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How Payment Gateways and Credit Card Processing Is More Than It Seems

One of the most common scenarios today is the usage of a credit card. However, the whole process behind credit card processing is a bit intricate, and definitely more than meets the eye.

The first step is made in the store, when a customer makes a purchase. An Internet-connected terminal is used to begin the operation. It transfers the information to the acquiring bank, which then communicates with the credit company to make sure the number on the card is valid and that the amount can be validated.

Upon confirmation by the company, the card issuer will issue an authorization. It must send the information back, informing if the purchase is authorized or declined. This happens in a few moments. If it is declined, the customer must choose another method of payment. While it might inform that it was declined, the terminal is not able to detail specifically on why this happened.

In case it is declined, the customer should then call customer service just to make sure why exactly it happened. There are a couple of common scenarios, but the most important are those in which the value surpassed the customer's limit, or simply a payment was not made in a timely manner. Also, keep in mind that some cards can only be used a certain number of times per day, making it possible to also be declined if used too much in a period of 24 hours.

This whole process might happen in a matter of seconds, but the actual act of payment to the retailer does not occur at that moment. All purchases that are authorized remain on the merchant's terminal. These records need to be batched and sent to the bank for processing.

After receiving the authorizations from the retailer, the bank will communicate with the company. The company will pay the bank the amount necessary and address the issuer to retrieve the amount from the customer's account. Some companies are both the network and issuer, thus making this process much smoother.

This all applies to a retail store, however if it is an online store, the process is different. Due to the possibility of information theft while inputting and sending information through a website, an additional measure of security is needed. All the information, both incoming and outgoing needs to be encrypted and will go through an external payment gateway, normally owned by a third-party company. This ensures that the customers' information will be safely secluded behind the system.

In conclusion, all that remains is for the merchant to be paid. After the bank has processed all information, it directs it to the credit networks. They must then pay the bank, which will pay the merchant, but these payments only occur only on a monthly or weekly basis. For a retailer to be able to use a system like this in its retail outlet, there are fees that need to be paid. These can vary, as with every network the percentage taken from the merchant's proceedings is different. Credit card processing may look like it's a fast and non-bureaucratic system, but behind it lays a well-built machine.

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