Merchant processing is the settlement of electronic payment transactions for merchants. Merchant processing activities involve gathering sales information from the merchant, obtaining authorization for the transaction, collecting funds from the card-issuing bank, and reimbursing the merchant. The processing of sales transactions for merchants by banks does not directly affect the bank's balance sheet except through settlement accounts and reserve balances. However, merchant processing can create significant off-balance-sheet contingent liabilities that may result in losses to the bank
Merchant processing is the settlement of electronic payment transactions for merchants. Merchant processing activities involve gathering sales information from the merchant, obtaining authorization for the transaction, collecting funds from the card-issuing bank, and reimbursing the merchant. The processing of sales transactions for merchants by banks does not directly affect the bank's balance sheet except through settlement accounts and reserve balances. However, merchant processing can create significant off-balance-sheet contingent liabilities that may result in losses to the bank
