Choosing a payment processor is a fundamental decision for any business—in France or elsewhere. Payment processors play a key role in successful transactions. To ensure the security of all parties involved and select the right service provider for your business, it’s important to understand how payments are processed.

In this article, we describe what payment processors do and the features you need to prioritize to make the best choice.

What’s in this article?

• What is a payment processor?
  
• How do payment processors work?
  
• The difference between a payment processor and payment gateway
  
• Why are payment processors important?
  
• How to choose a payment processor
  

What is a payment processor?

Payment processors handle financial transactions between banks and businesses. They communicate with payment card networks and customers’ banks to verify funds are available and approve or decline transactions. Payment processors are key in processing payments in France and abroad, regardless of the point-of-sale (POS) type (e.g., online, in-person, etc.).

Businesses typically rely on one or more third-party payment processors to ensure smooth transactions. The processor handles the actual transfer of funds between the customer’s bank and the business’s bank.

In France, the Prudential Supervision and Resolution Authority (ACPR) regulates this activity. The ACPR is overseen by the Banque de France and ensures businesses comply with French and European laws. Therefore, it is important for businesses to use secure payment systems.

How do payment processors work?

Payment processors gather encrypted payment information from the payment gateway and contact the relevant debit or credit card network. They also contact the customer’s issuing bank to verify that the card is valid and the funds are available. The processor then obtains a card payment authorization or denial and sends the response back to the gateway.

If the payment is authorized, the business receives the funds through the processor. Payment processor providers charge businesses a per-transaction fee or a percentage of the total transaction value.

Transaction security and compliance with regulations are paramount for payment gateways and processors. In France, this includes the General Data Protection Regulation (GDPR) and the Payment Card Industry Data Security Standard (PCI DSS) pertaining to card data protection.

The difference between a payment processor and payment gateway

Businesses need to have a clear understanding of the difference between a payment processor and payment gateway. Both are key components of any payment system. The gateway—also known as the “portal”—is the customer-facing interface. It gathers and encrypts customer data before securely sending it to the processor.

The payment processor plays a more technical role, handling the payment behind the scenes. It receives the encrypted information from the gateway and relays it to the relevant parties. Once the issuing bank and card network have verified and approved the transaction, the processor receives the funds on the business’s behalf.

Why are payment processors important?

Payment processors play a fundamental part in ecommerce and retail, including verifying customers’ payment details. Apart from authorizing transactions, payment processors support businesses in various ways:

• Payment method diversification: Offering a choice between various payment methods (e.g., bank cards, digital wallets, etc.) allows businesses to reach a wider customer base and makes the purchasing process easier.

• Security: Payment processors use advanced security protocols—such as data encryption and tokenization—to keep sensitive information safe from fraud.

• Easy integration: Most payment processors offer simple solutions for integration into ecommerce websites, POS systems, and sales platforms.

• Analysis and reporting: Analysis and reporting tools help businesses monitor sales, identify trends, and gain insight into customer behavior.

• Regulatory compliance: Payment processors are typically responsible for compliance with industry standards—such as PCI DSS—and with current financial regulations. This lightens the company’s administrative workload and helps prevent legal issues.

How to choose a payment processor

Similar to the choice of a bank in France, your choice of a payment processor will depend on your business’s requirements in terms of costs, accepted payment methods, technical integration, and geographical reach. Both your current needs and your growth perspectives should inform your decision.

When considering costs, it’s important to know that you’ll typically need to pay a flat fee along with per-transaction fees. Extra charges can apply (e.g., if you require a specific payment terminal).

Businesses should always prioritize security, both for themselves and their customers. That’s why managing and reducing risks associated with your payment system is important. Select a trustworthy processor that complies with French and European regulations. Make sure to choose a flexible solution that offers the features needed to support your international growth.

Stripe Payments allows you to simplify and improve transactions thanks to a flexible, scalable payment system. As both a payment processor and payment gateway, Stripe offers French businesses all the tools they need to handle secure payments globally.