How the Credit Card Processing Environment Works

The credit card processing environment exists as soon as a customer makes a payment by credit card for goods or services purchased from a merchant. At that point, a host of industry role players become involved in different stages of the process. The credit card processing environment is the automation of electronic card transactions made by the customer to the merchant through the use of sophisticated technology to process, verify, and either accept or decline payment transactions.

There are many participants involved in each card payment transaction aside from just the customer and the merchant. Behind the scenes, other participants include the issuing bank, the merchant bank, the credit card brand, a payment gateway, and the payment processor. Each participant has a different role to play that can range from issuing cards to encryption, data transmission, maintaining security standards, or funds and fee transfer.

Apart from the participants with direct involvement in each card payment transaction, the processing environment also involves entities that are responsible for determining the rules of card use, determining legislation, security standards, interchange rates, compliance, and global standardization. These include an ongoing collaboration between governments, business, and the public to ensure a safe and secure payment environment for all involved.

How credit card payments work

As soon as a credit card payment is processed, the data is instantly relayed by the processor to be approved or declined. The transmission of the data is a complex process that encrypts sensitive information to ensure a high level of security. The data is routed through the banking network to the issuing bank to be approved or declined, and the result is then rerouted along the same channels back to the merchant.

If the payment transaction is approved, the acquiring bank performs an interchange with the issuing bank, and the issuing bank transfers the purchase amount to the acquiring bank and the payment is deposited into the merchant’s account.

How are card payment accepted?

Depending on the practical requirements of a business, there are different means of processing credit card payments. All businesses, however, use the credit card processing environment. Card payments can be processed by:

Payment terminals:
The most familiar way of processing credit card payments face-to-face, Payment terminals allow merchants to swipe, dip, or key-enter customer card details.

Mobile payments:
Mobile devices are equipped with technology that allows merchants to accept payment by swiping or dipping customer cards, or key-enter transactions using an app or browser.

Virtual terminals:
Virtual terminals are web-based payment solutions that allow merchants to process payments online for both card-present and card-not-present transactions from any Internet-connected device with a standard web browser.

Online payments:
Merchants can process payments via their website shopping cart or hosted payments page using a payment gateway.

 For more information about how the credit card processing environment works, information on pricing, or to sign up for a merchant account, please call (888) 924-2743 or go to

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