A payment processor helps businesses accept, manage, and settle electronic payments.

Whether a customer pays by credit card, debit card, Interac e-Transfer®, or directly from their bank account, a payment processor helps move the payment from the customer to the business.

For Canadian businesses, payment processors also play an important role in security, fraud prevention, settlement, and reconciliation.

What is a payment processor?

A payment processor is a company that helps businesses accept electronic payments.

It connects the different parties involved in a transaction, including:

• The customer
• The customer's bank or financial institution
• The business
• Payment networks and financial institutions

The processor helps verify the transaction, move payment information securely, and settle the funds.

The exact process depends on the payment method.

For card payments, the processor works with card networks such as Visa and Mastercard.

For pay-by-bank payments, the processor connects with participating financial institutions to facilitate payments directly from a customer's bank account.

How does payment processing work?

A typical payment follows a few basic steps:

1. The customer chooses a payment method.
   They select a card, Interac e-Transfer®, or another available payment option.
2. The payment is authorized.
   The payment processor helps verify the transaction and confirm that it can be completed.
3. The payment is processed.
   Funds move through the relevant financial institutions or payment networks.
4. The payment is confirmed.
   The business receives confirmation that the transaction was successful.
5. The funds are settled.
   The processor transfers the funds to the business based on the agreed settlement schedule.

The process can vary depending on the payment method, provider, and business model.

How does Interac e-Transfer payment processing work?

Interac e-Transfer® is a familiar way for Canadians to send money directly from their bank accounts.

For businesses, a payment processor can help manage the process from payment initiation through settlement.

A typical flow looks like this:

1. The customer starts the payment

The customer selects Interac e-Transfer® and follows the payment instructions.

2. The customer approves the payment

The customer completes the transaction through their online banking or mobile banking experience.

3. The payment is received

The funds are transferred from the customer's bank account and processed through the payment provider.

4. The payment is confirmed

The business receives confirmation that the payment has been completed.

5. The funds are settled

The payment provider settles the funds with the business according to the agreed settlement schedule.

This gives businesses a way to accept payments directly from Canadian bank accounts without relying only on cards.

What does a payment processor do?

Payment processing involves more than moving money.

A processor can support several parts of the payment journey, including:

• Payment authorization: Helps verify whether a transaction can be completed.
• Security: Protects payment information during the transaction.
• Fraud prevention: Monitors transactions and applies risk controls.
• Settlement: Moves funds to the business based on the agreed schedule.
• Reconciliation: Helps businesses match payments with their records.
• Reporting: Provides transaction and settlement information.
• Payment methods: Gives businesses access to different ways for customers to pay.

The services available depend on the payment provider and the business's requirements.

Payment processors in Canada

Canadian businesses can choose from a range of payment providers.

Some focus on card payments, while others support pay-by-bank, digital payments, or a combination of payment methods.

Examples include:

• Paramount Commerce: Provides direct-from-bank payment solutions for Canadian businesses, including Interac e-Transfer® and Instant Bank Transfer.
• Moneris: Provides payment processing and commerce solutions for Canadian businesses.
• Nuvei: Provides global payment technology and supports businesses across multiple markets.
• Stripe: Provides payment processing and financial infrastructure for businesses operating in Canada and other markets.
• Adyen: Provides global payment and financial technology solutions for businesses.

The right payment provider depends on factors such as payment methods, markets, transaction volumes, integration requirements, risk controls, and settlement needs.

Pay by bank vs. card payments

Pay by bank allows customers to pay directly from their bank account.

Card payments use a card network and the customer's credit or debit card.

For Canadian businesses, offering both can give customers more choice.

Pay by bank can be particularly useful for businesses that want to offer familiar bank-based payment methods such as Interac e-Transfer®.

The best payment mix depends on the business, its customers, and the types of transactions it processes.

Why are payment processors important for Canadian businesses?

Customers expect payments to be fast, secure, and easy.

Businesses also need reliable ways to manage transactions, settlement, reporting, and risk.

A payment processor can help businesses:

• Offer familiar payment methods
• Accept payments securely
• Reduce manual payment processes
• Manage transaction data
• Support fraud and risk controls
• Reconcile payments
• Scale payment operations

For businesses serving Canadian customers, local payment options can also be an import

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