How Credit Card Processing and Payment Integration Work

Introduction

Many people may be confused about how a credit card transaction on the web works. Particularly if you are an eCommerce site or other online vendor, it is important to have a basic understanding of what happens during a credit card transaction and how you can maintain security standards.

Who Is Involved in a Credit Card Transaction?

There are numerous participants involved in one credit card transaction. Typically, these participants include: the merchant, the customer (the cardholder), the payment gateway, the processor, the card network (Visa, Mastercard, American Express or Discover), the customer’s card issuer, and the merchant’s acquiring bank. Each of these players will, at some point, have access to order and transaction information. Even with this many parties, an approval usually comes back to the checkout within a few seconds.

How the Transaction Works

Once an item is purchased, the payment information is sent to a B2C, C2C, or B2B payment gateway. The gateway passes it to the processor, which routes it over the card network to the customer’s issuing bank. The issuer checks the card and the available credit or funds, then approves or declines the charge, and that answer travels back the same way to the checkout.

Approval only reserves the money: the merchant then captures the charge and sends it for settlement, usually in a daily batch, and the acquiring bank deposits the funds in the merchant’s account a few business days later.

Every party is paid out of the sale. Most of the cost is interchange, a percentage of the sale plus a small fixed amount, set by the card networks and paid to the issuing bank; the networks add their own assessment fees, and the processor and gateway add their markup. Flat-rate providers bundle all of this into one price: Stripe’s standard rate for US cards, for example, is 2.9% + 30¢ per successful charge. Some merchants pass the cost to customers as a surcharge where card network rules and state law allow it; most build it into their prices.

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Speak to a Clarity representative today about how to safely and smoothly integrate payment solutions into your eCommerce website.

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Payment integration solutions

Credit card transactions can be confusing. However, there are two takeaways: first, each credit card transaction will incur a fee, and it is important to strategize about how to cover this fee. Second, because the information passes to so many parties, it is imperative that the data remain secure and encrypted. Speak to a Clarity representative today about how to safely and smoothly integrate payment solutions into your eCommerce website.