People all over the world have businesses. They are either the owners or the consumers. For almost all businesses they have to accept credit card or debit card payments and in order to do this, there have to be credit card processing companies.
This credit card processor acts as an intermediate between both the business and the companies of the credit or debit cards. The business can be both offline or online and to accept credit card payments there is a necessity for a payment processor.
A credit card transaction is not as easy as it seems. There is more to credit card payments than the simple swipe and dip. Payment processing is by which business people perform credit card and debit card transactions.
- The first step includes the point of purchase where the customer makes a purchase and gives the payment details which can be a debit card, credit card, cash, or even check.
- Then comes the payment gateway which is a tool useful for transmitting data from the payment processor of the customer bank to the merchant account.’
- The payment processor of the credit card processing company validates the security of the card and transfer the money from the issuing bank to the merchant account.
- The business owner must have a merchant account to accept credit cards, debts cards, or even digital payments.
- The payment gateway is different from the payment processor.
- A payment gateway will help in establishing a connection to encrypt the data of the credit card which will be processed by the payment processor.
- The payment processor transfers the money securely when the gateway moves the encrypted data.
- This gateway is helpful in varying whether the credit card is valid or not and in the same it makes sure not to leak any of the personal data to the outside world
- A payment processor is like a mediator between the merchants and the card holders’ bank.
- They seek approval and communicate between the issuing bank and the merchant account if the card details are valid.
- Many merchants will take fees for each card transaction which includes interchange rate or swipe fee and this fee will be charged from the credit card company.
- Payment processors are also called credit card processors as they handle credit card transactions.
A merchant is the business owner who has to accept the payment. A business account is different from a merchant account as a business account handles all the expenses like paying rent and all but the merchant account only deals with credit card processing.
The merchant account is the landing pad where all the payments will land irrespective of the issuing bank accounts. All the processed and accepted payments will fall after 3 days in the merchant account.
There are three basic steps in any payment involving credit card processing companies named authorization of the payment, Authentication of the particular payment, and lastly processing or clearing of the said credit card or debit card transaction. In a credit card process, customers, merchants, the issuer’s bank, payment processor, credit card network, card issuing bank, and the merchant account are involved along with the payment gateway.