In the case of an online business, merchants receive transactional data through a specific type of security technology, a payment gateway. This may involve additional steps like 3D secure check. The cardholder (customer) enters their credit card data on the merchant’s payment page. To understand how the process looks from the inside, we’ll break it down by the main participants at every stage of a cycle: And each of them charges its fee based on transaction parameters. Now, from the merchant’s standpoint, processing is a service of several entities. The whole cycle of these actions, validations, interchanges, and the actual money transfer is what we call payment processing. Secondly, we also need to notify every participant about the transaction. Easy as it is – just a money transfer between the two banks, right? However, as we deal with sensitive data (card ID, transaction amount), multiple companies are involved in validating the information. How payment processing worksĮvery type of sale entails moving money from the buyer’s bank account to the merchant’s bank account. Specifically, we’ll look at credit card processing and credit card networks from the perspective of a payment service provider for merchants. Here we’ll discuss how payment processing works and who takes care of transactions. Everything that happens in between is called payment processing. The merchant sees only two end-points: the cardholder sending the money, and the funds appearing in your merchant account. So, where’re your funds at?Įach transaction consists of multiple players including banks and credit card networks validating the data and passing answers to each other. And in most cases, it’s not you as a merchant moving the money between the bank accounts. If you want to get paid for your services, you must accept various payment methods, such as traditional credit cards, digital wallets, or even cryptocurrency. Ironically - accepting payments costs money. What is the benefit of credit card networks? Reading time: 8 minutes.Payment processing by credit card networks and their fees.Credit card networks and payment processors.
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