Merchant Processing

If your business isn’t already using merchant services and you regularly take payments from customers, securing yourself a merchant account should be a priority. But if you aren’t sure about why merchant services would be necessary for your business, or want to learn more about how these providers manage to process payments, then read on.

When examining this industry, especially from the perspective of a company, the process of payment processing can appear to be straightforward. Your company pays a merchant service provider, and then with their help, you can take payments via card. The merchant service provider generally represents Visa and/or Mastercard (and is an official, established representative of the card issuer) in order to be able to process these payments.

However, merchant services are more complicated than they seem on the surface. There are actually a number of levels to the process of taking card payments, and lots of work that needs to happen behind the scenes in order to enable this.

Processing of Credit Card Payments

There are different ‘stages’ that must be completed in order for a credit card payment to be processed. This is where merchant services are more complex than they seem, and it is not such a straightforward transaction. What appears to only be a one step procedure, has different tiers in its proceedings. These must be fulfilled in order for the money to be transferred from the customer to the business’ bank account.

Credit card processing steps:

  1. The card information inputted from the customer’s credit card is captured. This capture is completed by a website, magnetic card reader, computer, POS system or is performed manually.

  2. The card data is then sent to your acquirer, along with information about the transaction in question. Your business’ acquirer will be the company supporting your merchant account.

  3. The acquirer sends this data to the card issuer (e.g. Visa, Mastercard), who then checks the card issuing bank to make sure there are sufficient funds for the transaction. If funds are available, they are held by the card issuer on behalf of the business that has accepted the payment.

  4. The card issuer sends information back to the acquirer in response, confirming whether the transaction was accepted, rejected or if there has been an error.

After the final step, the transaction is seen as finished from the standpoint of the customer. So where does the merchant service provider come in? Well, the merchant service company facilitates the link and connection between your business and the acquirer. Of course, this is a critical part of accepting these payments.

There you have it, the act of taking credit card payments using an ISO/MSP (Independent Selling Organisation/Member Service Provider – AKA merchant service provider) broken down into its stages. This should shed some clarity on what goes on behind the scenes when it comes to credit cards being accepted as payment, and also highlights the importance of researching and thinking carefully when deciding on a merchant service provider.

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