what we do.

What is Payment Processing?

At its core, payment processing is the automation of electronic payment transactions between merchants and customers. Payment technologies help process, verify and accept or decline credit card transactions through specialized hardware and software.

Who are the Participating Parties in Credit Card Processing?

There are a few main players involved in the payment process: 

Cardholder: The person or entity that receives an account from a card company or issuer, and is in possession of a credit card.

Merchant: A commercial entity or person authorized to accept cards and receive payments from its customers pursuant to agreement with the card brands.

Merchant (or acquiring) bank: The financial institution that has an agreement with a merchant to accept (acquire) deposits generated by card transactions.

Credit card network: The entity that facilitates transactions between merchants and credit card issuers. There are four major credit card networks, represented by the card brands Visa, Mastercard, Discover, American Express.

Credit card issuer: A financial institution, bank, credit union, or company that issues or helps issue cards to cardholders.

Payment processor: The company appointed by the merchant to handle credit card transactions for their acquiring bank.

How do Credit Card Transactions Work?

1. When a merchant runs a customer’s credit card, the data is sent with an authorization request to their processing company.

2. The processor then routes the information to the the card network and on to the customer’s credit card bank. The bank will then either approve or deny the transaction, and send the result back to the processor.

3. Once the processor has the approval or decline, they send the information to the payment gateway.

4. The settlement network can now transmit the data from the cardholder’s bank, or issuing bank, back to the acquiring bank, which routes the approval or denial code back to the merchant’s payment acceptance application.

5. The acquiring bank performs what is called an interchange for each sale, with the cardholder’s bank. Then the card-issuing bank transfers the sale amount, minus the interchange fee to the acquiring bank. The money is then deposited into the merchant’s account by the acquiring bank, minus a discount fee.

1. Authorization

The cardholder pays the merchant for a purchase with a credit card.

The merchant sent the credit card details to the acquirer.

The acquirer forwards the credit card details to the credit card network.

The credit card network requests payment authorization from the issuing bank.

2. Authentication

...through the acquirer to the merchant.

...through the credit card and the acquirer... network.

If funds are available, the issuing bank sends an approval code to the merchant via the same channels...

The merchant issues a sales receipt to complete the sale.

The merchant's payment terminal collects all approved transactions in a "batch"

The issuing bank verifies the card information it received from the credit card network.

Need more information?

Main Office
One Harbor Drive, Suite 300, Sausalito, California, 94965
Call Us
Office: (800) 496-0437
Tech Support: (628) 561-2111


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