Credit Card Processing Industry: The Card Processing Basics
This is the basics of credit card processing and how it works. Whenever a payment is made to a merchant from a customer the information from the card is recorded through manual entry, point of sale or the virtual terminal. After recording the information the verification follows so that merchant does receive the payment from the customer’s purchase of goods and services.
The parties that involves in that transactions are as follows.
- Merchant, the business owner that receives and accepts credit card payment transactions from the cardholders purchases of goods and services.
- Cardholder, refers to the owner of the card that initiates the purchases.
- Card Associations, they are the network that includes Visa and Master Card. They act as the gateway or the processing companies between issuer and cardholder that authorize as well as funding all transactions.
- Acquirer, organizations and financial institutions that offer services for credit card processing to merchants.
The interchange simply means as the flow of money and information between these parties. The following parties include the merchants, cardholders, card associations and the acquirer. The interchange consists of steps to be followed as a requirement in every payment transaction. These are the steps.
- Authorization. It occurs as the cardholder gives payment for his purchase to the merchant. Later, the merchant submits the information of the transaction to the acquirer. The acquirer in return would verify the issuer and in an instant the transaction amount and card number are validated. Then, the acquirer processes the cardholder transactions.
- Batching. It refers to the stored authorized payment transactions which are kept in batch. At the end of the day, the merchant themselves will send the information to the acquirer to receive payments.
- Clearing and settlement. The acquirer sends the transaction information through batch for the card associations. It debits the issuer for payment and giving credits to the acquirer. In addition, the issuer pays the transactions to the acquirer.
- Funding. If the acquirer has been paid the result will be merchants will receive payment as well. Usually, merchants will receive equal amount of the transactions minus discount rate. This is the fee which merchants are paying the acquirer for their service in every payment transactions.
Whatever industry or business size you are into there are advantages and disadvantages you are benefited from the services offered by credit card processing companies. Also, you offer bigger opportunities for your customers a lasting impression and secure transaction. You can have the capability of accepting several credit card payment transactions which will definitely make your business grow and prosper.