How Does Payment Processing Work [infographic]

How Does Payment Processing Work [infographic]

As long as your credit card processing system works, do you really need to know the mechanics behind everything? After all, the basic flow remains the same, regardless of how well you understand the process.

As a small business owner, you certainly don’t have to become an expert in payment processing, but there are advantages to understanding how the system works. The more knowledgeable you become, the better positioned you are to:

  • Keep costs to a minimum by removing unnecessary services
  • Shop for better rates, payment providers and benefits
  • Reduce your fraud exposure (which can help reduce your rates)

This article and accompanying infographic (below) outline the most important payment processing steps involved. They also detail some of the potential pitfalls you might face along the way.

Anatomy of a Successful Sale

Below is what happens when a successful online sale enters your payment environment.

#1 The Trigger

Every credit card transaction begins with the “trigger.” After visiting your site, a customer loads a shopping cart, enters credit card details, and clicks the “buy” button.

#2 The Gate

Your payment gateway securely captures these credit card details and passes them onto your payment processor.

#3 The Issuer

Next, your processor forwards these payment details to the customer’s card-issuing bank seeking verification of the transaction.

#4 The Authorization

The card-issuing bank then authorizes the transaction and deducts the “sale amount” from the customer’s credit card account.

#5 The Approval

The transaction is officially approved. The card-issuing bank notifies the payment processor, who then notifies you of the successful sale.

#6 The Credit

After a few days, the funds are finally deposited into your bank account. The entire transaction is complete.

Sounds straightforward enough, right? All of these steps (except for the final credit) happen in mere seconds.

But what about unsuccessful credit card transactions? What are some of the setbacks that can potentially crop up along the way?

Anatomy of an Unsuccessful Sale

When selling products and services online, there are a lot of things that can go wrong — from expired cards to chargebacks to simple website errors. Arguably, the biggest potential hurdle is fraud:

  • Thieves might try to buy your goods using stolen credit card data.
  • Criminals can hack into your shopping cart if it isn’t properly secured.
  • Your payment provider might not securely encrypt the data it sends.

Even with legitimate transactions, things can go wrong. For example, the card-issuing bank might reject a sale because of excessive volume or suspicious activity.

No matter the reason, delayed, rejected and canceled sales can cost you both time and money. As a small business owner, you should do everything in your power to eliminate as many roadblocks as you can.

Common sense strategies for accomplishing this include:

  • Updating your payment environment and IT infrastructure with all the latest security patches and virus scanners
  • Choosing a credit card payment processor that specializes in PCI-compliant data security
  • Investing in a Secure Sockets Layer (SSL) certificate that allows you to safely capture and process credit card payments online
  • Requiring additional credit card payment verification from all of your customers, including billing addresses, CVV codes and expiration dates

Want to Learn More About Secure Payment Processing?

Most small business owners never give a second thought to how payment processing works. If you understand the steps above, you’ll be light years ahead of the competition. If you’d like to learn more about payment processing and the various steps involved, check out the infographic below.

How does payment processing work?


Author bio: As Vice President of Sales at Performance Card Service, Matt Wollersheim’s focus is on marketing, client relations and developing new processing channels. Performance Card Services offers offshore payment gateway solutions to high-risk merchants. 

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