How does payment processing work
This is not to be confused with a refund, which is simply a merchant refunding a transaction. With chargebacks the card issuing bank sends through a request to recover money for their cardholder.
The most common complaint for a chargeback is that the cardholder cannot remember the transaction. However, the chargeback ratio is very low for transactions in a face-to-face POS environment. See Chargeback Management.
Need more help? Give us a call at To contact us online about payment processing, click here. Skip to content What is a Merchant Account? How do I get a Merchant Account? What credit cards can I accept? What is an Issuer? Instead, the bank issues a type of IOU that the customer will pay the debt. If the cardholder does not have the funds, the business will not receive any payment.
Because of this risk and the technology needed to verify these payments, a business needs to work with a payment processor. This processor facilitates the transfer of funds between the customer and merchant, communicating with all banks and credit card companies involved.
Typically, the payment processor provides a credit card terminal to the merchant. This terminal connects to the point of sale system and then is used to accept credit, debit, and contactless payments. Card and contactless payments follow a series of steps before releasing the funds. The goal of this process is to:. After the merchant calculates the total due, the cardholder will be prompted to insert their card.
After the issuing bank verifies the card details, it then authenticates the purchase in order to release the payment to the acquiring bank. After the transaction is over, the issuing bank releases the funds to the acquiring bank. This does not occur immediately, rather it can take several days for the merchant to receive the funds and for the customer to see the transaction on their statement.
Looking over the three steps listed above, you can see that transactions are not as easy as handing over a dollar bill. Because processing electronic payments is complex, each party charges a fee to account for their portion of the transaction. Typically, a merchant pays a fee on each transaction based on a percentage of the total purchase amount. This fee is usually a fixed percentage or a variable percentage, depending on what plan the merchant chooses. Fees can also vary depending on how the customer paid, how much data was used, and the type of business owned by the merchant.
If you plan to accept credit and debit cards, you will need a payment processor and point of sale system. While the EPOS will not be in charge of facilitating the transfer of funds, it will communicate with the credit card terminal and log all transactions. Without a EPOS , you will struggle to manage your sales, returns, receipts, and more. With our systems and partners, you can accept all major debit and credit cards quickly and easily. Sometimes user error is involved, and other times the card is completely unusable.
If a card is declined due to an error, the terminal will typically display a message to try again. In these cases, it is advisable for the customer to swipe the card a second time. If the terminal states the card has insufficient funds, the customer may not want to swipe it again.
Doing so could lead to overdraft fees or other charges. Every debit and credit card operates via a credit card network or association. This is the company listed on the corner of the card, such as Visa or MasterCard. For businesses that accept credit or debit cards, payment services are an integral part, for the simple reason that they need to receive money which does not come to them traditionally in the form of a paper currency.
While choosing a payment processor, it is important to consider certain things apart from the pricing packages. Some of the things that can be essential while deciding a payment processor are:. Beyond the points mentioned, another thing to consider is the fact that not all payment service providers process every type of transitions. Some may be experts at online processing, accepting card-not-present CNP transactions and some may specialise in in-store payments. Within an online payment process, you will have the option to accept a wide range of payment methods.
The most frequently used ones are:. Payment processing service providers assist merchants and customers in carrying out a smooth transaction. They mediate between the customers, merchants, card association, and the issuing bank, which makes them an important part of the financial industry. As an experienced partner for your payment processing needs, Radar Payments guarantee seamless payment transactions that give your customers a fast and enjoyable shopping experience.
Talk to our experts today and know more about what suits your business the best.