Credit card processing can seem like a very hard nut to crack too many, but once you understand how it actually works, one can start and see the subtle differences between different aspects of the entire system. For instance, one can understand which type of payment gateway is better for his own business and make the right choice regarding them. All it takes is a little bit of patience and some research in order to get your bearings straight. Once you understand that there’s more to paying using a credit card that what just meets the eye, you are on your way to growing a successful business.

The 6 Steps of Credit Card Processing

The entire process of https://www.bams.com/payment-gateways/ credit card processing happens very fast, but do not confuse it with the actual transaction being done. The merchant receives payment only after a couple of days. During this time other operations are made, but they do not necessarily concern the customer. This is due to the network the customer works with. Traditionally, Visa and MasterCard move a little faster than American Express. This is usually because American Express has higher processing fees but more complicated security protocols.

Payment methods have evolved over time and it is because of this that retailers and other parties involved in various transactions have to keep up with the technological advances. But before doing so, everybody should understand how credit card processing actually works.

1. It all begins with the client of any retailer swiping or touching his credit card to the retailers’ terminal. This sends the cardholders information to the merchant.
2. The next step is the information collecting done by the merchant. This is done through secure channels so as to protect both client and retailer from various data leaks and breaches. The payment is either done physically at the actual point of sale or using a gateway. More and more merchants and customers tend to use the second method nowadays, and this is why it is crucially important for the security to be so tight.
3. After the data has been collected, the credit card processor has to send the data to the cards’ network in order for it to be properly processed.
4. After receiving the information, the card network sends it on to the customer’s bank in order for the payment to actually be done.
5. This step is where the real action takes place. The actual credit card processing takes place at the customer’s bank. Here the information is received from the card’s network and verified. After the bank checks to see if the customer has sufficient funds it then runs other background checks in order to asses if the purchase is actually being done by the cardholder. If everything checks out, a message is sent back the way the information came approving the purchase.
6. It all goes back to the merchant. After all the credit card processing is done, the merchant gets the message if the transaction is valid or not. If it is, then he and the customer can move on. There are also some cases in which the transaction might be denied. Then the customer can choose to repeat the operation in hopes that it was just a simple glitch in the system or renounce the purchase.

Understanding What A Payment Gateway Is?

Merchants nowadays use a https://www.bams.com/payment-gateways/ payment gateway as alternatives to classic Point of Sale (PoS) terminals you would normally see in a store. These gateways enable the communication and transfer of data between the customer and the merchant’s account. Although normally used by internet merchants, payment gateways are making their way slowly but surely in the real world as well.

But although a gateway is a slick and very versatile alternative to more classic payment options, merchants should know that not all gateways are the same. In order to choose the one best fitting their business, they should firstly do some research and make sure they understand the differences between them before committing to anything. There are 3 main types of gateways:

1. Redirecting gateways

Redirecting payment gateways work by redirecting the customer to a separate platform such as PayPal where he gets additional information on the completion of the payment. Although it means that the customer has to leave the merchants platform in order to pay for his purchases, it offers additional layers of security and is ideal for emerging, small businesses.

2. Checkout on site, payment off-site.

Do you know how when you’re shopping online and click the cart to complete your order it takes you to another platform in order to pay for your purchase? This is the second type of payment gateway. Its main advantage is that credit card data isn’t stored on site and is handled by the more secure payment platform. The downside to this type of gateway is that the merchant has no control over what the customer is doing once he exits his site.

3. On-site payments.

The last and most high-risk payment gateway model is the one in which the customer doesn’t have to leave the site in order to pay for a purchase. The payment is processed on-site by the merchant operating the platform. The high risk it implies spans from the fact that, having all the payment processing done on site, the merchant is responsible for the security of the customer’s credit card data. This is why this method is usually reserved for larger companies that can invest in some serious secured servers for their platforms. The advantage of dealing with payments this way is that you can control the customer’s experience every step of the way and make sure he is happy with your services.

Choosing the right payment gateway isn’t really that hard. All it takes is a little bit of research and a basic understanding of how card processing works. This is why you should always take your time and not rush into anything when it comes to your business.