Every business has a payment gateway or payment processing provider. To improve customer experience and business reputation, they ensure that transactions run smoothly. It is more than simply tapping your card at a POS machine. There are many steps involved in payment processing and they include:
- Customers
- Merchant/business
- A payment processor
- Payment gateway
- Bank/ credit or debit company
- Merchant account/business bank
What’s A Payment Processing Service?
A payment processing provider is needed to help businesses that offer payment options via debit or credit cards to customers. They work together with all parties to ensure that the payment process is efficient and seamless for merchants as well as customers. They are responsible for completing a variety of tasks, from authenticating to settling transactions. They ensure merchants get their money in their bank accounts from any transaction that doesn’t involve paper money. These transactions include payments such as credit cards and debit cards.
Payment processors serve as intermediaries between customers and merchants. They are an integral part of the global financial system.
How It Works?
Financial Processing Services include authorization, funding, and settlement of transactions. The customer pays for the item or service by using their card at the point-of-sale (POS). Although the transaction may take seconds, it is complex.
The merchant requests authorization from their payment processor. Once that is done, the processor will take the necessary steps:
- The card association is connected to the payment processor, which submits the transaction.
- Based on specific criteria, the issuing bank accepts or rejects a transaction.
- The issuing bank sends a response to the merchant bank, indicating whether it approves or rejects the transaction.
The next step is funding and settlement. This is where the transaction gets deposited into the merchant’s bank account. Merchants then send the authorization request to the payment processor. The processor then forwards the details to the card association. Because the card association is linked to the issuing bank, the banks receive details about the transactions and then proceed with the process.
- The cardholders pay a fee to the issuing bank for each transaction.
- The merchant bank receives the amount transferred by the issuing bank, less the interchange fee.
- The amount is transferred to the merchant’s bank.
How Do You Choose A Payment Processor?
Payment services are essential for businesses that accept debit or credit cards. They need money that is not traditionally delivered in paper currency. It is important to look beyond the pricing packages when choosing a payment processor.
These are some of the most important things to consider when choosing a payment processor:
- Customer service – Enhanced
- Fraud management solutions
- Tools that support business growth
- Transactions are flexible
Apart from the above, it is important to remember that not all payment service providers can process all types of transactions. While some might be skilled in online processing and accepting card-not-present (CNP) transactions, others may specialize in in-store payments.
Which Types Of Payments Are Processed?
You can accept many payment methods when you make an online payment. These are the most popular:
Credit/Debit Cards: This is the most popular card among consumers. The card details of the buyer are provided to the payment processor when they make a transaction.
E-Wallets: Another type of payment that can be processed is the e-wallet. This payment method is preferred by consumers who sign up with their bank accounts or debit/credit card.
Bank Transfers: This mode of payment is mainly used for B2-B transactions. The shopper has complete control of the transaction as they must authorize the transaction through their online banking.
Merchants and customers can use payment processing service providers to facilitate smooth transactions. They act as intermediaries between customers, merchants, and card associations, making them an integral part of the financial sector.
