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: 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)