Online credit card processing requires a website where your customers can go to make purchases, and you’ll need a way to process those payments securely. In this article, we’ll mainly talk about what is online credit card processing and how does it work.
What is online credit card processing?
Generally speaking, online credit card processing involves the following roles to participate in:
Credit Card Networks: A credit card network determines where a particular brand of credit card is accepted and sets the interchange fees for each transaction. There are four major credit card networks: Visa, MasterCard, American Express, and Discover. Credit card networks are also often called “card associations” and “card schemes.”
Cardholder: The cardholder is the customer or client who makes payments or purchases with a credit or debit card.
Issuers / Issuing Bank: The issuer grants the cardholder the right to use the card, determines the cardholder’s line of credit, and approves or declines the transaction. Most credit and debit cards are issued by banks that partner with either Visa or Mastercard, but American Express and Discover act as both credit card networks and credit card issuers. The issuer is also often called an “issuing bank” or a “cardholder’s bank.”
Merchant: The merchant is you—the business that receives the credit or debit card payment.
Credit Card Payment Processors: Credit card payment processors or “payment processors” are the companies business’s hire to process their credit card payments. Credit card payment processors provide businesses with access to a merchant account through an acquiring bank and otherwise manage the merchant’s end of the credit card payment process.
A credit card payment processor is a tool used by merchants to process transactions. The payment processor provides a way to accept credit card payments and transmit banking information securely. Credit card payment processors can specialize in high risk industries or be traditional mainstream processors.
How to process credit card payments online?
It usually takes just a few seconds for a credit card or debit card payment to go through when processing credit card payments online, but in that short time a huge number of events take place.
The credit card payment process begins when a customer purchases from an eCommerce site. During the checkout, the customer’s payment data is collected and safely encrypted in the high risk payment gateway. The payment gateway can be considered the middle man between the merchant and paying customers. Once the gateway receives the payment data, the payment processor can verify it. This step ensures that the buyer is indeed who they say they are. After the cardholder is confirmed, the payment processor transmits the payment data to the respective credit card company and bank. It is up to the card company or bank to authorize the transaction. Card companies and banks make sure the purchase is a typical behavior of the cardholder. Most times, a transaction checks all the boxes and is approved. During this step, the payment processor communicates to the payment gateway that the transaction is approved. Finally, the payments reach the seller’s high risk merchant account after being released from the bank. The merchant gateway reflects that the transaction is complete and releases purchased products for shipping.
The transaction may decline if fraud is detected during the approval process by the card company and bank. In some cases, card companies and banks will place a hold until the cardholder indicates the purchase is valid. When this happens, the processor communicates with the high risk payment gateway that there has been a denial. Because online payment processing is a card-not-present transaction, it makes it easy for hackers submit fraudulent online orders. Thanks to the built-in safety features of credit card payment processors, all parties are better protected from fraud.
Processing credit card payments online for something safe, fast and efficient is simple when you have the right partner. This is where Oceanpayment comes in, contact us for more details about online credit card processing.