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How Does Payment Processing Work [INFOGRAPHIC]

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How does payment processing work?
This infographic was created by Performance Card Service

Most merchants don’t think twice about credit card payment processing or how it works. As long as new sales keep coming in, they don’t really care about the nuts and bolts of their payment environments. This is a mistake. Here’s why.

You don’t have to become an expert in payment processing, but understanding the basics can help you:

  • Avoid unnecessary fees and expenses. As a result, you’ll have more money to invest in your business.
  • Reduce your exposure to credit card fraud. This can lead to higher sales due to increased consumer confidence in your business.

Arguably most important, this knowledge can help you choose the right payment processor for your business. So, what actually happens behind the scenes whenever a new sale enters your system? Let’s take a look.

Anatomy of a Successful Credit Card Sale

It all happens in mere seconds, but the components below must work in perfect harmony for a successful sale to process.

1. Trigger the Transaction

The transaction officially begins when a customer chooses one of your products and submits credit card information.

2. Open the Gates

Your e-commerce shopping cart captures this credit card data and passes it on to your processor through a secure payment gateway.

3. Ask the Issuer

Your payment processor then asks the customer’s credit card issuer to verify the transaction details.

4. Authorization and Advance

If the transaction is legitimate, the credit card issuer authorizes the request and immediately deducts the sale amount from the customer’s account.

5. Approve the Move

Your payment processor notifies you that the customer’s card issuing bank has confirmed the transaction — you’ve just executed a successful sale.

6. Credit the Account

After a few days, the funds are credited to your bank account — after which the entire transaction is officially complete.

Want to Learn More About Credit Card Processing?

The above represents a simplified version of a standard transaction. If you understand this basic workflow, you’ll be ahead of the pack. Remember that most merchants never bother to understand how credit card processing works.

If you’d like a more detailed explanation of what goes on behind the scenes, be sure to check out the infographic below. In fact, you can even download this free resource and keep it as a reference if you have questions in the future.

Author bio: As Vice President of Sales at Performance Card Service, Matt Wollersheim’s focus is on general marketing, client relations and development of new processing channels. Performance Card Service provides offshore merchant account services to high-risk merchants.

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