A payment processor is a service that handles transactions between buyers and sellers. When you make a purchase online or in a store, the payment processor securely transmits your payment information to the bank or financial institution to authorize the transaction. This ensures that the funds are available and that the payment can be completed. Payment processors play a crucial role in e-commerce and retail by enabling various payment methods, such as credit cards, debit cards, and digital wallets like PayPal or Apple Pay. They also help protect sensitive information through encryption, making transactions safer for both consumers and businesses.