Payment Processing

The term ‘payment processing’ may sound complex and intimidating. On the surface, it simply describes customers using credit cards or debit cards to pay for something. But the process itself – even though it only takes a few seconds – is intricate and complicated. Let’s start by looking at some of the terms involved.

• Issuing bank – your customer’s bank
• Acquiring bank – your bank (i.e. you, the seller)
• Network – the company that supports the card e.g. Visa, Amex, or MasterCard
• Payment processor – the company that facilitates the whole process

Ordinarily, the payment processor, also called the merchant processor, allows you to receive money from your customers by facilitating interactions between the issuing bank, network, and acquiring bank. A good merchant processor will allow your customers to pay instantly, and will pass the money into your account within 72 hours.

Tools of the ecosystem

For successful payment to take place, your customer needs a valid credit card or debit card, and you need the ability to accept credit cards. You can do this using a cash register with a card reader, where you customers can swipe. You could also use a portable card reader, a mobile app, or a virtual terminal on your website.

Additionally, you need a payment processor to bring everything together. Some payment processors offer all these services as single package, with add-ons like shopping carts, security certificates, and programming being offered for free.

How the process works

When a customer swipes their card or enters their card details on your website, the data is received by the merchant processor. The processor identifies the type of card, for example whether it’s a Visa or MasterCard (the card network). The processor sends a request to the network. The network will confirm that the card is valid, it has money in it, it hasn’t reached its daily or monthly limit, and that your type of transaction is allowed.

It sends this message to the customer’s bank (the issuing bank), which will release the money to the payment processor. This should take a few seconds. Some payment processors offer instant verification so your customer won’t even notice that verification is even happening. Once the network has verified the customer, and the issuing bank has confirmed the availability of the money, then the network will move the funds through the payment processor.

The processor then moves these funds to your bank (the acquiring bank), which will verify where the money came from and check its systems to see that the money was actually received by the bank. It will then be deposited in your account, typically within one to three days.

For more information on payment ecosystems, or to sign up for a merchant account, please call (888) 924-2743 or go to Charge.com.