How Does Credit Card Processing Work?- The Flow Of Payment!
Credit card is a payment service which provides monetary services to the consumer. It runs on a promise that the customer will return the money after a certain period. Then, the credit card company issues money to the customer as a debt. The customer can use the money for everyday activities.
But how does the credit card processing company process the payments?
The bank usually follows a secure means of system & runs algorithms to ensure safety. It is a long process, usually involving many parties. We think that only the customer & the company are the participants in the whole transaction. But that is not true.
The Credit Card Processing Works In The Following Manner
First of all, there are several parties that are present in the transaction. When the request for using a credit card is initiated, the following parties come into action
- Card Company- The credit card company is the first to get involved in the transaction.
- The Network of the Card Company- The credit card company follows a network protocol. The network is responsible for communication between all the participants.
- Issuing Banks- The credit card company collaborates with several banks to provide the funds.
- Acquired Banks- They are the banks who team with the merchant service providers to authorize the transaction.
- Payment Processors- These platforms are chosen by the acquiring bank. Their basic job is to acts as an intermediate between the ISOs and banks.
- Payment Gateway- These are for the sole purpose of completing the transaction. It is responsible for completing the transaction whenever the customer uses the card.
The Process Of Credit Card Processing Is:
- The customer takes the credit card to use it, initiating the process. The customer has to swipe the card in the payment machine.
- Upon swiping, a notice is sent to the ISO. The ISO acts on the information & proceeds it to the payment processor.
- The network company then gets notified about the transaction. It verifies the transaction & forwards it to the credit card’s network.
- The credit card company checks the individual account of the cardholder. This is done to make sure that the holder has sufficient funds for the transaction.
- In case the payment gets approved, the acquiring bank notifies the information. It processes the information back to the ISO.
- The ISO sends out the confirmation code to the payment processor.
- From there, the card network reduces the amount from the holder’s account. The amount is then transferred to the retailer’s account.
- In the end, the cardholder gets a notice acknowledging the transaction.
The credit card processing is a lengthy process acquiring many participants. But in reality, the transaction takes less than a minute to complete. With the culmination of the efforts of every participant, the payment gets processed so easily.