![]() The bank then forwards the transaction requests to the payment brands, such as Visa ® or Mastercard ®, for clearing. To do so, you need to present your transaction data to your bank. ![]() The cardholder will need to contact their issuing bank to resolve the issue or use a different card to complete the transaction.Īfter the customer’s card is authorized - either in person, online, or over the phone - it's time to settle the payment to ensure it clears and that it’s funded. A referral can happen when a cardholder has reached their credit limit, if they use their card more than usual within a short timeframe, or when they swipe it outside of the country it was issued, among other cases. The last response code, a referral, means there’s a request to the cardholder’s bank for further information. A card can be declined for many reasons, including when a credit limit has been exceeded or if the card was reported stolen. If it’s declined, the cardholder cannot use that card to complete the purchase. ![]() If the card is approved, the transaction amount will be reserved from the cardholder’s available credit limit, you’ll receive an authorization number, and the transaction can move on to the next step. The cardholder has a sufficient credit balance to cover the transaction.Ī card can then be approved, declined, or referred.The cardholder’s credit card number coincides with a valid account number.You can’t accept the cardholder’s card without authorizing it - a consequence that could mean lost sales for you.Īuthorization, which can be obtained via a point-of-sale terminal, e-commerce website, or phone, confirms two key pieces of information: While the first step in processing a payment takes just seconds, it is an especially important one. There are three key phases to this process: authorization, settlement, and funding. What are the three primary parts of payment processing?Įach time a customer makes a purchase from you, called the point of purchase, a fairly complex series of electronic actions happen in order to complete the transaction. The financial institution that provided the cardholder with their card In Canada, there are six card associations: American Express Canada ®, Discover ®, The Exchange ®, Mastercard Canada ®, Visa Canada ®, and Interac ®, a debit card network.Ī company used by the merchant to access a payment card networkĪlso known as a credit card processing agent or a merchant services reseller, a payment processing agent is a firm or partner who works for a payment processing provider and sells its products and services to merchants. Sometimes called a payment card network, a card association is a group of banks or organizations that issue cards to cardholders and aid in transactions. The technical service that connects a merchant’s website to payment networks in order to process a transaction The financial institution (typically a bank, independent sales organization, or cloud service provider) that does business with the merchant The person who offers items for purchase by consumers The person (consumer) who uses a credit card to make a purchase Each entity plays a specific and important role, so before we explain how to process credit and debit cards, we’ll cover some helpful terms you should know. When it comes to processing payments, there are quite a few parties involved. Who are the important players in payment processing? Keep reading to learn important payment processing terms, how payment processing works, and the costs you may need to pay in order to process card payments. Beyond you and your customers, there’s a host of people and organizations that help transfer the money you’re owed to your business bank account. Card transactions may seem as simple as a swipe or tap, but a lot happens behind the scenes. If you’re wondering how to process debit and credit card payments online and in person for your small business, you’re not alone.
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