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.

Most merchant processing transactions originate from retail credit card purchases; however debit card purchases, smart card purchases, and electronic benefits transfer (EBT) transactions are increasing sources of processing volume. In recent years, bankcard associations have aggressively promoted the move to electronic transactions through their interchange rate structure. Because of this, and advances in technology, the vast majority of credit card sales transactions are now electronic.