You can never have too much knowledge when it comes to knowing the bank card system. Only in this way can you choose the credit card processor that suits you best. However, it is even more important that in this way you will find out all the details of the functioning of the credit card and its processing. It is important that you gain some general knowledge on this topic, because you will come to different stages of charging when it comes to this system.
Then you need to know how the card is processed, how charging works and everything about it. However, the whole system is based on a huge number of transactions between traders, processors and banks. This can really seem quite confusing at first glance, because a million transactions are done in a few seconds. To understand these processes, read below our brief explanation of the whole process, which we have presented to you in a few simple steps.
1. Purchase request
Who is involved in the whole process? There are five key parties involved in the whole process. This applies to the person who owns a particular card, the merchant, the merchant’s bank and the person who holds the card as well as the card association. So each side plays its part. The transaction begins with the owner initiating a purchase request and authorizing the credit card. The other party then transfers the information on the card to their bank using machining, software or something else. This is generally possible by dragging the card or entering it manually or increasingly popular option using NFC on your smartphone. The bank that takes over the money remembers the information contained in the transaction and forwards it to another bank. Approval was obtained there.
2. Data transfer and authorization
Point of sale (POS) or point of purchase (POP) is a term that connects to the network at the time when it registered the presence of your card in one of the ways we have already mentioned. During the pandemic, payments via smartphone using the NFC option became the most popular, as it further reduced people-to-people contacts. After checking the necessary information, it asks for authorization from you, which means that you have to enter your PIN, which is actually your unique password. He may not ask for that step, if it is a smaller amount of money. Usually every bank asks you how much there is no need to authorize with a pin, in order to speed up the daily payment process. What is important is to be careful with which sellers, whether they are brick and mortar or online, use your credit card. There are also advisors like iPayTotal who are just dealing with time problems with online payment and can solve such situations for you.
When the customer submits the request, the information is encrypted and forwarded for final approval while the card is still in the terminal. On the other hand, it is connected to other processing networks. Then the transaction is approved or rejected. If the card is valid, you will certainly not have a problem with approval. However, if the amount and available funds cannot match, the request is not successful and is rejected. Then the customer has to pay using an alternative approach in the form of cash, etc. If the buyer is granted the request and the transaction is successful, the trader receives an authorization response. Of course, the transaction is declared complete only when the customer receives his invoice as a confirmation. The same thing is with rejection, the buyer must definitely get a transaction report regardless of the outcome. When it comes to e-commerce, the merchant first prepares to send things to the customer and then the standard process continues.
Finally, part of the card payment business involves serial closing. This applies to merchants and banks. So, it is necessary to close all transactions that took place during one day. While the merchant is the one who completes this process, the bank keeps all the funds in one place and the data of the credit card issuers.
The last step is to deposit funds. When the bank has collected all the funds from the issuers, it must deposit them in the account of the company or trader. Of course, this can’t happen in just a few seconds like when it comes to swiping a card. The whole process requires a little more time, and it is usually completed in a maximum of two days. However, the party processing this data transfers the money from the transactions to the company’s account, but also deducts the part as processing fee. Of course, this is not just that. There is an explanation and variation in this process. For example, it is known exactly when funds are deposited and fees are deducted. Any company that did not collect all the transactions at once and sent them for processing, will receive unnecessary costs. This means that they have to group by a certain deadline in order to be able to get the funds the next day without prolongation. It can also happen that when depositing funds, the processor keeps a certain part or all.
History of credit card
The first mention of a credit card is in the novel Looking Backward, which was published at the end of the 19th century. Of course, the notion of that time and today is completely different, but the basic purpose is very similar. Until the end of the 1950s, various systems similar to today’s appeared, but none of them managed to survive. It was not until 1958 that BankAmericard appeared on the market, a precursor to the Visa. MasterCard soon appeared, which to this day remains the two most popular types of credit cards.
If you have ever wondered how the whole process of credit card processing takes place, know that it is primarily a large number of institutions. Numerous transactions are also included, but the payment process seems much simpler. Of course, the whole functioning can be explained very simply in just a few steps. We hope that we have been able to bring you closer to the details of card payment processing.