If you are thinking about introducing first data credit card processing devices into your store, you need to know how they work. For your customers, they just need to swipe their cards and the transaction is complete within seconds.
But did you ever wonder what really goes on behind the scenes?
It’s not necessary to have extensive knowledge about the inner workings of a credit card processing machine. But it’s always a good idea to have an overall understanding of how credit card processing works for business. This is because different fees are incurred during the different stages of first data e-commerce solutions.
Swiping a credit or debit card in a Point of Sale (POS) system is just the first step. It is followed by a very complex process that involves different parties.
Check out this guide to understanding the process and getting the best out of your card processing solution.
Credit Card Processing System — Understanding the Key Players
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When your customers swipe their cards on your credit card processing machine, the following parties are involved in processing the transaction.
● Card Owner: This is the owner of the credit/debit card and your buyer/customer. If they swipe a debit card, it will get linked to the user’s savings or chequing account. In case of a credit card swipe, the amount will be deducted from their available credit limit.
● Merchant: The seller of goods or services who accept payments using credit or debit cards is the merchant. The POS system is linked to the merchant’s account.
● Issuer Bank: This is the customer’s bank. It has issued the debit or credit card involved in a transaction. This bank will have the final authority to approve or reject the transaction. This will be based on the balance available in the customer’s account or their credit card limit.
● Merchant’s Bank: In your case, it will be the bank that manages your business account. It receives the authorization request for receiving the payment after a transaction. Then it will forward the same to the issuing bank.
● Processor/Service Provider: The processor is responsible for collecting data and routing the payment information to the card network.
● Card Network: Your customer’s credit card may belong to any of the four major card networks: MasterCard, Visa, Discover, or American Express. The card network will send the payment authorization request to the issuer bank from the merchant’s bank.
How Does Credit Card Processing Happen?
Once the above steps are complete, the next part involves clearing and settlement. This occurs when the authorization process takes place. For settlement, you will need to send a ‘batch’ of authorizations to your payment processor.
Then, the processor will reconcile the authorizations and submit the batch over the credit/debit card association networks. The processor will also deposit the money from those sales into your business’s bank account and deduct a certain processing fee. At this point, your business’s role will be complete.
Why Do Payments Get Declined?
There may be various reasons why your customers’ payment is declined. In such cases, the POS system would show you an error code which will help you determine the reason for payment rejection. In case the machine does not show any payment processing code, you need to call the customer care line of the merchant bank to find out the reason behind the decline.
Some reasons for declined payment include:
● Inadequate funds in the account
● Insufficient credit limit on a credit card
● Incorrect card number or if the card is expired (in case of an online payment)
● Technical issues with your POS system
● When the transaction doesn’t fall under the bank’s purview
● When the issuer bank suspects any kind of fraudulent activity
Now that you are aware of the payment processing path through your customer’s credit or debit card, it’s time to get in touch with a payment solution provider. The right payment solution partner will help you make your payments seamless, safe, and fast.