Understanding the Basics of Payment Processing

When it comes to payment processing, what matters is that the customer is able to use their credit card.

Are you a merchant? When it comes to payment processing, what matters is that the customer is able to use their credit card. You should remember that it is not your responsibility to explain to your customers why their cards are being declined – you do not receive this information.

If your customer wants to know why his card was declined, he should look for contact information at the back of the credit card.

Payment processing includes the following:

Authorization

It is important for you to understand the authorization process because without it, you would not be able to accept payment from customers who pay using credit cards, which could result in lost sales. What is authorization? It is the process of confirming whether the buyer’s credit card has enough credit to buy goods and services.

Moreover, authorization confirms whether a credit card is valid. You can get authorizations through an eCommerce website, a credit card machine, or over the phone. Authorization follows these steps:

• Your customer presents his credit card information to make a purchase. This can happen either over the phone or in person. The customer can also enter this information into your eCommerce site.
• You will then transmit this info to your payment processor.
• The payment processor validates the payment by sending it to the card payment brand such as MasterCard or Visa.
• The payment brand will send your request to the card-issuing bank.
• The payment brand will now send a response to the payment processor.
• The payment processor sends the response to you via a point-of-sale device, over the phone, or via your ecommerce website.
• The response will allow you to complete the transaction. If the card is approved, you will receive an authorization number. The card can be declined for a number of reasons such as insufficient funds.

Because many merchants deal with large sales volumes per day, you can choose to send many authorization requests at once.

Settlement

After he makes the sale, your customer leaves your store or logs out of your eCommerce website. However, the transaction will still be in process for you, as it needs to be settled.

What is settlement? It is the process of managing an electronic payment transaction so that it can be cleared and funded.

You must present the authorized card transaction to your payment processor, which then submits the transaction to your payment brand for clearing. The settlement process includes these steps:

• You submit the transaction to the payment processor.
• They forward your settlement request to the payment brand for confirmation with the issuing bank.
• The payment brand receives the settlement request and issues credit to your payment processor so that it can reimburse the amount. The issuing bank then pays the payment processor for the transaction.
• The issuing bank posts the transaction to the customer’s account and sends the statement to him at the end of a billing period.
• The cardholder receives the statement and pays the bill.

Funding

The process of funding is an extension of settlement. It involves the payment processor depositing money to your bank account to compensate you for the transactions that you process. To receive funding quickly, you should be aware of holidays and deadlines, which affect the funding process.

Are you a merchant who wants to start using payment processing? According to Dharma Merchant Services, ‘’payment processing issues affect your business in real-time, and the urgency that can be felt.” You should at least learn the basics of how it operates. Once you know how it works, dealing with customers will be a lot easier.

You will also look at customers who pay using credit cards with less trepidation.

Author Bio

Jim Thompson

Title: Super-Connector at OutreachMama

Jim is a super-connector with OutreachMama and Youth Noise NJ who helps businesses find their audience online through outreach, partnerships, and networking. He is a professional writer who has been in the business for 5 years. He has hands on experience with cars, tech, and relationship advice, among other things. Because of how quickly he can turn articles around, he is able to take on multiple projects at once. His writing experience spans from SEO articles to technical guides and everything in between.

Understanding the Basics of Payments Processing first appeared on Mompreneur Media