There are five main components or players involved in the credit card
transactions system. They are:
1. the credit card issuing bank
2. the consumer
3. the merchant services account
4. the acquiring processor/acquiring bank
5. the merchant bank
The credit card processing system has been carefully set up to insure that all parties involved will be able to take advantage of this efficient way of doing business. The credit card authorization process is basically the same whether your business actually swipes the credit card through the credit card terminal, keys in the credit card on the pad of the credit card machine, or accepts the consumer's credit card over the Internet using online, real time credit card processing software. The main difference is the variable levels of security involved with the different ways to process credit cards. The following is a step by step explanation of how credit card processing works.
Retail/Storefront Credit Card Processing
Consumer goes to merchant's place of business, chooses goods and/or services, and gives the merchant his/her credit card for credit card authorization.
Merchant swipes the card on the credit card processing terminal and the credit card machine dials the acquiring processor for credit card authentication.
Acquiring processor sends credit card transaction to card association, which in turn sends the request for credit card authorization to the issuing bank.
Issuing bank accepts or declines the credit card transaction and sends message to the card association.
The card association contacts the credit card processor with the credit card authorization, and then the request to deliver goods and services is given to the merchant by way of the POS terminal.
Merchant sends the credit card processing company "fulfillment notification to permit settlement" meaning that the goods and services have been delivered or are ready to be shipped.
The capture takes place when the credit card authorization information is given to the issuing bank and the consumer's credit card is charged for goods and services requested/received ** This entire process takes place in less than ten seconds.
Finally, when the merchant decides to settle batch, the acquiring processor finalizes the credit card transaction with the issuing bank and they transfer money into the merchant's bank.
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