What is a Third Party Payment Processor?
Reviewed October 25, 2026.
A third-party payment processor is an outside company that helps a business accept customer payments. The label covers different arrangements: ask whether you receive an individual merchant account and how underwriting works.
On an ecommerce platform, the meaning can be more specific. Shopify uses the term for providers other than Shopify Payments. That platform-specific definition should not be treated as a universal account model.
Compare the actual offer: total cost, checkout integration, funding terms and who handles payment problems.
What are Third-Party Processors?
When comparing providers, separate three decisions:
- Account model: will your business receive an individual merchant account, and who handles underwriting?
- Integration: does the provider work with your platform, region and checkout setup?
- Operating terms: who handles support, disputes, reserves and funding delays?
A platform's preferred provider is one option to compare, not proof that every outside provider works the same way. Shopify's documentation specifically calls providers other than Shopify Payments third-party providers and distinguishes direct checkout integrations from external checkout pages.
Confirm compatibility and contract terms for the offer you are buying. Do not infer cost, approval requirements or checkout behavior from the label alone.
For a closer look at checkout connectivity, read our payment gateway guide. For Shopify-specific setup and costs, see our Shopify payment processor guide.
Pros & Cons of Third-Party Processors
Now that we’ve cleared the air about exactly what third-party processors are, the question still remains whether your business should look into third-party processing options. Here are some of the pros and cons to consider before you decide to ditch your platform’s preferred provider:
Pros
1. Control
Choosing a provider lets you compare services and terms. It does not guarantee freedom from holds: Stripe describes reserves as temporary holds. Review the account agreement and funding conditions.
2. Cost
Neither built-in nor outside processing is automatically cheaper. Compare processing, gateway, platform and optional service fees using the same transaction mix. Shopify documents additional third-party transaction fees; check the rules for your setup.
3. Speed
The label does not guarantee faster deposits. Stripe distinguishes settlement timing from the payout schedule, and the receiving bank can add time. Get the proposed account's funding schedule in writing.
Cons
Time and Effort
Finding a processor, completing its application and integrating a gateway takes work. Assign an owner and check compatibility before choosing a provider.
Usability
An outside provider does not automatically require a redirect. Shopify distinguishes direct providers from external providers: the former complete payment in the store; the latter use an outside checkout page. Test the actual checkout on desktop and mobile.
Cost
A separate gateway or an additional platform transaction fee can change the comparison. Include every applicable fee and implementation cost; do not decide from a headline processing rate alone.
Choose the arrangement that fits your platform, payment needs and operating capacity. Swipesum's payments team can help compare the options, including merchant accounts and payment processing. Book a consultation and bring a recent statement.
