What Happens When Your Customer Swipes a Credit Card?

International currencies

Do you know what actually happens when you accept credit cards online? On the customer side, a few buttons are clicked and some information gets entered. On your side, you receive a report about what has been paid for so that you can ship out the goods. Seems simple, right? So why did you need to find a payment processor? Once you see what really goes on behind the scenes of card payment processing, you’ll understand better why third parties end up getting involved.

  1. The customer uses the credit card virtual terminal.
  2. For the sake of simplicity, we will assume an online shopping cart situation. The customer has browsed your shopping portal, selected an item they wish to purchase, entered their credit card information into the terminal, and clicked “Checkout.”

  3. An authorization request is sent to the payment processor.
  4. This is where the third party facilitates. They are the link between the customer and their bank account, and you and your bank account. A request is sent to the processor as to whether to authorize this payment request.

  5. The authorization request is routed to the customer’s bank.
  6. The payment processor then routes this request to the customer’s bank, which is ultimately responsible for deciding whether or not payment can be made from the customer’s account.

  7. The approved or denied response is sent back to the processor.
  8. If the bank account exists and the funds are available, then an approved response is passed back to you, the merchant, along with the payment information.

  9. You deliver the goods, the customer’s bank sends funds to you.
  10. The approved response is conveyed to the customer, and it is then your responsibility to deliver the product. At this stage, the payment processor facilitates the transfer of the customer’s payment to you.

This is of course a highly simplified version of what happens when you accept credit cards. The card issuer, whether it’s Visa, MasterCard, or Discover, is also involved in the mix. Also, the process is slightly different with physical card payment terminals that accept debit and credit cards. Whether you accept credit cards online, or in a brick-and-mortar store, payment processors are essential to keeping the transactions quick, easy, and secure, so that the customer only has to press a button, and all you need to do is honor the purchase.

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