Traditional payment processors require the business owner to set up a merchant account, which requires a business license. They also ensure purchases are secure and merchants are in compliance with payment industry standards. Payment processor: Also known as merchant service providers, this intermediary body communicates transaction details between the consumer’s bank and the merchant’s bank.Payment gateway: A merchant service or ecommerce platform that transmits encrypted payment data to the payment processor and ultimately communicates to the merchant and customer if a transaction has been approved.Point-of-sale System (POS system): Also known as a payment depot, this is where customer’s orders are placed and credit card information is collected.Merchant: A person or business selling products and services.The issuing bank manages the consumer’s account. Issuing bank: The bank that provides the credit card to the consumer, branded with the name of the affiliated credit card network.Credit card network: The consumer’s credit card-issuing company, such as Visa or American Express.Consumer: The individual attempting to make a purchase with a credit card.There are three major players on the cardholder’s side of the transaction: These stakeholders are either affiliated with the cardholder or the merchant. What is credit card processing?Ĭredit card processing is everything that happens from the moment a customer taps, swipes, or inserts their credit card into a point-of-sale system until the funds are deposited into the seller’s bank account.ĭuring this process, payment data travels through an involved network of stakeholders, each of whom plays a vital role in completing the transaction. The vast majority of US consumers (76%) have at least one credit card, and those cards account for approximately $300 billion in annual ecommerce sales, or 47% of all ecommerce transactions.īy offering ways to buy that are convenient to the customer, credit card processing helps your business reach a broad customer base and, ultimately, increase sales. Completing credit card transactions easily, efficiently, and securely is essential to thriving as a modern business.
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