Credit Card Processing: How the System Works


Creating a merchant account for your business is the wisest financial decision you will make for the growth, expansion and success of your business. Once you have created a merchant account, you can accept credit and debit card payments from your customers for your products and / or services. You can also arrange to accept online and mobile banking payments for your products and / or services.

A merchant account opens up new opportunities for your business. Therefore, give your company many more opportunities to prosper. But have you already understood the operation of the credit card processing system? Have you tried to perceive the complexity of the actors involved in the process and the subtleties of the system?

Although it is not absolutely essential for you to know the inside and outside of the card processing system, your merchant service provider will do what you need. it is good that you become familiar with the system in general.

Participants involved in a card transaction

A typical credit or debit card transaction involves the following players:

• The consumer

• Merchant

• the payment gateway

• the issuer of the customer's credit card

• credit card swap

• the processor of the acquiring bank

• Merchant acquisition bank

The road that takes the money from the customer to the merchant

Let's take an example to understand the operation of the card processing system.

Suppose a customer enters a clothing store and finds a bag that catches her eye. She immediately goes to the payment desk and makes a payment of $ 100 for her purchase with her cards.

The merchant's cashier accepts the cards and uses a card machine to trigger the process.

• The $ 100 amount makes its first stop at the payment gateway where payment is first authorized with a minor deduction of the amount.

• Now, $ 99 goes to the appropriate processor and after a minor deduction is submitted to the card swap, it rises to $ 98.5.

• Once the transaction is clear at the time of the exchange, it is transferred to the issuing bank with an additional deduction. The issuing bank verifies the availability of funds on the customer's credit / debit card.

If the transaction is declined, it returns to the customer from here.

• If the transaction is approved, $ 98 reaches the processor of the absorbing bank, one step closer to the merchant's account.

• Once authorized, $ 97.5 is deposited into the merchant account, which is now available to the merchant.

(The figures and fees related to card processing are based on the number of players, the type of merchant, the type of card and the risk factors)

At the present time, a large number of payments are made electronically, particularly with the widespread use of credit and debit cards and the transfer of funds online. Although the processing of a card usually requires seven participants, the complete transaction requires a maximum of five seconds to be approved.

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