What is a Third Party Processor?

Every single time, it never fails.. “what do you do for a living, Marshall?”

me: I’m in payment processing, I help business owners accept credit cards for their business.

them: “OHH!! Like the Square! I gotcha”

me: smh, not exactly.. I’ll give you an actual merchant ID to mitigate your risk.

them: “huh?”

me: So, not so much like the Square.. I’m an actual processor.

them: “huh?”

me: ok, I have to go, I have a meeting.

It’s long overdue time to squash out the ignorance when it comes to payment processing. I hope I can play my part by shining a little truth on what a third party processor actually is.

First, I’ll just give you a basic definition:

A third party processor is a company that helps you accept credit cards without needing a merchant account of your own. Your money goes to their merchant account and then gets sent to your bank account. Examples are Square, Paypal, Stripe, and Amazon Pay. 

That’s the definition, sounds pretty simple right? It does get a bit more complicated when we start talking about risk mitigation, but that is basically the definition. I’ll dive into some advantages / disadvantages and I’ll let you determine what is right for your business.


  1. Easy set up, very little questions asked to get mailed a swiper and begin accepting cards.
  2. If your business is just starting out and you are kind of ‘testing the waters,’ this simple solution works.


  1. Difficult to get service and reports. No monthly statement is sent to show what you are paying.
  2. Account shut down risk. If there are deemed too many risky charges, you will be shut down.
  3. Difficult to recover funds from chargebacks or fraud.

So, as an advisor, I’ll always give you the advice based off what I know and have seen. When I am asked, my reply is usually the same..

A third party processor is an OK option for someone who is processing less than $10k in transactions per month. When your volume starts to climb above that, it’s important to look into getting your own merchant ID. 

As your business grows, so should your payment processor. Working with a payment processor that provides a detailed monthly statement of your charges, provides great service, and always makes sure you are securely processing transactions is very important.

I hope this helps and you understand a little more about how this money gets into your account.

If you would like to go more in depth, you can book an appointment from here or you can have a chat with my chat bot.. Thank you for joining me. https://bit.ly/marshall-lowy-intro