How Does Payment Transaction Processing Work

1. How Does Payment Transaction Processing Work? As business owners, receiving the payments made by customers by swiping their credit and debit cards makes us happy. But have you ever wondered about credit card processing? Do you know what goes on behind the scene? Despite the fact that the entire process takes a matter of seconds to complete, online credit card processing is an intricate process. In this article, we are going to try to help you understand how payment transaction processing actually works. To begin with, let us start with the several parties involved in credit card processing. The cardholder is the person who owns the credit card used to make the payment. The merchant is the person who accepts the credit card and receives the payment from the customer. A merchant bank is an institution that has an agreement with the merchant to accept the deposits of card transactions. Credit card networks facilitate the transaction between merchant and credit card issuer. A credit card issuer is a bank that issues credit cards for the customer. A payment processor is an intermediary that handles transactions for the merchant bank. Here is how online credit card processing actually works. The customer purchases the goods and pays with their credit card. The merchant’s POS system securely sends the customer’s information to the merchant’s payment processor. The processor sends the information to the credit card network. The credit card network sends the information to the credit card issuer for authentication. After the authentication is complete, the credit card issuer will either approve or decline the transaction. If the transaction is approved, the issuing bank routes the payment to the merchant bank. And once the amount is deposited into the merchant’s account, the transaction is complete. The next time it takes mere seconds to complete credit card processing, you’ll know what goes on behind the scenes.