraud, and initiate the fund transfers. Processors are typically large financial institutions that provide the backbone of all transactions. They come in two major types, ISOs and processors. Merchant acquirers are the financial institutions and organizations that provide the tools and processing that allow cards to be accepted. This is where it starts to get complicated. Merchants are the businesses that customers are trying to purchase goods or services from. Easy to understand and relate to - this includes anyone with a credit or debit card trying to make a purchase. There are a couple of distinct parties, though sometimes lines get blurred. Understanding how credit card transactions work requires understanding who’s involved. For sellers, however, this is just the beginning. For customers, that’s typically the end of the transaction (unless something goes wrong). To most consumers, it looks simple and straightforward - you swipe or insert (“dip”) a card into a machine, or enter your number and information into a form, and your payment goes through. To really understand why Stripe Payments was a big deal, it’s important to understand a little bit about how the credit card processing industry works. It added services and features like fraud protection, fixed rates regardless of network, and an application programming interface (API) that allowed app makers to easily incorporate card processing into their apps. Stripe set out to fix a lot of that by streamlining the process. Long story short, accepting credit cards was an incredibly complicated and poorly explained process. Then there were the banks you had to deal with, the credit card companies themselves, and a slew of additional services that were often poorly explained and sold by various third parties. At the time, taking credit cards meant working with a legacy processor or a middleman broker who would provide you with access to a processor. Stripe was founded in 2010 with the mission of making it easier to accept payments over the internet.
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