There are more than 188 billion purchase transactions that were made in the year 2021, as per the reports and in those transactions that was made globally in that Visa Payment cards were used. In addition, this did not even include the different credit card companies. Whether you have a traditional land based shop or an online store, it is very important for people to understand how the credit card processing works. Moreover, this is mostly true as debit and credit cards are one of the most common forms of payments that is being used today by the customers. So, continue reading to know how the credit card processing works and why it is pivotal for your business.
What Is a Credit Card Processor?
A credit card processor means a multi-step process or types of process, which is needed to successfully complete the payment transaction. In todays tech-savvy world the transactions can take place anywhere. People can make transactions over the phone or over the mail or online or as the case may be. Several entities are involved in the credit card processing. This comprises of the following like merchant, consumer, payment gateway, credit card processor, issuing bank, card network, acquiring bank and so on.
Who are the Key Entities in Credit Card Processing –
- Consumer – It is the person who makes the purchase or does the purchase
- Merchant – The organization or person or the shop selling the products and the services to the consumer.
- Payment Gateway – A technology is used to connect the merchant to the payment processor. In this process, the payment information is obtained from the customer sending the details to the merchant’s bank and then sending back approved or not approved message to the merchant.
- Credit Card Processor – This is an organization that assists the credit card network, merchant and cardholders bank to communicate or connect through the help of the technology and it is important that the credit card processor and merchants should comply with the PCI DSS standards i.e. Payment Card Industry Data Security Standard.
- Card Network – This customer’s credit card brand like that of Discover, Mastercard, Visa and others. The networks set assessment and interchange fees for the same.
- Issuing Bank – It is also known as cardholders or consumers bank. This refers to the bank providing customers with credit card. The issuing bank will identify and find out whether the consumers bank account has funds to complete the transaction. If the account meets the requirements then the issuing bank will release the money for payment to the merchant.
- Acquiring Bank – This is merchants bank and it is used for storing the business money collected and receive money from transactions. The bank also provides card readers and equipment to the merchants, permitting the merchants to accept card payments. One of the things you will know is the acquiring banks also work as a credit card processor.
Lastly, three important steps are involved in the processing of the credit card i.e. authorization, authentication and settlement.
