The Merchant Processing Guru

The Merchant Processing Guru Tip#20: What is the flow of a credit card processing transaction?

When you process a transaction what really happens in those few seconds that you are waiting for an approval or decline on that card? Well, whether you swipe the card or key it in on some other system the flow is the same. A line of communication is opened up and information is sent to the acquiring bank to say that a transaction for this amount on this card holder’s card is being requested for this merchant account. Then the acquirer’s computer will then contact the issuing bank to verify the account information and that the card holder has enough credit for the transaction to be approved. Then the approval is sent back to the acquirer from the issuing bank and the acquirer issues an approval number for the transaction. A receipt is then generated with this information and the transaction is complete. This is called the “front end” of the process.

The “back end” of this process happens at the end of the day where all the transactions from that day are grouped together “batched” and settled through the acquiring bank for deposit into your account. The Acquirer also sends transaction information to MasterCard and Visa on a daily basis, which will reconcile the incoming information and route them to the appropriate card issuers overnight. The card issuer will then post the transaction to the cardholder’s account for payment.

The Merchant Processing Guru Tip#19 Continued: The Players in the Credit Card Processing Industry.

To be approved to accept credit cards a merchant will approach a “Member Service Provider” or MSP who are approved & registered entities with Visa & MasterCard to offer processing services. Behind them is the “Acquirer” or “Acquiring bank”. The Merchant Acquirer basically coordinates the flow of information and money between the different players, namely the cardholder and their bank and the merchant and their bank. On the front end they use a “payment network” to processes the individual transactions between the cardholder and the merchant (also known as a payment platform). I will get into the actual flow of the transaction in a later post. On the back end network they settle the transactions into a lump sum to be deposited into the merchants account. This is referred to a settlement or batch. A card issuer cannot be an acquirer even though they are both banks, This is why you cannot go “direct” with your bank! This is also how the two separate interests of the cardholder and the merchant are kept apart.

Where do I fit into all this? I represent the Merchant and the Member Service Provider. I am a merchant advocate and it is my job is to make sure that you have the right solution for your particular business needs and to represent you in a dispute between you and the MSP. This is not to be confused with a dispute between you and the cardholder, that is the MSP who then represents you.

Russell Harverson has over 6 years experience in the card processing industry and has build a reputation for “being there” for all his merchants! His goal is to provide you with the right, cost effective processing solution for your individual business needs, no matter how large, small or different, he has done it all. He is your Guru of the Merchant Processing industry, shedding light on the credit card processing industry. To contact him via email theGuru@theMerchantProcessingGuru.com
Or call him at: 1-888-368-GURU (4878)

The Merchant Processing Guru Tip#19: So who are all the players in the Credit card processing industry? – More than meets the eye!

First of all you have the “card issuers” who are in most cases the banks but there are many forms of cards which I will go over in another post here shortly. For our purposes in this post I will refer to the banks as the card issuers. Visa and MasterCard are the associations who are recognized as the entities who stand behind the credit cards that are issued by the banks and offer the fraud protection we all enjoy so much and any other benefit that they give us through the cards that carry their emblem. The banks issue a credit card, with either a Visa or MasterCard logo on it to the “cardholder” who then goes about using that card to purchase goods and services from “the merchant”.

The merchant needs to set up a merchant account in order to accept credit cards from the card holder. A merchant must be approved under Visa & MasterCard regulations to accept credit cards as a form of payment, this limits the risk to the cardholder and helps to create some regulation and prevent fraud. So far so good right? I haven’t told you anything you don’t know yet. In my next post I will explain about the players on the processing side of this industry which is a little more of an unknown.

Russell Harverson has over 6 years experience in the card processing industry and has build a reputation for “being there” for all his merchants! His goal is to provide you with the right, cost effective processing solution for your individual business needs, no matter how large, small or different, he has done it all. He is your Guru of the Merchant Processing industry, shedding light on the credit card processing industry. To contact him via email theGuru@theMerchantProcessingGuru.com
Or call him at: 1-888-368-GURU (4878)

The Merchant Processing Guru Tip#18: Some facts about the credit card processing industry

Here are some interesting facts about this industry from 2007 that you might like to know.

58.3 Billion electronic payments were made in 2007, totaling a whopping $36.4 Trillion (this is all forms of electronic payment such as ACH, direct debits, etc.).
24.7 Billion transactions were made using a credit card at $2.5 Trillion, this is a growth of 9.7% from 2000.
20.6 Billion transactions were made using a debit card totaling $1.5 Trillion in sales with a growth of 25.5% from 2000.
Check payments numbered 36.7 Billion with a value of $39.3 Trillion. This is a decline of 4.3% since 2004

Studies show that consumers spend 40% more with a credit card compared to cash

A report by AC Nielsen shows that by the year 2020 only 10% of transactions will be made in cash.

In 2004, for the first time in history, electronic payments surpassed check payments. So with checks & cash on the decline, credit cards, online banking and other forms of electronic payments are fast becoming the norm. So if you are in a business that works directly with the consumer and you do not accept credit cards yet as a form of payment, you might want to give that another look as pretty soon it will be unavoidable.

The Merchant Processing Guru Tip#8: What about American Express & Discover? Most credit card processing companies today can process all of the important card types like Discover and American Express. Discover now is part of MasterCard for the most part and you will be able to accept Discover automatically and without an additional setup fee with a new merchant account.

American Express however is still independent. Should you decide to accept AMEX cards the processor acts basically as just a pass-through for AMEX. This means that even though it will be set up for you through the Processor you will be paid directly from AMEX for all of your AMEX transactions. It can take anywhere from 3-5 business days for those transactions from AMEX to clear your account.

AMEX sets their own rates at their sole discretion and those rates cannot be marked up by the processor. The processor can however take a transaction fee for processing each AMEX transaction, which is typically 20-25 cents.

It is possible in some cases to be charged a flat fee of $5.95 per month from AMEX if you process less than $5,000.00 in a 12 month period. This is a good option for many merchants wishing to try out AMEX for the first time, but beware, if your volume exceeds $4,999.00 in any consecutive 12 month period AMEX will adjust for the difference.

To find out what AMEX rates are in your industry type and how you can tap into the American Express card holder market, contact me at: theGuru@theMerchantProcessingGuru.com

The Merchant Processing Guru: A big part of the problem facing business owners today, as it relates to the credit card processing industry, is the deluge of sales calls from companies promising great rates and huge savings. More often than not, those who have made the switch find that they have saved very little, if anything at all.

To compound this issue, very few people are actually able to read and understand the statement that their processing company sends them each month. In fact I have found very few CPA’s who can even decipher these statements themselves. This is partly due to the fact that many companies purposely make them difficult to understand and figure out. It is also due to this industry having a degree of complexity to it. Without understanding the details of how the industry works and what is behind the statement you cannot even begin to comprehend it, let alone figure out what is a good and fair deal for you, the business owner. Stay tuned for more about understanding how this works.

The Merchant Processing Guru: If you accept credit card payments for your business, this blog is a must read for you! If you have been in business for a while, you may have switched processing companies several times in the hopes of lowering your costs in this area. But like many others who have done so, you may have been left wondering why those savings have been so elusive and why you are no better off than you were before you made the switch….

This and many other issues related to accepting credit cards is what this blog is dedicated to addressing. My name is Russell Harverson and I have been working in this industry for over 6 years. I have learned how it operates & with this blog I will attempt to shed some light on what the other processing companies don’t want you to know. Stay tuned for more.