|June 28th, 2022|
Payment processing service providers indeed work to fuel every business, whether they are online businesses or offline businesses.
They ensure that transactions are carried out to enhance customer experience and improve business reputation. On the other side, the entire credit or debit card transaction process appears simple and generally takes a few seconds.
We can say that it is more than just tapping the card on a POS machine. Payment processing services comprise different steps and include various parties, including customers, merchants, payment gateway, credit or debit card companies, and merchant account.
What is a payment processing service?
Businesses usually facilitate payment options such as credit or debit cards to their customers who need a reliable payment processing service provider to assist them in crediting the money directly into their bank accounts.
They help form a collaboration between all parties, which works to make the payment processing services more efficient and seamless for the merchants and customers.
Payment processing services necessarily work for authenticating a transaction. They assure merchants who receive their money directly into their bank account from all transactions that don’t involve paper money.
These transactions usually include payment methods including credit cards, debit cards, and e-wallets.
What are payment processing companies?
Payment processors are companies that function as a mediator between merchants, customers, and financial institutions that process transactions.
They work as an essential part of the global financial chain. They work as entities that synchronize non-cash transactions by validating all information and distributing funds to the merchant once the sale is completed.
The network payment processors allow them to harbor the proper data flow between all parties. As a result, the payment processing companies assure merchants and issuing banks to receive their funds.
Do you have any idea about how payment processing companies work?
In case, if you really don’t know, then we are here to help you out know more about processing companies. Before going in-depth, it is essential for you to know that any payment processing company facilitates services like authorization, settling of transactions, and funding.
Perhaps, this is the reason that whenever a customer purchases a good or service, the payment is then made with the card at the point of sale (POS).
It is because the actual process behind the transaction remains intricate. Then, the merchant further sends a request to their payment processor for the authorization of the transaction, and then the payment processor usually carries out essential steps-
The payment processor deposits the transaction to the card transaction, which remains connected to the issuing bank. The issuing bank accepts or rejects the transaction based on specific criteria. The issuing bank then sends either an approval or rejection status back to the merchant bank and the merchant.
After the authorization process gets completed, there comes the process of settling and funding.
It works as to where the transaction gets deposited into the merchant’s account. Then, merchants should send the authorization request to the payment processor, which further sends the details to the card association.
The credit card companies association is usually made with the issuing bank. Therefore the issuing banks receive the details of transactions and also carry out the process which includes-
The issuing bank charges a sum from the cardholders for the transaction. The issuing bank also transfers the relevant amount to the merchant account by subtracting the interchange fee. Furthermore, the merchant bank transfers the amount to the merchant’s account.
How to choose a payment processor?
It is seen that businesses usually accept credit or debit cards, and payment services remain an integral part, this is because of the simple reason that they need to receive money that may not come directly to them in the form of paper currency. So, while choosing a payment processor, it is highly important to consider certain things that are essential for pricing packages.
When deciding on a payment processor, some essential things include enhanced customer service, fraud risk management solutions, tools to assist business growth, and transaction flexibility.
Apart from the points mentioned above, another important thing is to consider that not all payment service providers process every type of transaction.
Some people remain experts at online processing, accepting card-not-present (CNP) transactions, and some gain specialization in in-store payments. The CNP payment processor works as an online payment gateway, which remains equivalent to the POS.
Read To Know What Types of Payment Get Processed?
With the help of the online payment process, one has the option to accept a wide range of payment methods. The most frequent type of payments that are being used include-
It is the most widely used by consumers. The transaction usually occurs with a card, the buyer also provides the card details, and these details get transferred to the payment processor.
E-Wallets work as another type of essential payment that can be easily processed. Most consumers who prefer this mode of payment sign up for the e-wallet with their bank account or debit/credit cards.
Apple Pay, PayPal, and AmazonPay are the most prominent e-wallets in the USA, whereas Alipay is highly dominated in Asia.
Bank transfers are completely suited for B2B transactions, this mode of payment gives the shopper complete control over the transaction, as they need to authorize within their own selves to initiate the transaction through online banking.
Payment processing service providers assist merchants and customers in receiving smooth transactions. They transfer the funds to customers, merchants, card associations, and the issuing bank, which makes it an essential part of the financial industry.