Which entity processes card transactions for merchants?

• A. Bank
• B. Payment processor/Merchant Service Provider
• C. Card issuer
• D. Clearinghouse

Answer: (B)

Processing card transactions for merchants is handled by the payment processor, also known as a merchant service provider. They supply the technical bridge that takes a sale from the merchant’s point of sale or online checkout and routes it to the card networks, then back with an approval or decline. When a transaction is authorized, the processor communicates the decision to the merchant, and later batches the transactions for capture and settlement, essentially coordinating the flow of funds from the issuer to the merchant’s bank account. The issuer is the bank that issued the customer’s card and decides whether to approve the transaction; the clearinghouse (card networks) handles the back-and-forth clearing and final settlement between issuer and acquirer. In many setups, the acquiring bank funds the transaction, but the specific day-to-day processing—the routing, authorization, and settlement logistics—belongs to the payment processor/MSP.