Payment processing1/13/2023 ![]() The customer sees a confirmation message on the checkout page or receives a hard copy receipt in a brick-and-mortar business.Once the transaction clears, these funds will be withdrawn and deposited in the seller’s account. The issuing bank puts a temporary hold on the customer’s account in the amount of the purchase.The credit card association passes on the authorization to the acquiring bank.The issuing bank gives the credit card association its approval.Once the issuing bank is satisfied that the card details are verified, it authenticates the purchase so the payment can be released to the acquiring bank. Although this sounds like a lot of steps, it generally only takes a few moments to complete. The issuing bank authorizes the transaction once it verifies the card number, expiration date, security code, billing address and total payment amount.ĭuring this process, it is the payment processor that handles the communication, asking the banks and card associations for authorization.The credit card association approves the payment request and asks the issuing bank (the customer’s bank) to authorize the transaction.The acquiring bank sends the card details to the credit card association (e.g. ![]() The card details are encrypted and sent to the acquiring bank.(the seller’s bank).The customer enters their card information on a website checkout page or inserts their card into a POS terminal at a brick-and-mortar business.This step ensures that the customer’s card is valid and legitimate. Let’s take a closer look at each one.įor a credit or debit card transaction to go through successfully, the card details must be verified and authorized. Payment processing happens in 3 steps: authorization, authentication, and settlement. When someone pays you with a credit card, the processor verifies the authenticity of the card and handles all communication between any involved banks and credit card companies. Cybercriminals are lurking everywhere, looking for opportunities to turn a profit by taking advantage of unsuspecting merchants.Ī payment processor can take care of all of this for you. There’s always the possibility that a card is stolen or counterfeit. You’ll need the infrastructure to allow smooth and secure transactions.Īccepting online payments can be risky. If you want to sell on your own website, whether you’re selling goods, services, or subscriptions, you’ll need a way to accept credit cards and other payment methods. These transactions can be via credit card, debit card, or any other digital payment method. Payment processing is a general term used to describe the sequence of processes that take place behind the scenes of electronic transactions. What Is Payment Processing and Why Do You Need It? I’ll also tell you about the best ways to accept payments on your website. I’m going to explain exactly what happens behind the scenes when a customer makes a purchase, to give you a good understanding of the full picture. You’re responsible for your customers’ private financial information as soon as they enter their payment details on your site, so you want to be as informed as possible about the process in case any issues ever come up. You want to be able to receive payments smoothly, but it’s not just about that. If you own a business, it’s important for you to understand the basics of payment processing.
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