Payment processor: what is it, how does it work and which is the best in Latam?

In Latin America, payment processors have become an indispensable mechanism for business growth (physical and digital), thanks to digitization and the growing adoption of electronic payment methods.

These systems allow agile transactions adapted to the particularities of the regional market. Stay to find out which is the best payment processor option to automate your business collections.

What is a payment processor?

A payment processor is a system that manages electronic transactions between a buyer and a seller during a commercial operation. It is essential both in e-commerce and in physical stores, since it allows receiving payments with credit cards, debit cards, digital wallets and other electronic payment methods.

By functioning as the intermediary between the client's account and the merchant's account, it ensures the mobilization of funds in a secure and efficient manner. 

Payment processor vs. payment gateway: how do they differ?

When making electronic payments it is important to understand how they work and what is the difference between a payment processor and a payment gateway. Although they work together, each one fulfills a specific role.

Apayment gateway is responsible for collecting the customer's payment information and securely redirecting it to the payment processor or acquirer to complete the payment. Some popular payment gateways in Latam are: Rebill, Mercado Pago, Kushi, among others.

On the other hand, thepayment processor is responsible for processing transactions, connecting the acquiring bank, the issuing bank and the card network (such as Visa, Mastercard or American Express), i.e., the processor is the link that ensures the movement of money between financial institutions. 

Thus, the key difference between gateways and processors is that: the gateway captures, encrypts and transmits the payment data, while the processor handles the authorization, communication and transfer of funds.

How does a payment processor work?

Paying through a service with payment processors is a quick and easy payment experience. However, this mechanism is complex and requires the fulfillment of a series of steps: 

Start of the transaction at the point of sale

The process begins when the customer decides to make a purchase, either in a physical store (through a point-of-sale terminal) or online (through a payment gateway such as Rebill, Stripe, Checkout or PayPal). 

The customer enters their payment information, such as cardholder name, card number, security code, digital wallet, etc. 

Data authentication

The payment gateway then collects and verifies the data entered by the customer, making sure that the information is valid and that the card is not expired or blocked. The payment processor also verifies that the data matches the issuing bank's records.

Encryption and tokenization of information 

To protect transaction data, the information is encrypted and, in many cases, tokenized (i.e. replaced by a secure identifier). This step is essential to prevent fraud and ensure the security of sensitive data. Learn more about tokenization.

Authorization or rejection of payment information

The encrypted information is sent to the acquiring bank, which forwards it to the card network and then to the customer's bank, which validates the transaction, reviews the available funds and authorizes or rejects the payment. The response then travels back the same way to the point of sale.

Capture of funds

If the transaction is approved, the payment processor records the authorization and the merchant can deliver the product or service to the customer. The funds are reserved in the customer's account pending final settlement.

Settlement by payment system

Finally, the issuing bank transfers the funds to the acquiring bank. The acquiring bank then deposits the money into the merchant's account, completing the process. Depending on the payment system, settlement may be effective in real time or take a few business days.

All of this happens in a matter of seconds, ensuring a fast and reliable experience for both the customer and the merchant. This is how the processor proves to be of paramount importance for payment services in the digital and physical world.

How to choose the best payment processor?

Choosing the right payment processor for your business is a decision that needs to be made carefully, as it will impact your customers' experience. Among the factors to consider when choosing the best payment processor are: 

• Security measures: make sure that the processor complies with international security standards, such as PCI DSS (Payment Card Industry Data Security Standard), which guarantees encryption and protection of sensitive information. As well as fraud detection and prevention standards.
• Integration with APIs and SaaS platforms: verify that the processor offers flexible APIs and is compatible with the platforms you use for e-commerce or SaaS software, to facilitate smooth integration.
• Chargeback and chargeback management: evaluate what tools and support you offer to handle chargebacks or returns, as this can affect profitability and your relationship with your customers.
• Accepted payment methods: choose a processor that supports the payment methods preferred by your customers: credit and debit cards, digital wallets, wire transfers, and even pop-up options such as "buy now, pay later". The more options, the higher the satisfaction and conversion rate.
• Support for recurring payments: if your business handles subscriptions or recurring payments, it is crucial that the processor facilitates automatic handling of recurring payments to avoid interruptions.
• Smooth checkout process: The ease and speed with which a customer can complete their purchase has an impact on sales. Look for processors that offer an intuitive checkout process, without unnecessary steps or frequent errors.
• Speed of funds transfer: Consider the time it takes for the money to clear your bank account. Some processors offer almost instant transfers, while others may take several business days.
• Conversion rate optimization: Some payment processors include tools to reduce cart abandonment, such as one-click payments or mobile adaptation, which can significantly increase sales.
• Commissions: study the cost structure, transaction fees, monthly fees and any additional charges. Choose a model that fits your sales volume and growth projections.

Top 5 Payment Processors in Latam

Processors as a method of optimizing online payment methods have become key players in e-commerce in Latin America. Here are some of the most popular payment processors in the region: 

1. Rebill

Rebill is a payment infrastructure, ideal for companies that manage subscriptions or digital services. It is present in the main Latin American markets: 

• It functions as a payment processor and payment gateway.
• Automatic management of periodic collections.
• Support for multiple payment methods and currencies.
• Integration in less than an hour through its World Class API, SDK or no-code integration.

2. Mercado Pago 

It is one of the most recognized payment processors in Latin America, with a wide scope and versatility. Noted for: 

• Fast integration for online and physical stores.
• Variety of payment options, including bank transfers and cash payments.
• High security with tokenization and two-factor authentication.

3. Kushki 

Kushki is an emerging fintech that facilitates the implementation of electronic payments for digital businesses. It is characterized by: 

• Flexible and easy-to-integrate API.
• Support for local and international payment methods.
• High security and fraud prevention standards.

4. PayPal

It is present in more than 200 countries and is widely used in Latin America. It stands out for: 

• Accept payments in 26 different currencies, facilitating international sales.
• Function as a payment processor and gateway, with high security and fraud protection.
• Supports card payments, PayPal balance and digital wallets.

5. PayU

PayU has a strong presence in emerging markets and is trusted by regional businesses. It has: 

• Local processing in more than 50 countries.
• Multi-currency support and varied methods.
• Quick and easy integration.

Rebill is positioned as the ideal option to give dynamism to your digital payments. Its infrastructure is designed so that your business can grow smoothly, offering a seamless experience for both you and your customers. Contact us and discover an efficient payment service provider for your business.