What role does the front-end processor play in transaction processing?

The front-end processor serves a crucial role in transaction processing, primarily focusing on the management of data between merchants and financial institutions. It aggregates merchant batches, which involves collecting and compiling multiple individual transactions initiated by customers for a particular business. This process ensures that the data from these transactions is organized and matches with the corresponding financial information, thereby facilitating accurate processing and settlement.

This function is essential for the smooth operation of payment processing systems as it enables merchants to efficiently handle and reconcile their sales transactions with their respective payment networks. The aggregation of merchant batches ensures that the aggregated data aligns properly with back-end processing, where transactions are ultimately settled and funds are transferred.

The other choices do not accurately reflect the specific functions of a front-end processor. Handling customer service issues pertains more to customer support roles, issuing cards is a function typically performed by the financial institution or card issuer, and directly approving transactions is primarily done by the payment networks and banks involved in the transaction process.