Businesses need to bank on credit card processing companies to manage the acceptance of debit and credit cards on the phone, online or personally. If a business relies on a third party for the above, there is a lot of stress and tensions involved. This is where a good credit card processing company steps in to help them.
The process of card payments
Here, the customer will present their card to the store for payment. The card will have all the information about the customer. The presentation of this card takes form in the following ways-
- It can take place inside the store with a magnetic strip card that is swiped in the machine.
- It can take place in the store with an EMV Chip card
- It can take place in the store with an NFC enabled card
- From a website using a payment gateway
- From a mobile point of sale
- From a virtual terminal
The information of the payment is sent to the processor who communicates with the bank of the customer via the appropriate card networks like Mastercard or Visa.
The bank of the customer, either approves or declines the transaction that is made. This approval is based on detailed verification that includes the validity of the card number, whether funds available are sufficient and other factors. This approval is sent to the payment processor and back to the credit card or terminal reader.
The next step of the business owner is to send batches of transactions that have been approved for settlement. This is done at the end of every business day. Here, the accounts of the customers will be charged, and the amounts of the transactions are deposited into the merchant bank after the processing fees have been deducted.
How Does Credit Card Processing Work?
Before you search for a credit card processing service; you must be aware of how the whole process works. The following are the steps via which credit card processing works-
There are three steps for credit card processing, and they are authorization, then settlement, and then funding.
In the first step of authorization, the holder of the debit or credit card presents payment details to the merchant in exchange of services or goods. In the past, the above process was very simple. With the advent and the evolution of e-commerce, one can find that the alternate payment options have actually increased the type and number of payment methods in the market today.
The merchant sends out a request for authorization of the payment to the payment processor. This request either originates from the point of sale (POS) system or a credit card terminal in a physical store or an e-commerce site payment getaway.
The processor of the payment submits the transaction to the card association that connects it to the bank that has issued the card. The bank later will either approve or decline the transaction as per the present status of the account of the cardholder. It checks the available funds available on the debit and the credit cards of the account holder. The issuing bank subsequently back to the credit card association, merchant bank and lastly to the merchant.
The above is a synopsis of a credit card authorization process in brief. The next steps that are involved in credit card processing are settlement and funding.
The evolution of card transactions today
Merchants send a set of authorized transactions to the processor of payment. This process is an overnight automated process. The processor of the payment pass details to the card association that matches the appropriate debits with the issuing bank within the network. The issuing bank charges the account of the cardholder for the sum of the transaction. The issuing bank will then transfer the funds for the transaction to the merchant bank sans the interchange fee. The merchant bank will deposit these funds in the merchant account.
Faster service, increased customer satisfaction
The process of authorization takes place in just a few seconds. The settlement and the funding that in the past used to take days now are done overnight. This means one can get their money fast. In this way, as a business owner, you can get paid for the goods and services you offer, pay others, and expand your business at the same time.
Benefits of using a credit card processor for the small business owner
When you take your business from a cash-only operated platform to a credit/debit card accepting store, you will find a significant increase in the customer base for your goods and services. The more customers you attract, the more additional sales you will make.
If you are the owner of small business and looking for a credit card processing company for your needs, make sure that you read its online reviews and ratings carefully. In this way, you are able to choose the right credit card processing company for your needs.
You are now aware of how credit card processing takes place. Ensure that you always make an informed choice when it comes to choosing the right credit card processing company for your needs. There are many credit card processing companies in the market, and so the task of choosing the right one is challenging. Take time and read online ratings, reviews, and customer testimonials carefully so that you can get an honest insight into the pros and cons of the company with success.
Experts in the field conclude by saying that payment options are evolving very fast precisely like your business. It is crucial for you to ensure that you keep up with these technological advances. You will find that major payment processors keep pace with the technological changes in the market so that they effectively are able to expand their present business operations. Credit card processing companies understand the unique needs of their businesses, and this is why businesses from start-up companies to industry leaders across the globe bank on them for seamless credit and debit card transactions with success.
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