Credit Card Payment Processing 101: Everything Merchants Need To Know

1. Credit Card Payment Processing 101: Everything Merchants Need To Know We are officially in the digital age where a majority of businesses accept credit card payments. If you are a merchant, simply accepting credit cards isn’t enough. It is also important to understand how a credit card processor works. Before understanding how an online credit card processor works, let us first know who is involved in credit card processing. The issuing bank is the bank that provides the customer with a credit card. Credit card brands like Visa, Mastercard, etc determine the rules for card use. Payment processors shuttle the information between card banks and banks. A payment gateway connects payment technology and processing networks. The sponsor bank is responsible for getting the funds to the merchants. Let us now see how a credit card processor work When the merchant swipes a customer’s credit card, an authorization request is sent to the processing company. The information is then sent to the issuing bank via the card network. The request is either approved or denied by the bank. Once approved, the information is sent to the payment gateway. The data is then transferred from the issuing bank to the sponsor bank. Then the sponsor bank performs what is known as an interchange for each sale with the issuing bank. The issuing bank then transfers the amount to the sponsor bank, which is then deposited to the merchant's registered account. This entire process may seem like a long and tedious one, but it only takes a minute or two to be executed. Digital payments are the new normal. It is important to adapt your business to the latest technology. If you haven’t yet switched to digital, now is the time. The transition will be easier now that you also know how an online credit card processor works.