|November 21st, 2018|
Online shopping’s fever has risen in today’s economy, resulting in setting up of digital shops to accept online payments. Success is extending friendship hands to businesses that are incorporating online payment processing. Feeling like starting? Understand the essential 3 P’s first:
In terms of processing credit and debit cards, there are three major players. On the one end is the business or merchant, on the other end is the customer and middle section is occupied with technology that connects the two.
Understanding how money moves from a customer to the business is quite important. Payment processing has two stages:
The authorization process involves:
1. Customer purchases a product on the website with credit or debit card
2. The details travel down the payment gateway, encrypting the data to maintain its privacy followed by sending it to the payment processor
3. Request is sent to customer’s issuing bank by the payment processor to assure whether they have enough credit for the payment
4. In case of ‘approval,’ issuer responds with ‘yes’ and in case of ‘denial,’ issuer responds with ‘no’
5. Payment processor sends the answer about approval of sale and asks the merchant bank to credit the merchant’s account
Now comes the settlement phase or the second phase:
1. Card issuer sends the funds to merchant bank to deposit the money into their account
2. Funds are transferred
Everyone who is involved with transaction needs to get paid be it the issuing bank, credit card association, merchant bank or the payment processor.
Every time a sales transaction is processed, four fees are paid:
Most of the pricing structures come under one among the three categories:
This makes things easy for everyone. However, as the processor defines the pricing tier it wants, it can turn expensive.
And this was all! We hope you have found this post useful. Stay tuned for more!