Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

What function does a third-party processor serve in credit card transactions?

1. Manages customer accounts

2. Processes transactions for banks

3. Provides loans to customers

4. Issues credit cards

The correct answer is: Processes transactions for banks

A third-party processor plays a crucial role in the facilitation of credit card transactions, specifically in processing transactions for banks. This entity acts as an intermediary that handles the transaction data between the merchant and the bank, ensuring that payment information is securely transmitted and that the transaction is authorized. By processing transactions, the third-party processor takes on the task of verifying credit card details, checking for fraud, and managing the flow of funds between the credit card issuer (the bank) and the merchant. This streamlining of the transaction process helps improve efficiency and speed, reducing the burden on banks to handle every individual transaction directly. The other choices do not accurately describe the primary function of a third-party processor. Managing customer accounts pertains more to financial institutions or customer service teams rather than a processor's role. Providing loans to customers typically falls under the realm of banks or lending institutions, not processors. Issuing credit cards is the responsibility of financial institutions and credit card companies that offer physical or virtual cards to consumers.