Credit Card Processing System: A Beginner’s Guide

Posted by Brian Latch on January 6th, 2022

If you have decided to incorporate the means to accept credit card payments in your retail store, you are moving in the right direction as far as the advancement in business and technology are concerned. When the customer swipes his card on your credit card machine for small business, it only takes a few seconds for the transaction to reflect on your account. However, the process is a bit more intricate than that. If you are new to terms like credit card processor and credit or debit card machine for small business, you are in the right place. In this article, we are going to discuss how credit card processing works.

Let us first talk about the participants involved when it comes to an online credit card processor.

•          The consumer is the one who makes the purchase
•          The merchant is the business owner who offers his services for a price
•          The acquiring bank is the financial institution that accepts payment on behalf of the merchant
•          An issuing bank is a financial institution that provides a card to the consumer
•          The credit card network allows transactions between issuer bank and merchant bank
•          The payment processor handles the transaction details, payment routing, and approvals.

Let us now discuss the process

•          The consumer purchases a product using his credit card
•          The payment processor encrypts your data and sends it to the gateway processor
•          The processor checks with the issuing bank, whether or not there is a sufficient balance
•          The issuing bank notifies the processor about the approval or decline of the transaction.
•          The processor then informs the merchant bank to credit your account.

This is how the entire process works. We hope this has proved helpful. In the next article, we will talk about how to get a credit card machine for small businesses.